Buying new commercial premises can be a huge challenge for a business, whether it is a small new set-up or an established firm looking to expand.
For businesses with surplus capital, buying a property in a desirable location can prove to be a good investment.
There are risks with such a major move but advantages of buying commercial property can include:
- The costs of finance may be no more expensive than renting.
- It gives you more freedom to use the premises as you wish, in line with local authority regulations.
- If the property's value goes up, you can make a profit.
- You can let all or part of the property at a future point and receive additional income.
- If you move, you are not bound by rental notice clauses.
Before you start, you need to identify how much you can afford. You will be expected to contribute to the loan in the same way as you fund the deposit in residential property purchases. Speak to your bank early on to see if they will give you an agreement in principle.
What's your timetable? If you have a choice, think carefully about when to start your business, particularly if takings are likely to fluctuate during the year.
Shops are usually quiet after the Christmas rush, and anything to do with the holiday industry may go dead all winter, so, plan ahead to avoid overstretching your finances before you have properly started.
Just like residential properties, location is paramount with a commercial purchase. You need to be sure the move will be sustainable for your business in the long term.
See buyer's guide for more advice.
The first place to start is to look at the businesses already for sale, either on the Internet, in trade papers, or via an agent.
The main advantage of this is that the owner is likely to be motivated to sell, but you may be under pressure from other potential buyers
You should draw up a list of the initial costs before taking the plunge to buy:
- Estate agent, solicitor and surveyor fees
- VAT and stamp duty
- Fees for searches or enquiries with the local authority or Companies House
- Lender's fee
As well as the initial costs in purchasing the property, you should consider the ongoing maintenance and disposal costs. It is worth noting some of these costs:
- Business rates, based on the value of the property at a given date.
- Repairs and maintenance costs
- Running costs - lighting, heating and any cleaning or security services you employ
You will need to take into account the moving costs. These might include:
- Marketing the property costs
- End of lease dilapidations
- Any early repayment fee imposed by the finance provider
Once you have found the right property, you can make a conditional offer to the agent.
This will be subject to certain conditions, such as:
- a satisfactory building survey
- confirmation of finance
- planning permission if you plan to make alterations
Your solicitor can advise you on the suitability of the premises. Talk to your solicitor and finance provider about finding a surveyor experienced in commercial property.
The surveyor will assess the value and condition of the property you are intending to buy. A full structural survey will reassure any mortgage lender that the property is a sound investment.
Once you are satisfied that this is the right property for you, the next step is to exchange contracts and pay the deposit.
You can do this after:
- both buyer and seller are happy with the contract
- your surveyor and solicitor have made all the necessary legal checks and searches
- any planning permission has been granted
- you have received approval from your finance provider
On completion, your finance provider will forward the funds to your solicitor, who will pay the seller's solicitor.
The solicitor will also pay the stamp duty, register your title with the Land Registry and forwards the property's deeds to the finance provider.