BUSINESS ADVICE COLUMN
There are obvious similarities between the two sectors e.g. both are property based and generate rental income. However, there are also significant differences.
The most obvious is the property itself. A residential BTL will be a house or flat, whereas commercial property investments include industrial and retail units and offices. They can vary significantly in size and value, whereas the value of a typical residential BTL property outside London might not exceed £200,000.
Residential tenants will usually have signed an agreement known as an Assured Shortholdtenancy. They are usually simple documents and include responsibilities of the tenant and details of rent payable and the term of the lease, usually six or 12 months.
The agreement for a commercial property will be contained within a more detailed document. The lease term is likely to be longer, possibly up to 20 years, but will usually include the right of the tenant to “break” the agreement but only at certain defined times in the future.
The landlord will also have the right to review the rent payable at set dates, often five-yearly intervals. Commercial tenants will also vary between blue chip covenants, e.g. a High Street entity to local, independent businesses.
Before making any decision I strongly recommend you discuss this with your accountant or professional advisor.
With Steve Cox, Commercial Lending Manager of Norwich and Peterborough Building Society Tel: 01733 372425