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When you are thinking about buying commercial premises, don’t wait until terms are agreed before speaking with us. We can give you a number of useful pointers to help you on your search, looking for the right type of finance or getting an agent involved in helping you.
We find many clients have been searching for the right type of premises for some time and so the last thing they want to find is any delay in the process starting. Clients like the proactive approach we take from the outset to understand the transaction, getting the detail right from the beginning, contacting the seller Solicitors, commencing searches, etc.
Nowell Meller’s Commercial Purchase Property team experience, means that from the outset our clients understand what is involved. We don’t assume clients know what the commercial Conveyancing process looks like so we explain this in plain English. We also try to pre-empt matters that are likely to cause delays. So, for example, it will be important to know whether the seller has an up to date Asbestos Report because if one should be in place - and it isn’t - then we can liaise with the sellers Solicitor or selling agent to ensure an expert is instructed to provide one.
Within the section below, we have set out some useful tips when the right premises have been found.
Useful tips when buying commercial premises
- Finance – if our client needs financial assistance for the purchase, there is no point looking for premises without confirmation of funding in place. We recommend clients speak with their lending relationship manager to see whether the project would be supported, or seek commercial lending advice to understand the criteria and conditions which may be imposed.
- Engage with local agents – they understand the local market and will register your details so that you are notified when a suitable property becomes available.
- Make some approaches – you may have seen premises which are ideally located and meet your space requirements – there is nothing to lose in writing to the owner of the premises to see if they are considering a sale.
- Private Sale – if you negotiate directly with a seller (because they have not advertised via a local agent) then instruct Solicitors to draft Heads of Terms. These contain fundamental details regarding the sale such as the sale price, parties involved, Solicitors to be instructed, a plan of the area to be purchased, any conditions (i.e. if the deal is subject to any change of use), whether VAT is to be charged on the sale price, any works to be undertaken before completion, timescales for completion etc. This avoids any later uncertainty.
- Check the EPC (Energy Performance Certificate). Commercial premises with a below E rating cannot be offered for sale without improvement works to provide at the very least an E rating. If the rating needs to be improved then the seller will need to undertake those improvement works.
- Consider Asbestos. It is the responsibility of every commercial property owner or occupier to hold an up to date asbestos report and management plan. In our experience many commercial property sellers are not aware of the regulations and our buying client is entitled to see the report as part of the due diligence pack. Given it can take a couple of weeks for a specialist company to undertake an inspection and then produce a report, we recommend our buying clients enquire early doors as to whether the seller has an up to date plan. If not, as part of the negotiations we recommend this is included as a seller obligation. View Government Website for Asbestos Guidance.
- VAT - check whether VAT is chargeable in addition to the purchase price. For a buying client who is not registered for VAT and cannot claim the VAT element back after completion, this can be an unforeseen expense and so being aware of this from the outset is essential. Even for clients who are registered for VAT, they will still have to fund the VAT element until it can be reclaimed after completion. View Government Website for VAT Option to Tax Guidance.
- Check the authorised use. There is no point a buying client proceeding with a premises they cannot use for their intended purpose so checking the authorised use of the premises with the relevant local planning or speak to Nowell Meller who can help clients with this aspect.
- Capital Allowances. This is a complex area and requires certain contract clauses to protect any capital allowance elections. It may be important for a buying client to know whether the seller has claimed capital allowances and this is another question which can be asked at the outset. View Government Website for Capital Allowance Guidance.
- Environmental Issues. A buying client may have concerns regarding potential contamination if, for example, the premises has a history of industrial use or the current use requires environmental licences. An offer may be subject to assurance the seller has not received any environmental notices and if necessary, Nowell Meller Commercial Property team can undertake a desktop environmental report to look the environmental history of the property.
- Speak with your accountants as to the best way to structure the purchase.
- Engage Solicitors as soon as possible – many clients will leave instructing Solicitors until the last moment. They may well have been working on the deal and putting finance in place for many months and understandably are then eager to complete. Buying clients may not understand the conveyancing process and everything involved (see below), and so the sooner Solicitors are instructed the better.
The commercial property buying experience
Once our client has agreed a purchase, Nowell Meller will:
- discuss all the details of the transaction. We will be asking about boundaries, what the premises are used for, what our client wants to use the buildings for, whether VAT is applicable, whether capital allowances are available, whether funding is agreed, projected timescales etc. At Nowell Meller we believe in getting the detail right from the outset.
- contact the selling agents for the heads of terms and then liaise with our client once received to make sure they understand any conditions imposed.
- contact the seller’s Solicitors to request the draft contract, title, replies to commercial enquiries and supporting information. We look at the premises online and will also take a look at the Land Registry map service.
- once the documentation arrives from the sellers Solicitor this is carefully considered. We send our clients the plan to check, we will carry out a site survey if necessary just to ensure the title boundaries match the boundaries on site.
- if lending support is required, we liaise early doors with the funding relationship manager. This is essential to ensure we understand what the lender requirements will be. We keep the relationship manager updated throughout the transaction.
- we report to our clients on the contract pack and discuss the replies given by the seller to standard commercial enquires called CPSEs. We will raise additional enquires if necessary.
- we provide our clients with a list of searches to be carried out and then discuss these. We report to our clients when the results arrive and if necessary raise enquiries of the sellers Solicitor – for example if planning permissions are revealed which have not been provided.
- our clients are kept updated through each stage and when everything is in order, we will report and meet with our clients to go through documentation and sign up in readiness.
- report to the lender (a separate report is required) and deal with any queries raised contact any lender for an indicative settlement figure. Prior to completion we also obtain an accurate figure based on the agreed completion date.
- once the lender has agreed release of funds we will exchange contracts which fixes the completion date.
- Prior to completion we provide clients with a detailed completion statement and we deal with any pre completion requirements, searches and lending criteria.
- on completion, we will deal with transfer of funds, release of keys and call you to confirm completion.
- following completion, we submit any HMRC Return and pay the stamp duty amount, submit an application to the Land Registry to transfer the title to our client, return any necessary documentation to the lender and provide our client with a copy of the title.
There may be other complexities, for example if our client buys a long leasehold interest, but throughout we keep our clients posted on progress so they are not left in the dark wondering what happens next.
Buying a long leasehold interest
Further work is involved for the purchase of long leasehold property. Leases can impose ground rent and service charge payments that a buyer is not aware of. There may be a management company responsible for repairs of buildings, roads, common parts which can also increase the expenses and so we report to our clients at the earliest opportunity once the seller provides a detailed leasehold pack of information. Particular care needs to be taken to ensure all service charges are up to date, and the management company or landlord are not expecting to carry out works in the future which could significantly increase expenditure.
The lease may also contain provisions which either require notice to be given to the freeholder/management company on completion, or for our client as a buyer to enter into separate documents or even, in some situations, require freeholder consent to the actual sale taking place.
On completion we also ensure that any ground rents or service charge payments are properly apportioned.
Purchase of commercial land
We have a dedicated section dealing with land for commercial or residential development so please refer to our New Build section and services available.