How to secure your business premises

Before you sign any documents or hand over any money for a property, your single most important action is to appoint a solicitor who specialises in commercial property. This task is the final, legal step in making a physical location yours. It involves finalising all negotiations and signing a binding commercial lease or the contracts to purchase the property (the freehold), giving you the legal right to operate your business from that address.

Understanding your options: leasehold vs. freehold

You will acquire your premises in one of two ways: by leasing it (becoming a tenant) or buying it (becoming the freeholder). These are fundamentally different, and the right choice depends on your budget, business model, and long-term plans.

Leasehold: You are granted the right to use the property for a fixed period of time, from a few years to 25 years or more. You are a tenant, and the property owner is your landlord. Most new businesses start by leasing premises.

Freehold: You buy the property and the land it stands on outright. You become the owner and have full control, but also full responsibility.

Here’s a simple comparison of the two:

FactorLeasehold (Renting)Freehold (Buying)Upfront CostLower (typically a deposit and first month's rent)Very high (requires a large deposit and commercial mortgage)FlexibilityHigher (you can move when the lease ends or at a 'break clause')Lower (selling a commercial property can be a long process)ResponsibilityShared (depends on the lease, but landlord is often responsible for the main structure)Total (you are responsible for all maintenance, repairs, and insurance)Long-term ValueNone (you are paying rent to your landlord)Asset (the property is an asset that can grow in value)

The process for leasing a property

Signing a commercial lease is a formal legal process. Your solicitor will guide you, but the key stages are:

1. Agreeing Heads of Terms: Once you have agreed a price with the landlord or agent, they will issue a document called the 'Heads of Terms'. This is not legally binding but outlines the main points of the deal: the rent, the length of the lease, and any key conditions. Check this carefully before instructing solicitors.
2. Due Diligence: Your solicitor will now carry out legal checks. This involves 'searches' with the local council to check for any issues, such as planning history or public rights of way. They will also raise detailed enquiries with the landlord's solicitor.
3. Negotiating the Lease: Your solicitor will review the draft lease document provided by the landlord. This is a complex document, and they will negotiate on your behalf to ensure the terms are fair. Key clauses to pay close attention to are those covering rent reviews, your repair obligations, and any 'break clause' that allows you to end the lease early.
4. Signing and Completion: Once the lease is agreed, you will sign it. The deal is completed when the lease is dated, you pay the first instalment of rent and any deposit, and you receive the keys.

The process for buying a property (freehold)

Buying a commercial property is similar to buying a house, but with more complex due diligence.

1. Making an Offer: Your offer is accepted and a 'Memorandum of Sale' is issued to both parties' solicitors.
2. Due Diligence and Surveys: As with leasing, your solicitor will conduct searches and enquiries. Crucially, you must also arrange for a professional building survey from a chartered surveyor. This will identify any structural defects or costly problems with the property before you are legally committed.
3. Securing Finance: You will finalise your commercial mortgage application. The lender will require a valuation survey and will only issue a formal mortgage offer once they are satisfied.
4. Exchange of Contracts: This is the crucial step where you pay a deposit (typically 10% of the purchase price) and the solicitors exchange signed contracts. At this point, the deal is legally binding, and you cannot back out without losing your deposit.
5. Completion: On an agreed date, your solicitor will transfer the remaining funds to the seller, and you will become the legal owner of the property and receive the keys. Your solicitor will then handle the payment of Stamp Duty Land Tax and register the property in your name at the Land Registry.

Key tips for a smooth process

• Budget for professional fees: You will need to pay for your solicitor, a building surveyor, and potentially a mortgage broker. These costs can add up to several thousand pounds.
• Understand Stamp Duty: You will have to pay Stamp Duty Land Tax (SDLT) when you buy a commercial property or are granted a new lease. The amount depends on the value. Check the GOV.UK website for the latest rates.
• Don't rush: The legal process for securing a property can take anywhere from 6 weeks to several months. Don't feel pressured into signing anything until your solicitor confirms that all checks have been completed satisfactorily.