Hamilton Pratt

Property

The UK operates a system of land law which is based on concepts and uses terminology which are unfamiliar to many overseas franchisors.  Overseas franchisors often find the English system complex compared with the system in their own country.

Background

English land law recognises two types of property ownership: “freehold” where the holder of the land owns the property outright and “leasehold”, where the occupier is a 'tenant' who holds the land for a fixed period subject to a lease (tenancy agreement) in which it undertakes various obligations to the landlord (eg payment of rent).  The landlord will either be the owner of the freehold or the owner of a leasehold interest in the land which has been created previously.

A new business may choose to buy a freehold or leasehold interest in a property or simply to rent a property on a short term basis.  Serviced offices are available in the UK which can offer office space for start-ups.  These are typically expensive in the long term but convenient if, initially, you wish to avoid entering into long term commitments.

Sales or leases/rental of commercial premises (eg factories, warehouses, offices and shops) are usually handled through specialist firms of property agents.  They provide property valuations and surveys and will advise on the suitability of a specific property for the proposed business use.  They will also search for the right property and assist in the negotiations relating to price and the other key terms of a deal.  Negotiations in relation to the detailed terms of purchase or lease/rental and the relevant legal documentation are typically handled by lawyers.

Whether you buy a freehold or rent a leasehold property will largely be a matter of cost and the type of property you require. However, it is less usual for businesses to own property on a freehold basis, particularly where the business is a new venture.