Whether you’re looking to buy UK commercial property now or in the future, a clear understanding of the process will help you make the most of your investment. Once you’ve identified the right location and type of property for your needs, follow our step-by-step guide to ensure the acquisition runs smoothly.
Identify which stage in the cyclical market we are in: recession, recovery, expansion, or contraction. You may want to delay the acquisition if the market is in contraction due to the fact that prices will be expected to fall.
Check the permissions. Commercial properties are covered by The Town and Country Planning (Uses Classes) Order 1987. Make sure that the property you are looking to acquire has the appropriate permissions in place for your line of business.
Review the tenancy. If you are an investor and looking for an income-producing property it is important to review the details of the tenancy contract of the current tenant. If you are looking for a property for your own business and the property is occupied you will need to review how and when the tenancy contract can be broken and what liabilities that would entail.
Budget for additional fees. Potential fees include: surveyor fees, solicitor fees, commercial mortgage fees, business rates (local tax), service charges, insurance, maintenance, utilities, SDLT, deposits, and VAT.
Check the Commercial Energy Performance Certificate (EPC) that will be provided by the seller. If the property has a poor rating, this could be a tool to help negotiate the price down as work will be needed to improve the efficiency of the property.
Examine your capital allowance eligibility. You can reclaim expenditure on your commercial property against your overall tax liability.
Make a written offer to the seller. This is usually done through the agent representing the owner of the property.
Draft of the Heads of Terms (HOTS), also called a Memorandum of Understanding (MOU). The HOTS is recognized as an initial draft of the actual contract. When both parties agree to the HOTS the legal work begins.
Conduct a “Local Search”. This is to research the area surrounding the property and identify any plans for its alteration or development. Your solicitor will apply to the local authority for the searches to be conducted. These searches normally take 2-3 weeks but additional fees can be paid to expedite the process.
Exchange contracts. When both parties are satisfied, the surveyor and solicitor have made all the necessary checks, permissions if any have been granted and the funds are prepared, you are ready to exchange contracts. Until the contracts are exchanged, the seller can sell to another party unless a lockout agreement has been entered into. Upon exchange there is usually a deposit paid, which is normally 10% of the selling price.
Complete the transaction. This usually takes about one month after exchange. Upon completion the buyer will pay the remaining balance.
Lastly, meet your obligations as the owner of a commercial property. Pay the SDLT (stamp duty land tax), register with the Land Registry, register with the Health and Safety Executive if necessary, examine the utilities contracts and establish the business rates.