Guide to buying a Commercial Property
Buying commercial property can be a great investment and commercial property actually counts for over 10% of all buildings across the UK.
There are a number of different commercial property types you can buy which include; Offices buildings, Warehouses, Factories, Retail Shops, Shopping Centers, Pubs, Restaurants, Gyms and Hotels.
In this guide we are going to break down the process of finding and purchasing a commercial property.
1. Search for a commercial property
Like with most things involving buying property, the first step involves actively finding property. If you can, choose a good time to buy commercial property. You don’t ideally want to do it at the top of the market when prices are high. It is advisable to look at the trends in the local and national commercial property market, such as:
- Value of commercial property
- Supply of commercial property
- Availability of commercial mortgages
- Tenant demand and rental values, if you plan to let the commercial property
WRUK are on hand to offer you advice regarding this.
Commercial property is normally divided into use classes under the Town and Country Planning Order 1987. This can give you a understanding how each commercial property is occupied and make sure any property you do purchase is in line with its planning use.
The following list gives an indication of the use classes:
- A1 shops
- A2 financial and professional services
- A3 restaurants and cafés
- A4 drinking establishments
- A5 takeaways
- B1 business
- B2 industrial
- B8 storage or distribution
- C1 hotels
- C2 residential institutions
- C2A secure residential institution
- C3 homes
- C4 houses in multiple occupation
- D1 non-residential institutions
- D2 entertainment and leisure
If you plan to change the use of the building or alter it’s intended use, you may have to apply for planning permission.
2. Work out the costs of buying a commercial property
A deposit is usually required when contracts are exchanged to purchase commercial property. The remaining amount is then paid when the deal completes.
You should be ready for other costs involved including fees from commercial solicitors, estate agents, stamp duty land tax, VAT, refurbishing the property, mortgage fees, insurance, etc.
There can be a lot of costs involved in purchasing commercial property so you would want to factor in everything before making a decision.
3. Get a Commercial Mortgage
As purchasing commercial property can be costly, you may need a loan to give you that bit of help or boost. A commercial property is one of the best ways to get more funds. We can help you get a commercial loan.
4. Offer
When you have found a commercial property to buy, you will need to make a written offer – usually to the vendor’s commercial estate agent.
If the vendor refuses your offer, it is worth trying to negotiate to reach a mutually acceptable level. Remember that the seller has a number of factors to consider, including your price and the speed at which you can complete the deal.
When your offer is accepted, politely request that the commercial property is taken off the market to prevent other interested parties from closing in on the deal.
You should carry out a local authority search to unearth anything that might impact the commercial property and the wider area.
The search may include details of relevant planning applications, building regulations, transport development and other issues, such as contaminated land.
After all, you don’t want to find a nasty surprise lurking further down the line that will impact the value of your commercial property.
5. Exchange contracts
When you exchange contracts you will require a commercial solicitor. The solicitor will drafted the main points of the agreement up once your offer has been lodged and accepted. The document will include details about how the deal is structure, how it will be financed and what timescale everything will be completed upon.
Once this is done your estate agent and solicitor will negotiate the final details of the contract with your seller.
A survey of the commercial property will need to be done to ensure everything is in sound condition and there are no flaws with the property. If you plan to redevelop the property or change the properties use, it is a good idea to apply for planning permission from the local council.
Contracts will be exchanged once both parties are satisfied with the contract and the deal and the necessary funds to fund the deal have been raised. Once this has been done, in the eyes of the law it is legally exchanged hands.
The deal will complete when the formal documents are signed, dated and delivered. Your solicitor will hand over the remainder of the purchase price to the seller’s solicitor, and you will receive the keys to your new commercial property.