Guide to buying commercial property
Our practical guide will assist you in buying commercial property.
British people are well-known for their love of property ownership. Many people dream of owning a home or a flat. The majority of UK buildings are homes.
Have you ever thought about buying commercial property? According to the PIA Property Data Report 2017, it now represents around 13% of all UK buildings’ value.
The vast majority of commercial property is composed of:
thing that’s used for professional, commercial or bureaucratic purposes
Leisure restaurants. pubs. gyms.html3_
Other types of commercial property include schools and petrol stations.
This comprehensive guide will assist you if you are looking to purchase commercial property.
Locate a property
Choose a time when you are able to purchase commercial property. It is not a good idea to buy commercial property at the peak of the market, when the prices are high. It is worth looking at trends in the national and local commercial property markets, such as:
Commercial property value
Commercial property available for sale
Commercial mortgages available
If you intend to let commercial property, the rental value and tenant demand will be important.
When deciding on which commercial property to purchase, it is important to consider the location and type of the building. These are the main considerations:
Type of property: Retail, offices, leisure, or industrial
Types of investments: Leasehold or freehold
It is important to consider how commercial property can be used for your business, whether it is yours or that of a tenant.
Transport: Air, sea, rail, and road links
Staff can use the local amenities
Access to a pool of potential employees via colleges and universities
Business relationships with suppliers and clients
Equipment, furniture, and other services
It will make potential clients and employees feel good about themselves
Under the Town and Country Planning Order 1987, commercial property can be divided into use classes. This legislation governs the use of commercial property. You should ensure that the business you do in the commercial property you are considering buying is permitted.
Here’s a list of possible use classes:
A2 Financial and Professional Services
There are 3 restaurants and cafes
Drinking establishments A4
Take-Aways for 5
Distribution or storage of B8
Hotels in C1
Residential institutions C2
Secure residential institution C2A
Multiple occupation C4 houses
D1 institutions that are not residential
D2 entertainment and leisure
Planning permission may be required if you intend to renovate the building or change its intended purpose.
There are exceptions to this rule, however. Some legislation permits some modifications between uses without consent.
You should always seek the advice of the local council or a commercial agent regarding feasibility.
Calculate the cost of purchasing a commercial property
A deposit is usually required for commercial property purchases. When the deal is completed, the remainder of the payment is due.
There are many other costs involved in buying commercial property. These include:
Advice: Many buyers require assistance from professionals such as a lender, commercial estate agent and solicitor.
Stamp Duty Land Tax: If you purchase commercial property worth more than PS150,000 (current threshold in England and Northern Ireland), then you must pay this tax. SDLT is 2% on any portion above PS250,000 and 5% for any sale price.
Stamp Duty has been replaced by the Land and Buildings Transaction Tax (Scotland) and Land Transaction Tax (Wales).
Commercial mortgage arrangements are subject to fees
Renovating and decorating commercial properties
Fitting out and buying furniture and other equipment
Hire a company to transport furniture and other equipment
Establishing IT infrastructure, which includes setting up new facilities
The bills aren’t over. It is important to consider ongoing maintenance costs for commercial property. You will want to share some of the bills with your tenant if you intend to let commercial property.
A commercial property may have costs that include:
Maintenance and repairs
Services include security and cleaning
Charges for local authority services, including waste collection
To manage the building, retain a commercial property agent
If applicable, commercial mortgage repayments
Owners of commercial property should also consider business rates. They are a tax on all non-domestic buildings.
Business rates are calculated by multiplying the rateable property’s value – which is set by the Valuation Office Agency, (VOA) by the Uniform Business Rates (UBR).
VOA valuations are updated every five years. Based on rateable values as of April 1, 2015, the most recent revaluation took effect in England and Wales.
Each year, the local council will send you a bill for business rates. You may be eligible for exemptions such as rural rate relief or small business relief.
Energy costs are another factor to be considered. An Energy Performance Certificate (EPC) will be provided by the vendor. This will give you information about how energy-efficient the commercial property is, and more importantly, your expected energy bills.
The EPC is valid for 10 years and will display the energy rating of the building, from A (most efficient) through G (least efficient). Boilers and air conditioning can have a major impact on your energy bills.
You might also be eligible for capital allowances to help with business expenses.
To complete the deal, get a loan from a bank
To help you buy, you may need a loan. Commercial mortgages are one of the most popular forms of financing used for commercial property.
There are many lending options available. To find the best mortgage deal, you should compare all the available options.
Before granting a commercial mortgage, lenders require extensive information. Lenders will ask for a variety of information, including a business plan, repayment proposal, and statements and accounts from business banks.
The typical term for commercial mortgages is three to 25 years. A commercial mortgage broker may be able to help you.
Make an offer
Once you’ve found the commercial property you want to purchase, you must make a written proposal – usually to the commercial estate agent.
It is worth trying to negotiate with the vendor to reach an acceptable level. Keep in mind that the seller will consider a variety of factors, such as your price and the speed at the which the deal can be completed.
Accept your offer and ask politely that the commercial property be taken off the market. This will prevent any other interested parties from closing the deal.
To find out anything that could affect the commercial property or the surrounding area, you should conduct a search with the local authority.
You may also be able to search for information about relevant building regulations, planning applications, and transport development, as well as other issues such as contamination.
You don’t want to be surprised by something that could affect the value of your commercial property.
Complete on commercial property and exchange contracts
It will contain details about the agreement, the financing and the timeframe.
The final details of the contract will be negotiated with the seller by your solicitor and commercial estate agent.
An exclusivity agreement, also known as a lockout agreement, can be requested. This agreement will give you a time frame to complete due diligence, knowing that the seller won’t negotiate with any other party.
A survey will usually be done on commercial properties to ensure that it is structurally sound, and any major flaws have been addressed.
If you are planning to redevelop commercial property, you may want to take advantage of this opportunity to obtain planning consents from your local council.
Contracts can be exchanged at:Both parties are happy with the contract
You are satisfied with the current state of the commercial propert
The finance necessary to complete the deal has been raised
This is when the purchase of commercial property is recognized by the law.
Your solicitor will be able to advise you on other boxes that need to be checked.
Setting up insurance
Land Stamp Duty
Register your commercial property ownership with Land Registry Verify whether your commercial property must be registered for safety and health reasons Once the documents are signed, dated, and delivered, the deal is complete. Your solicitor will transfer the remaining purchase price to the seller’s lawyer and you will be given the keys to your commercial property.