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Buyers Guide to Commercial Property

Whether you have a firmly established business or are starting afresh, if you want a fully dedicated place to operate from, you need to invest in commercial property. In the UK, commercial property can refer typically to those used for leisure and hospitality purposes, industrial premises, retail units and offices.

Just as is often the case with residential property, it is not as easy as just finding a property and buying it when you are looking for commercial property. Therefore, to help you navigate the commercial property market, we have put together the following guide.

Finding a Property

When it comes to finding a property, the timing could be the key to securing a great deal. It’s best, if possible, to avoid buying at the top of the market when the property prices are highest and is recommended that you spend time monitoring the national and local commercial property trends. Look at trends like:

  • Commercial property value
  • Commercial property supply
  • Commercial mortgages availability
  • The appetite of any investors you are likely to be competing with
  • If you’re planning to let your property, rental values, and tenant demand

Calculate The Costs Involved

As is the case with investing in anything significant, you need to consider the costs involved in buying commercial property. A deposit is normally required when the contracts are exchanged in commercial property purchases. Once the deal is complete, the rest of the sales price is paid.

There are several other costs you need to factor into your calculations when buying commercial property that you need to be aware of, such as:

  • Advice from a professional, such as a solicitor, lender, or estate agent
  • Stamp Duty Land Tax – you are liable to pay this if the commercial property you buy is valued at over £150,000.
  • VAT
  • Commercial mortgage fees
  • Refurbishment and decorating costs
  • Purchasing and installing equipment and furniture
  • Removals
  • Establishing your IT systems and other facilities

There are also many ongoing costs involved with maintaining the commercial property that you should make sure you can afford. These include

  • Insurance
  • Maintenance and repairs
  • Other services like cleaning and security
  • Any applicable local authority charges, such as waste collection
  • Repayments on commercial mortgage
  • Energy costs

Consider Getting a Business Loan

It may be, depending on your financial situation, in your best interests to get a business loan o give yourself a better and stronger buying position. The most common type of finance used when buying commercial property is a commercial mortgage. Don’t settle for the first lender you come across though, as there are many out there. Compare and contrasts offers from a lot of different lenders to make sure you are getting the best deal.

Putting In Offers

When you think you have found the commercial property you want to purchase, you need to put in a written offer. Unless otherwise directed, this will normally go to the estate agent representing the seller. Don’t be put off if your first offer is rejected. It’s a good idea to try and negotiate to find a mutually acceptable sale price.

If your offer is accepted, asked politely for the property to be taken off the commercial market to prevent any other buyers from swooping in and securing it for themselves.

Exchange Contracts

For the next stage, you need the help of a solicitor who specialises in commercial property. The heads of terms, which is a legal document that outlines the main points of your sale agreement with the vendor, will be drafted following your offer being lodged and accepted.

This includes details of the kind of agreement that was made, how the deal is going to be financed and the proposed timescales.

It is then the job of your commercial solicitor to negotiate the final details of the contract on your behalf with the seller.

You can request things like an “exclusivity agreement” which is also referred to as a lock-out agreement that gives you a specific amount of time to carry out relevant due diligence without fear of losing your deal.

This will include a commercial property survey that will check it is structurally sound and that there are no serious flaws that have not been disclosed.

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