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4. Leasing for the Longer Run

Most established companies lease their premises. For small start-up businesses, the pros and cons may be finely balanced.

4.1 The advantages of leasing increase as your business becomes more established.

• Choice - most business property is leased.
• Security - you have a stable base, with the right to stay there for the length of the lease (usually three to 25 years).
• Alterations - you can spend money on improving the property (usually subject to obtaining written consent from the landlord), knowing you will be staying.
• Incentives - a landlord may offer incentives to take up a lease (eg a rent-free period).

4.2 Leasing's disadvantages tend to stem from bad landlords, or odd clauses in the lease.

• Ongoing liabilities - as your situation alters, you may need to move on. In most cases, a lease can be passed on, but you may still be liable for rent and costs (including the legal costs for both sides) if the new tenant fails to pay up. In some cases, you may also be responsible for all repairs.
• Fees and time - buying a lease can be expensive and time consuming. Legal advice is essential.
• Bad landlords - some fail to fulfil their side of the agreement to keep premises clean and maintained. (This may also happen with licensed premises.)
• Extra restrictions - these may be written into the lease and could threaten your business (eg by hindering diversification).
• Rent reviews - most leases allow the rent to be increased periodically (every three or five years), in line with market rents.