Buying and selling commercial property

Davisons can help businesses buying or selling commercial property. Our commercial property solicitors provide a comprehensive conveyancing service. We are dedicated to making sure transactions run smoothly by identifying potential problems and opportunities quickly so you can make the best decisions.

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Buying a commercial property

There are a number of factors to consider when buying commercial property to ensure you make a sound investment.

Calculate rental yield

Rental yield indicates the return you will receive on your investment. For a commercial property you need a yield of at least 5% to cover costs and make a profit. A commercial mortgage company will only lend you the money to buy a property if the rental yield is strong.

Rental yield is calculated by dividing the annual income by the value of the property and multiplying the total by 100.

Consider how to maximise your investment

You might think about buying a commercial property with a business in situ. This can provide you with an income straight away and save you searching for tenants. Before doing so, however, it is important to research the strength of the business. If the tenant’s credit rating falls this can affect the future security and value of your investment.

If you buy a commercial property with business in residence this may mean taking over the existing lease. A solicitor will examine the lease to make sure it protects your business interests.

You can also maximise your investment by purchasing a property that needs refurbishment. As with residential properties, refurbishing the right property in an area of high demand can mean a greater return on your investment.

Choose the best location

Find a location where rental yields are high and where there is likely to be a demand for your property in the future.

Think about the type of business that will rent your property and their priorities. Will transport links be important to them? Will they need passing trade? Can they afford the local authority business rates? Will a rural location suit them, or do they need to be located on an industrial park?

Plan your finances

Most commercial mortgages require a deposit of at least 25%. There are two types of mortgages, owner-occupier mortgages, and commercial investment mortgages. Owner-occupier mortgages are for buyers who plan to run their own business from a property. Commercial investment mortgages are for buyers who will lease their premises to another business.

Commercial mortgage rates vary depending upon the type of property, the industry sector, and the property investor’s prior experience.

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Selling a commercial property

Just as when selling a residential property, a commercial property needs to be prepared for buyers. The premises should be presented so that prospective buyers can envisage running their business from the property.

Prepare buyer information

It is advisable to prepare a pack for prospective buyers to help them to make a decision. Your business solicitor will be able to help you with this.

The pack should include:

Energy performance certificate (EPC)
Planning permissions and lawful use documents
Business rate costs
Asbestos survey, if applicable
Any other costs the buyer will need to consider such as stamp duty land tax (SDLT).

Calculate selling costs

Whatever type of commercial real estate you are selling there are costs to consider, such as:

Professional fees for the estate agent, surveyor and solicitor.
Mortgage redemption fee. If you pay off your mortgage early when you sell you may have to pay an early redemption fee.
Commercial mortgage arrangement fee. This is payable unless you can transfer an existing mortgage.
Capital gains tax (CGT). CGT for commercial property gains is 10% for basic rate taxpayers and 20% for higher rate taxpayers. Tax is discounted by Business Asset Disposal Relief for qualifying businesses.
Removal expenses. You may need to factor in the cost of removing furniture and other equipment from the premises.

Why choose Davisons commercial property solicitors?

Our commercial conveyancing team act for a broad range of businesses in the UK and overseas. We protect our clients’ interests through a proactive approach, and we make sure they are aware of all developments throughout the conveyancing process. We aim to exceed our clients’ expectations by ensuring transactions are both efficient and cost-effective.

Whether you are buying or selling a commercial property our solicitors can offer you high-quality legal advice tailored to your business goals.