Leasehold vs. freehold: What are the key advantages and disadvantages
Leasehold v Freehold: what are the advantages and disadvantages?
- You own the property outright
- You can use the property as you wish, subject only to any planning or other legal restrictions
- You have greater control over the management of the property, e.g you choose when to carry out works of repair or decoration
- Property may rise in value.
- A business with poor, limited or no financial history will find it difficult to obtain commercial mortgages.
- Cash flow will be affected by the payment of any deposit.
- Mortgage costs may increase in line with any rise in bank base rates.
- Smaller initial outlay, giving the business greater flexibility.
- Less financial exposure for the business than a freehold acquisition.
- Rent and any service charge is a business expense spread over the lease term.
- The lease will usually contain restrictions as to the use of the premises, allowing other parties to use the premises etc.
- Unless there is a break option, you are bound to comply with the lease obligations for the duration of the term.
- Even if you find another party to take over the lease, you will probably be required to stand as guarantor.
Written by law firm Charles Russell - This guide represents only an outline summary of relevant principles and detailed advice should always be sought in particular cases.
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