Renting, buying, or leasing your business premises
Is it more favourable to rent or to buy a commercial property? There is no standard answer to this question. Sometimes buying is better, sometimes renting. Read here about the pros and cons of renting and buying.
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Renting
Advantages
- You are more flexible. You can cancel a rental contract more quickly than sell your business premises.
- In principle, major maintenance costs are paid by the owner and not by you. But look carefully at the terms of your rental contract, because other arrangements are also possible.
Renting has less impact on your finances. For example, with a rental property, you will have no or fewer maintenance costs than with a purchase property.
Disadvantages
- You do not benefit from any increase in the value of the property.
- The owner usually sets the conditions. For example, the cost of renting.
- The rental price can be uncertain and may rise.
- Rental contracts are sometimes valid for several years and cannot easily be terminated prematurely.
- You usually need the cooperation or permission of the owner for (major) structural adjustments to the building.
- If you rent a space in a shopping centre, your rental contract can be terminated before the end of the lease if this is necessary for the renovation of the shopping centre.
Rules differ per type of commercial property
Do you want to rent or let business premises? The rules differ for each type of commercial property. For example, you are only entitled to rent protection if you rent medium-sized business premises. Read more about renting business space.
Buying
Advantages
- You decide how long you stay in your building.
- You build up capital as the value increases, for example for your pension.
- You are usually free to do what you want with your property.
- You benefit from any possible increase in value when you invest in the property.
Disadvantages
- There is capital in a property. You cannot use this capital for other things.
You may not be able to borrow the full purchase amount of a property with a business mortgage. You will have to pay the remaining amount yourself or finance it in some other way.
- You pay the costs for major and minor maintenance.
- Your property may lose value.
- It can be difficult to sell your property at the desired time and price.
Premises on the balance sheet
A purchased business premises is usually part of your business accounts (balance sheet). That will give you tax benefits. And you can use the surplus value as working capital for your business. However, the moment you stop doing business, you run the risk of having to settle with the Tax Administration of the Netherlands (Belastingdienst ) over the increase in value of the premises. Read what to look out for if your premises are on the balance sheet.
Agricultural tenancy
In agriculture, we talk about agricultural tenancy or lease (pacht) instead of rent. Lease, or agricultural tenancy, is a special form of rent. The difference between rent and agricultural lease is that it concerns the use of immovable property (for example, a farm or land) for agricultural purposes. There are also a number of regulations that you must take into account when entering into such a lease agreement.
The best-known forms of agricultural leasing are:
This form of leasing applies to a farm, separate agricultural buildings, or separate land. For a farm, the legal term is 12 years. For separate land or separate commercial buildings, this is 6 years. After this period, the agreement is automatically extended for a period of 6 years, unless the agreement is terminated before that. The agreement can be longer or shorter under certain conditions. Regular lease is not possible for an indefinite period. The price must meet the requirements of the Tenancy Prices Decree (Pachtptrijzenbesluit, in Dutch).
This form is more flexible than the regular form. There are fewer legal regulations. This form of lease is only possible with the lease of separate land. Does the lease last 6 or fewer years? Then you and the owner determine the rent. Does the lease last longer than 6 years? Then the Dutch Agricultural Tenancies Authorities (Grondkamer) will review the rent and conditions (in Dutch).
Land can also be temporarily leased with a cultivation lease for 1- or 2-year crops that require crop rotation. This agreement is for a maximum period of 1 or 2 years. And you only have the right to grow crops on the land for a period of 1 or 2 years. Most protective conditions do not apply.
Read more about leasing, or agricultural tenancy.
Options other than renting or buying
There are other options besides renting or buying premises. If you do not want to take on large premises or staff chair rental might be interesting. You can also open a pop-up store in a temporary location. Or rent a workspace in a multi-company building.