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Freehold or Leasehold?

Whilst ultimately the dream of any would be business buyer is to own the Freehold property in which the business is situated it is sometimes just not achievable due to budget constraints, especially if the business in question also offers residential accommodation. Unfortunately this can increase its purchase price considerably making it difficult to fund which is probably a factor more so now due to the tightening of lending criteria by the banks, a Leasehold business offers an affordable route to becoming your own boss.

Before we go any further though, please when purchasing a Leasehold business do not get too concerned about the length of the Lease as in the majority of cases Tenants are afforded the protection of the Landlord & Tenant Act whereby the Lease is renewable at the end of the term. Should there only be a short period remaining on the Lease at the time of purchase then it may be possible to negotiate a new Lease with the Landlord at the outset as the primary objective of most landlords is for the property to be occupied producing rental income.

In a slow housing market a Leasehold business option can be the solution for both business buyers and business sellers, in respect of buyers whereby they are unable to sell their residential property the option exists to rent out their property providing an income and at the same time possibly raise some capital through a 'Buy to Let' mortgage in order to assist with the business purchase but at the same time still keeping a foothold on the property ladder.

For those selling a Freehold business, by offering a Leasehold option the business becomes affordable and opens the business up to a far greater audience providing a greater chance to achieve a sale with the vendor retaining the building as an investment property getting a return on their investment where a bank can get nowhere near, the property could always be sold at a later date as an investment should a capital lump sum be required.

Those Leasehold businesses which also offer accommodation prove very popular, in particular if self contained, offering owners accommodation or an additional income stream through the renting out of it should the accommodation not be required for personal use thus offsetting the overall rent for the whole premises and making the actual rent for the business premises most attractive.

If you are looking for a business in desirable sought after trading position you will probably find that Freehold businesses rarely become available and Leaseing is the only option, landlords prefer not to relinquish their interest in the property knowing the premises are always bound to attract a strong rental and prove easy to Lease providing regular income.

The actual Lease for a property can vary considerably with others more favourable than others, should a Leasehold business prove attractive ask to see a copy of the Lease but as with anything legal it is recommended the advice of a solicitor is also sought.

EMF Group

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