Purchasing a Commercial Property
Most people are interested in purchasing a commercial property to start new business, expand current operations, or in need of larger commercial premises. For any corporate entity, choosing the right commercial property is an important transaction, critical to the success of the business.
Purchasing a Commercial Property
Commercial property sector includes but is not limited to, the following types:
- Leisure (cinémas, pubs, gym, restaurants)
There are many financial advantages to buying a commercial property, for instance, no rent payment and designing the building as you think best. Besides not being affected by rental increases, the owner can also sub-let the portion of the building to earn a steady stream of revenue.
Purchasing a commercial building can be complex and requires you to consider a number of factors before committing.
Find a Commercial Property
It is important to buy the right commercial premises at the right time. Ideally, avoid making an investment when the prices are high, keep updated with the changing trends in the commercial property market.
Office buildings with central locations are the most common choices followed by malls and shops in highly populated areas. Determine the type of commercial property you need and start your search.
Location is critical when setting up a shop, restaurant, or supermarket to ensure a steady flow of customers. If buying such property in a popular shopping area is out of budget, you will need an excellent marketing strategy to compensate for not buying a property in central location.
For offices and warehouses, choose a location depending on where the majority of workers live and how accessible the location is for deliveries.
Calculate the costs of buying a commercial property
Most people consider the purchase price of the property and overlook other related costs. The buyer is expected to make an initial deposit at the time of exchange of contract. The remaining amount is paid upon the completion of the deal.
Additional costs include:
- Assistance – Before closing a deal, buyers often tend to seek advice from real estate agents, mortgage providers, or solicitors.
- SDLT – If you buy a commercial property valued at over £150,000 in England and Northern Ireland, you have to pay Stamp Duty Land Tax, 2% on amount up to £250,000 and 5% on more than the aforementioned sale price.
- Insurance – You have to make regular insurance payment, make sure to shop around for the best rates.
- Others – Other costs include repair and maintenance, security and access, local authority charges, mortgage repayments (if required), VAT, setting up facilities, decorations, furniture, and many more.
Secure a commercial mortgage
Commercial property is a huge investment, the buyer will likely need a commercial mortgage to buy the property. There are tons of lending sources in the UK, enquire rates, and compare mortgages to secure the best deal.
Make an Offer
Once you have found the right commercial property and secured a loan, make a written offer to the seller’s commercial estate agent. If the seller refuses the offer, try to negotiate, and once the offer is accepted, request the estate agent to take the property off the market.
Investigate the property documentation and conduct a local authority search to unearth any unresolved dispute that might have an impact on the commercial property valuation.
Hire a solicitor to draft a sale agreement detailing the terms and key information, it is also called head of terms. At this stage, the buyer’s estate agent will initiate the final negotiations with the seller. If the buyer is happy to proceed, they will be required to make an initial deposit to secure the deal.
Completion of Sale
Lastly, the transaction will complete when the required documents are signed, dated, and transferred. The buyer’s solicitor will hand over the remaining payment to the seller’s solicitor and will receive the keys to the new commercial property.
The information in this blog is for general information purposes only and does not purport to be comprehensive or to provide legal advice. Whilst every effort is made to ensure the information and law is current as of the date of publication it should be stressed that, due to the passage of time, this does not necessarily reflect the present legal position. Connaught Law and authors accept no responsibility for loss that may arise from accessing or reliance on information