Acquiring business premises – a beginner’s guide

Business has been going well and it’s time to expand. Your spare room has served its purpose and you now want to find the perfect premises for your business.

There are many things to consider before you take the plunge:

  • What sort of property do you need?
  • What impression will the property give to your potential customers and staff?
  • Do you need any particular facilities?
  • How much space do you need now and how much space will you need in the future?
  • Should you buy or rent?

There are benefits to both buying and renting. Renting allows you to move into business premises without a huge outlay of funds and to test the market as to whether a particular area works as well as you hoped for your business. There are of course drawbacks to renting – you have little choice as to the timing of repair and renovation work or cost and your rent will be “dead” money. You may also face difficulties when the lease comes to an end.

Buying property requires a much greater outlay of funds and leaves you with less flexibility if your business outgrows the space or the area fundamentally changes. There are ways of structuring a purchase to make it tax efficient – for example, buying through a self-invested pension and renting to your business.

Having made the decision to buy or rent and having decided on what you are looking for and your budget, it’s time to find the perfect property. At this stage, it can be helpful to engage a commercial property agent. Similar to an estate agent, but working on your behalf, an agent can help negotiate terms as well as find a suitable property. The help in negotiating terms can be particularly useful if you have decided to rent.

The property that you buy or rent will need to be suitable for your business and what may appear ideal on a viewing may not have such perfect paperwork.

The use of property is regulated by planning. This specifies the use to which a property can be put. Certain uses can be changed to another specific use without consent, whilst others will need planning permission. The cost of any planning permission for use and any consents (planning and/or building regulation) for work you propose to do to the building will need to be budgeted for. You should also remember that, if you are renting, you may also need Landlord’s consent for alterations and change of use. Again there is a cost implication to this.

If you choose to rent, it is important to show yourself in the best light possible to a future Landlord. This will include having a detailed Business Plan.

You will need to consider both the one-off costs of the purchase or lease and the ongoing expenses associated with the property. These may include:

  • Professional fees: surveyors, solicitors, architects, planning consultants etc;
  • Planning Authority fees;
  • Renovation and/or alteration costs;
  • Stamp Duty Land Tax;
  • Deposit – often 20-30% of the value of the property;
  • Rent Deposit – usually equivalent to 6 month’s rent;
  • VAT
  • Rent or mortgage payments;
  • Insurance;
  • Maintenance and general repairs;
  • Running costs and service charges

Start-ups have been known to fail because they forgot to include an expense (for example, business rates) in their calculations.

Moving into new business premises is an exciting time for any business. It is important to ensure that you have done the necessary preparation. This article is intended for general guidance only and specific advice should be sought for an individual property.

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Tamzin Mandelli

Partner, Commercial Property

Prior to joining Hart Brown, Tamzin had worked for a local authority, for both regional and national firms, and she had managed her own firm....

Partner, Commercial Property

Tamzin Mandelli

Prior to joining Hart Brown, Tamzin had worked for a local authority, for both regional and national firms, and she had managed her own firm.

Tamzin is a Partner with over 20 years' experience and she is based at our Woking office. Tamzin specialises in all aspects of commercial property including the sale and purchase of shops, offices and restaurants, landlord and tenant matters (from granting the new lease, through to the various licences for works, transfers and so on) and dealing with the eventual termination of a lease. She is also experienced at dealing with development work including option agreements and acquisitions.

Her most memorable case was the lease of some advertising space – for a well known electronics company in Leicester Square!

What do Tamzin's clients say about her?

"We have just worked on a commercial transaction together, which was by far the most challenging case I have dealt with (for a variety of reasons). Tamzin was extremely efficient and salvaged the transaction multiple times... I highly recommend her!"

“Thank you very much for all of your help and support. It has been an absolute pleasure working with you and hope to do so again in the future!”

"...thank you for your support with X, it's been good fun. Wish you were handling a commercial purchase for me! … lesson learnt, will place with you next time!"

“The service I received was efficient, professional and the members I dealt with both past and present have been helpful…and very personable.”