FAQ: "I'm buying a commercial property. What do I need to know?"
When buying a commercial property, make sure you’re clear on what you and your business need before you start looking for a commercial property for sale.
"Should I buy a freehold commercial property or a leasehold commercial property?"
The decision to purchase a leasehold or freehold commercial property will all depend on your budget, your business priorities and your long-term intentions for the commercial property which you want to purchase. If you are looking for a good long-term investment for your business, purchasing the freehold of a property will leave you free to divide the property into a series of long-leased units at a later stage, should your business needs change for instance. You will never have another rent review, and once the commercial mortgage is paid off your costs will become dramatically lower, but it will also leave you or your business 100% responsible for all maintenance and repair work. If you purchase the leasehold interest of a property, you purchase the right to use someone else’s property as your own for a given period of time. These can still prove to be an effective long-term solution with good resale value (most new leases are granted for a term of 999 years), and depending on the lease agreement, you could find yourself with less ongoing responsibility for the upkeep of the building or land. One of the most popular types of lease is a full insuring and repairing lease, which leaves you responsible for the upkeep of the premises, but will generally have a much lower annual ground rent. If you’re unsure about what you’ll need, talk through your requirements with a commercial estate agent or chartered surveyor.
"What planning classification do I need to run my commercial property ?"
The planning class of any given commercial property could also have a large impact on your decision to purchase, depending on the type of business you are running or intend to run.
For instance, a commercial property that is classed as A1 in the UK is perfect if you wish to run a shop, but you will need to seek extra permission if you want to run a financial services business (this requires A2 classification), restaurant (A3) or pub (A4). As a general rule, it’s possible to use a premises with a higher planning classification for a business that requires a building with a lower planning classification of the same type. For example, if you buy a pub, which is A4 classified, you should be able to run a restaurant in it, as the required planning classification for a restaurant is A3. It can prove harder to get a commercial property’s planning classification upgraded (ie from shop to bank, or from restaurant to pub), as structural changes are often required, and the local authority may have strict town planning guidelines that they are following in your area. If in any doubt over whether a premises is suitable for your business needs, consult your local planning office, or an independent chartered surveyor / planning expert.
"What facilities, by law, will I need to make allowances for?"
You will need to ensure that your commercial premises provides enough space to meet your legal obligations both to your employees and your customers, and the requirements will differ depending on the type of business you are running. Some requirements apply across the board in equal measure, while others will have a greater impact on the day-to-day operation of your business, depending on the type of business you run. If you are considering the purchase of a small office that you intend to fill with a large number of sales staff, the legal requirement to allow at least 11 cubic meters per employee will become an important factor to consider while you are purchasing. Equally, if you are running a business where the nature of the business means that employees need a place to shower, you will need to either ensure that the commercial property you wish to buy has showering facilities already installed, or you will need to factor in the cost of getting showers fitted when preparing a purchase price offer, as this is a legal requirement in this case. For a full list of your requirements as an employer, you can browse the businesslink.gov.uk website.
"How do I decide on a fair price to offer to the commercial property seller ?"
There are many factors to consider when deciding on a fair market value for commercial property; the location, classification and tenure will all play a part, but in order to get a comparable price, many people refer to the price per square meter, or price per square foot. To use this when preparing your own bids, you need to find other commercial property that roughly matches the location, classification and tenure criteria of the property you are interested in, take the asking price of these comparable premises and divide this value by the internal area of each premises. You can then apply the same method to the area and price of your own intended purchase and decide on a fair offer from that. You can find commercial properties for sale here.
It’s important to remember that price per square footage is a good benchmark or starting point to use when preparing your initial offer, but it’s not a concrete immutable value. Demand for any given commercial property will play a large part in the asking price, as will the owner’s need to sell. Find out as much as you can about the business in question so that you’re armed with the relevant information before you make your offer.
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