Should I rent or buy?   

There are four main ways to secure commercial property:

Licence arrangement

Short term monthly rental agreement, often including other costs e.g. business rates, insurance & background heating. A licence agreement is an ideal solution for

new business start ups, as it provides a flexible tenure arrangement with no long term financial commitment. Businesses can also benefit from services such as a manned reception and secretarial support.

However, there is no long term security of tenure as the landlord is only obliged to give a relatively short period of notice. Rental levels are also subject to change over time reflecting moves in market value of the premises.  

Leasehold

The most common premises occupancy arrangement in Redditch, where there is a commitment to rent the property for the full lease term, usually 3-5 years or multiples thereof. Rental level is fixed for the entire term of the lease, and the tenant enjoys long term security of tenure. However, the tenant is personally liable for, and obliged to

meet all terms under the contract for the entire lease term, even if the business fails and the premises are vacated.

The tenant is also usually obliged to insure and maintain the leased premises, and in addition to planning  consent, any structural changes made to the building must be approved by the landlord.

Virtual Freehold

(Long-leasehold)

Essentially long-leasehold – an uncommon arrangement where total rent payable for the full term is paid at the beginning of the virtual freehold, and a token “peppercorn” rental is paid annually. The term of a virtual freehold usually falls between 99 - 999 years,

and as such, a virtual freehold has asset value.

The holder of a virtual freehold never owns the property or land, and at the end of  the term the property and land revert to the owner. Essentially this arrangement gives a tenant inflation-proof rent, and an asset that  may gain value in an increasing property market.

Freehold

Is where a property is bought outright.

A commercial mortgage may be needed which usually requires a large deposit and runs for 15 years. However, the purchase of freehold property can be a good investment in a rising property market, the property holding asset value for the company.