Leasing Business Premises – what you need to know about leasing your business space
As a business owner, you must choose whether to lease or purchase your business space. Our previous blog discussed the advantages and disadvantages of purchasing a business premises. Here are some of the pros and cons you need to consider if you are looking at leasing business premises.
Advantages of leasing business premises:
- Prime location and property: The option to lease provides a business with the opportunity to select from a greater choice of properties with a good location to create a better image, which you may not otherwise be able to afford to do if you buy.
- Available capital: If your money isn’t tied up in real estate then you will have more to use elsewhere in the business, this would allow you to respond to opportunities in the market faster.
- More time: Leasing provides you with the ability to focus completely on running your business, not managing your commercial investment
- Faster response to business needs: Your business has more flexibility to respond to its needs. If it grows you can move to a larger premise faster if you don’t have to sell first.
- Risk: Leasing is not necessarily a long-term financial commitment; whilst you are entering into a lease agreement which will have a fixed time frame, once the lease ends you can leave the property.
Disadvantages of leasing business premises:
- Variable costs: With a leasing option you are usually subject to annual rent increases and increased costs when you renew the lease.
- Limited control: You have little control over what the owner of the property decides to do. If he/she sells you may have to relocate, which causes disruption as well as being an expensive exercise. This can result in a loss of ‘goodwill’ and potentially a loss of your customer base.
- Lack of equity: If the business has no equity in the property, the lease repayments essentially build the property owners’ equity.
- Obligations: There can be many obligations and hidden costs in a lease which can be onerous on the tenant if you are not aware of them and can leave you out of pocket.
Our experienced Newcastle and Sydney solicitors and accountants are experienced in advising on the legal, accounting and financial implications of buying or leading business premises. Please don’t hesitate to contact Butlers Business and Law on (02) 4929 7002 or fill out an enquiry form on our website.