Should your business buy or lease its premises? Legal and practical points to compare

Choosing premises can shape your cash flow, flexibility and long-term business value. At the start of 2025, the UK had around 5.7 million private-sector businesses, including 5.64 million small businesses. Whether you need an office, shop, warehouse or industrial unit, the right arrangement depends on more than the purchase price or monthly rent.

Buying can give you control and a valuable asset, but it can also tie up capital and expose you to property-market risk. Leasing usually requires less money upfront and may make relocation easier, but it can leave you responsible for rent, repairs and other costs for several years.

Before you commit, a commercial conveyancing solicitor can examine the title, lease terms, searches, planning position and funding requirements so that you understand the obligations attached to the property.

Compare the immediate and long-term costs

Buying normally requires a deposit, lender fees, valuation costs, legal fees and searches. You may also pay Stamp Duty Land Tax in England and Northern Ireland. Current non-residential purchase rates are 0% on the first £150,000, 2% on the portion from £150,001 to £250,000 and 5% above £250,000. Different property taxes apply in Scotland and Wales.

A qualifying £400,000 commercial purchase in England would produce an SDLT bill of £9,500 before special rules or reliefs. You should also budget for insurance, repairs, finance interest and any VAT.

Leasing generally requires a rent deposit, advance rent and professional fees. Rent is only part of the cost. You may also pay:

• Business rates and service charges
• Insurance contributions and utilities
• Repair and maintenance costs
• VAT where the landlord has opted to tax
• Alteration or reinstatement costs

Ask for a full annual occupancy estimate rather than comparing rent with a mortgage payment alone.

Consider how much flexibility you need

A lease may suit you when staffing levels, location requirements or space needs could change. Check the lease length, break clauses and rights to assign or sublet. Missing a break notice deadline or failing to meet its conditions could leave you liable for rent until the end of the term.

Buying gives you greater stability, but selling commercial property can take time. If you need to relocate quickly, your capital may remain locked into the building. Letting it to another occupier may create landlord responsibilities and require your lender’s consent.

Review your control over the premises

Ownership usually gives you greater control over layout, branding and improvements. Your plans may still be restricted by planning law, building regulations, title covenants or lender conditions.

As a tenant, you will normally need the landlord’s written consent before carrying out alterations, changing the use or installing signage. You could also be required to remove the works and restore the property when the lease ends.

Planning permission and permission under the lease are separate, so approval under one does not automatically satisfy the other.

Understand repairing liabilities

A full repairing and insuring lease can make you responsible for keeping the premises in good repair, even when the building was already in poor condition when you moved in.

A building survey can identify roof problems, damp, structural movement and outdated services before you sign. You may also negotiate a schedule of condition that records the property’s state and limits your repairing obligation.

If you buy, repair costs are also yours, but you control when work is completed. Investigate likely expenditure on roofing, heating, drainage, fire safety, accessibility and energy efficiency. A low purchase price may not represent good value if major work is imminent.

Check business rates and energy performance

Business rates are generally paid by the occupier. From 1 April 2026, new rateable values took effect in England and Wales following the 2026 revaluation. In England, a business using only one property may qualify for 100% small business rate relief where its rateable value is £12,000 or below, with tapered relief up to £15,000.

Buying does not remove this expense. As an owner-occupier, you will still normally pay business rates. If the property becomes empty, the person entitled to possession may become liable after any relief period.

In England and Wales, most privately rented non-domestic properties must currently achieve at least EPC rating E unless a valid exemption applies. Review the EPC, energy bills and likely improvement costs before buying or leasing.

Think about tax, VAT and ownership structure

Commercial property transactions can have complicated tax consequences. Sales and lettings of land are often exempt from VAT, but an owner may have opted to tax, adding VAT at 20% to the purchase price or rent. Whether you can recover it depends on your business activities and VAT position.

If you buy, consider whether the property should be owned by your trading company, a separate property company, a pension arrangement or personally. This can affect financing, tax, risk and a future sale. Take tax and financial advice before exchanging contracts.

Consider security and investment potential

Buying may help you build equity instead of paying rent. You could benefit if the property rises in value, and ownership may support future borrowing. However, values can fall, interest rates can change and specialist premises may be difficult to sell.

A lease avoids direct exposure to the purchase price, but rent reviews can increase your costs. Check whether reviews are open-market, index-linked or fixed. Establish whether the lease benefits from security of tenure under the Landlord and Tenant Act 1954 or has been contracted out. Contracting out can mean you have no automatic right to remain when the lease ends.

Make the decision around your business plan

Buying may suit you when you have stable cash flow, expect to remain in the same location for many years and want control over the asset. Leasing may be more appropriate when you want to preserve working capital, test a location or retain the ability to move.

Before deciding, compare:

• The cash required at the outset
• Annual occupancy and finance costs
• Expected growth or contraction
• Repair and improvement liabilities
• Tax and VAT treatment
• Exit options and likely timescales
• The property’s condition, title and permitted use

Get advice before you commit

The choice between buying and leasing should support your commercial plans rather than restrict them. Athi Law can review a proposed purchase or lease, identify legal risks, negotiate appropriate terms and guide you from initial instructions to completion. Contact Athi Law today to discuss your business premises and receive advice tailored to your proposed property transaction.