While many business searching for premises choose to lease, buying can sometimes be the better option – offering greater freedom and flexibility. As with any purchase of property, due diligence plays a crucial part in the buying process.
Keystone Law’s Tony Houghton shares his top tips to consider when buying commercial property.
Location, location, location
Keep your options open and go for the location that will best suit your business needs when buying commercial property. There are lots of factors to consider such as access and visibility to customers or commuting needs for staff. The important thing is, to take your time.
It pays to do your homework
You wouldn’t buy a car without checking it over first, so why should buying a business premises be any different? Often carried out by the buyers’ solicitor, important checks include a full local, drainage, environmental, ground survey, and other relevant searches were required. It is also possible to carry out a Plan Search, which shows any planning applications that have been granted but not yet implemented, as well as any forthcoming capital projects, such as Crossrail, that could be disruptive. If you’re new to the commercial property market hiring commercial property consultants is definitely something you should look into.
Go compare on mortgage deals
As with most buys, part of the purchase price can be financed on a competitive fixed interest, commercial repayment mortgage which means that the title will have to be checked on behalf of the mortgage company as well. With that in mind, it’s important to compare commercial mortgage offerings with other lenders to ensure you’re getting the best possible deal.
Exchange of contracts
The exchanging of contracts formally confirms your agreement to buy a property. At this stage, you must ensure that you are satisfied with all search and survey results and that you have no further concerns. Usually the necessary deposit is 10% of the purchase price and, on completion, (where the vendor has opted to tax for VAT purposes) you will need to budget for the remaining 90% as well as VAT at the current rate.
Beware of post completion fees
Following completion, fees such as Stamp Duty and Land Registry are payable (note that stamp duty is levied upon the purchase price and any VAT payable ie a tax upon a tax). These extra charges can prove to be problematic if not taken into account at an early stage.
While property value can increase or decrease over time, many business owners have benefited from buying a commercial building. Not only can it provide an asset for the owner’s business, it can also provide longer term security for both the owner and his or her family. For example, in the event of retirement or sale of a business, the property can be used to create an income for the owner by way of letting to a tenant or it can be used as an asset to raise money either through mainstream or P2P lending or equity crowdfunding or when looking at ways to exploit the new pension freedoms.
Organisations such as Property Investors Network now provide property resources and expertise online so you can pick up some useful tips and networking tools when looking into buying commercial property.