06 Mar How much is your business worth? Freehold or Leasehold?
Freehold or Leasehold?
This month on how much is your business worth, we are discussing Freehold and Leasehold options.
When you enter into buying a business it is cheaper if you are purchasing a leasehold property as there is less finance to raise, but you are without the stability of owning your own property. Borrowing money when buying a freehold property however is often easier as banks will often put a charge on the property.
The decision on buying freehold or leasehold comes down to several variables which we have laid out here:
Freehold is a full-ownership title certificate with no time limit. When you buy a freehold, you are simply acquiring the ownership of the property. You can sell the property as leasehold or as a freehold if you want to transfer the ownership. Freehold is best for buying a property as a long-term investment. However, there is a considerable difference in the price of the business as you are buying the property element also.
Leasehold is a type of title certificate that states you as the owner of the property for a predetermined number of years. Apartments, flats, and several houses as well as commercial buildings come with a leasehold certificate. The lease period can be anything from 5 years to 999 years depending on the leasehold deal you are getting. At the end of the lease period, you may be able to renew the lease subject to the Landlord and Tenant. Before you buy get solicitors to confirm that the lease is renewable and has not been “contracted out”. You may even have the option to buy the property as a freehold after the lease period is completed.
In general terms lenders prefer freehold deals as they have a property element to secure the lending on, however they are often happy to lend on leaseholds if the lease terms are favorable and they can take a charge over it.
Please see our for sale page for Freehold and Leasehold opportunities at JSReakes for sale