10 Step Guide to Buying a Commercial Property
Buying a commercial property is an exciting time for any business. Find out what it involves with our 10 step guide to buying a commercial property.
Buying a commercial property
Choose a property carefully
There is a lot to think about when choosing a commercial property. First and foremost, you need to check the use classification of the property. For example, commercial properties classified as A1 can be used as shops, whereas properties classified as A4 can be used as drinking establishments. If you buy a commercial property without the right use classification, you will need to make a change of use application. There is no certainty this will be accepted.
Additionally, you need to ensure the property meets your business needs in terms of size, location, access and amenities. There is no point in buying a commercial property, only to realise that car parking is essential and you do not have sufficient space for your staff and customers. It is better to find the right premises for your business first time round, rather than having to move in the not-too-distant future.
Consider your budget
Your choice of commercial property will also be guided by your budget. Just like buying a residential property, you will likely have to put a deposit down when you exchange contracts. You also need to factor in the cost of conveyancing fees, due diligence, Stamp Duty Land Tax and refurbishments.
Once you own the property, you will have ongoing payments to make, including business rates, local authority charges, energy bills, maintenance and building management fees (if applicable). Calculate these costs and be sure you have the money available. If you overstretch yourself, your business venture could be put in jeopardy.
Get a commercial mortgage
Commercial mortgages can take a lot of time to organise. So, if you are buying a commercial property with the help of a commercial mortgage, it is prudent to put it in place sooner, rather than later. If you have your mortgage offer ready, you can proceed as soon as you find a commercial property that you like.
There are also other funding options to explore, if a commercial mortgage is not available to you, or is not right for your business.
Make an offer
Once you find a commercial property that suits your needs and your budget, you can make an offer. Just like buying a residential property, this may require some negotiation. As soon as your offer is accepted, you need to instruct a commercial property solicitor (if you have not already done so).
Agree to the Heads of Terms
When your offer is accepted, the seller’s solicitor drafts a document called the Heads of Terms. This sets out exactly what you are buying, how you are buying it, and other details related to the sale. This is subject to contract, meaning that at this stage, it is open to negotiation. Your commercial property solicitor will review the document and advise whether any amendments are needed.
Request an exclusivity agreement
At this point you can ask to put an exclusivity agreement in place, also known as a lockout agreement. This prevents the seller from offering the commercial property to anyone else. It gives you time to carry out due diligence, without the fear of losing the property purchase to another interested party.
Carry out due diligence
Due diligence is vitally important when buying a commercial property. Local authority searches will tell you if there is anything that could impact the property – be it planned building work or contaminated land. You should also carry out surveys of the building to ensure any issues are identified.
If there is anything you are concerned about, you can raise queries with the seller’s solicitor. If you uncover certain information and you decide you do not want to proceed, now is the time to withdraw your offer.
If you are happy with the results of the searches and the terms of the contract, you can proceed to exchange contracts. You will have to provide the deposit, after which you are in a legally binding agreement.
Next, you need to organise insurance for your commercial property, including buildings insurance and contents insurance.
Complete the sale
Finally, you can complete the sale. You need to pay the remainder of the purchase price, or draw your mortgage. You also have to pay Stamp Duty Land Tax. The keys will be released to you and you can begin operating from your new business premises. Your solicitor will register your ownership of the commercial property with the Land Registry.
Commercial property solicitors Sunderland
Are you buying a commercial property? If so, please call our Sunderland solicitors on 0191 567 7244 and we’ll be happy to help.