Buying or leasing commercial property: a checklist

From utilities and tax liabilities to the condition of the building itself, here’s what you should check when evaluating a commercial property for sale

There’s a lot to consider when inspecting a commercial property with a view to signing a lease or buying the building. Here’s a rundown of what you should look for – both in terms of the building itself as well as documentation, utilities and taxes – to choose a property that cost-effectively meets your needs.

Documentation

The owner of any commercial property you’re interested in must furnish you with all relevant legal documentation.

Commercial premises are often owned by larger organisations, although they may be solely owned or owned by a partnership.

Verify the vendor’s identity and that they have the legal right to sell you the property. You can do this by cross-checking what is supposedly for sale against the records held in the public land registry. 

You also need to find out the tenure type and terms.

If the premises are leasehold rather than freehold, establish the length of the lease and any restrictions you might face in your day-to-day operations. For example, a lease may impose restrictions on usage – or even prescribe what you must use it for – building alterations and the number of occupants that can work in the building.

These restrictions can have major implications for how you can use the building – now and in the future – and for any expansion plans you might have.

Utilities

If the current owner or their tenant has gone bust, the utilities may have been disconnected, which means you may have to pay fees to have them reconnected.

As well as checking for gas and electrical connections when looking around a property, check that there is running water. Also check whether phone lines are available and what sort of broadband speed you can achieve.

You can check broadband speed by connecting to Wi-Fi and running a speed checker on uSwitch. If the WiFi is disconnected, you can still gauge achievable speeds from various broadband providers in the area by using uSwitch’s postcode checker.

It’s also worth checking how many power points the premises have and where they are located.

Taxation

Ask the current owner what taxes – primarily business rates and stamp duty land tax – apply to the property, although you can do your own research too.

You can find out what business rates apply to the property – and appeal, if the value has been wrongly assessed – on GOV.UK.

Stamp duty is only payable on purchases costing more than £150,000. The payable amount above this threshold is determined by the amount of the purchase price that falls within each tax band.

VAT rules are complicated, but it’s worth making the effort to understand the VAT status of any commercial property you are considering buying or renting – lest you end up with a large bill that you cannot recover.

You should also establish if you will be entitled to any tax reliefs when trading from the property.

Internal checks

When inspecting the property interior, look for damp and other problems requiring maintenance work. If you do spot a damp problem, ask the owner if they have addressed the problem and for proof of any repairs carried out.

Establish if plumbing and heating systems are operational too.

External checks

When examining the exterior, find a high vantage point – if safe – to examine the roof, including the quality of drainage and damp-proof course – especially important given the frequency of increased rainfall in recent years.

Rising damp can be expensive to resolve and may increase your insurance costs, so look out for broken or missing damp-proof course in the low brickwork. Look for air bricks too, as these allow fresh air to pass through and prevent the build-up of mould.

And finally, look for areas around the building exterior that are suited for company signage – especially important if you plan to run a retail business.

You could also appoint a chartered surveyor to carry out more comprehensive checks on both the interior and exterior. Click here to find out about the types of commercial building survey available, what they cost and what you get for your money.

Negotiation leverage

Ask the agent or seller how many other people have been viewing the property (though don’t be naive enough to take their response at face value) and how long it has been on the market. The longer it’s been on the market, the greater the chances that an offer below asking price will be accepted.



Jo Thornley

About the author

Jo joined Dynamis in 2005 to co-ordinate PR and communications and produce editorial across all business brands. She earned her spurs managing the communications strategy and now creates and develops partnerships between BusinessesForSale.com, FranchiseSales.com and PropertySales.com and likeminded companies.

@BusinessMaiden

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