Renting a commercial premise is similar to renting a home in the sense that there is always a lease involved and you and will need the help of a solicitor or conveyancer to get the legal details finalised.
But that’s about where the similarities end. The differences when it comes to taking charge of a commercial premise – such as an office, shop, restaurant, factory etc – include such areas as how often you will be expected to pay the rent, the inclusion of business rates, possible VAT charges, a higher mortgage deposit and what you can claim back against tax as a capital expense.
Renting a commercial premise
Probably the biggest difference between a commercial and residential lease is the length of time it covers. Leases for offices, shops and factories, for instance, can be for a minimum of five up to 25 years – whereas for a flat or house it’s six months. Rent reviews are every three or five years for a business premises.
Rent is usually paid quarterly, although it can be possible to pay it monthly too. Insurance for the building and any services charges (offices in a multi-storey building often have these) are added to the rental charge.
Another cost is business rates but it may be possible to offset these by applying for a small business exemption.
On the plus side, many commercial leases contain rent-free periods and break clauses. The latter means it’s possible to serve notice two months in advance without incurring any possible penalty charges. There may even be the possibility to sub-lease if you want to take a longer break.
If your tenancy is a fixed term agreement ie it lasts for 15 years, 25 years etc and you want to stay on afterwards, then you have a ‘continuing obligation’ to pay rent. The length of notice you’ll then have to give increases to three months.
Interested in buying a commercial premises? Visit our sister site, iSell Properties to find out how!