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SDLT rates for commercial property

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Lease or buy

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Lease or buy?

Reasons to consider leasing

There are several reasons why it could make more sense for your business to lease a commercial property, including:

• your business is growing and you’re not sure how fast you might outgrow the property
• there are market conditions that are unstable, so only committing to a three- to five-year lease gives you better peace of mind
• capital is tight and you don’t have enough for the deposit
• your company is new to a market area, or your customer base is in a tight geographic area, and the only option is to lease without losing customers
• your timing is immediate, and you need a building within the next 30 to 60 days
• you have the opportunity to get favourable lease terms.

Tip. Check the lease to find out who is responsible for repairs as this will affect your lease or buy calculations.

Tip. Lease payments are usually tax-deductible as a business expense, providing potential tax benefits.

Reasons to consider owning

There are also times when owning the property could be a better fit for your business, such as:

• buying allows you to have full control of the property, and you don’t have to answer to a landlord. This means you have the freedom to modify and customise the property to suit your business needs
• purchasing allows you to build equity as you pay down the mortgage, providing a potential source of capital in the future
• if the property value increases, you may benefit from appreciation when selling or refinancing
• ownership provides stability and the ability to establish a long-term presence in a location.

Cost considerations

For leasing, the key cost considerations are:

Monthly lease payments. Consider the total cost of monthly lease payments over the desired lease term.

Additional costs. Factor in costs such as service charges for common areas and solicitor fees for dealing with the lease.

For buying, the key costs you need to consider are:

Deposit. Consider what percentage of the total price you will need to put down as a deposit.

Mortgage interest rate. The interest that will be charged on the monthly mortgage payments.

Stamp duty land tax (SDLT) on the purchase. You need to factor in how much SDLT will be due on the purchase (see The next step ).

Operating expenses. You’ll need to factor in costs such as buildings insurance and general maintenance.

SDLT rates for commercial property

lease or buy calculator.