Buying Commercial Property
Buying Commercial Property in North West London
Whether you are buying a commercial property for your business or as an investment, it is a huge financial commitment. Therefore, it’s important to be aware of everything involved in choosing the right space. Every business requires a specific type of property to support its activities, so we’ve put together a commercial property buying guide to help you narrow down your options and find the right premises for your business or investment.
Find the right location
The first thing to consider is which area you want the commercial property to be in. Not only will it impact the accessibility of the site, but also the other costs involved. For example, buying a commercial property just outside of a city centre will usually be cheaper compared to a property located in the city centre. This is true for commercial property in North West London, where you tend to get a lot more for your money than buying in Central London.
Timing is everything when it comes to buying a commercial property, so ideally you want to purchase when prices are starting to fall. A reputable local commercial property agent will be able to give you advice based on current market trends, and if you intend to lease out the property, what tenant demand and rental values are currently like.
Think about what the property will be used for and how much space you will need, which will also play a big role in determining the cost.
Some of the things to consider for clients/customers/suppliers visiting or living nearby to the property include:
- Parking availability and restrictions
- Local congestion charges
- Associated business rates (such as waste collection)
- Local authority charges
- Delivery accessibility, times and restrictions
- How noise may impact local residents
You also have to factor in how the property works for people who will be using the property. This means looking at things such as:
- Local transport links
- Property condition (as this creates an impression of the business)
- Ensuring there is good footfall nearby (for retail outlets)
- Local amenities for staff (for morning and lunch periods)
- Staff facilities inside the building (toilets/staff rooms etc.)
- Furniture and equipment contained in the property
There are also laws related to how each commercial property can be used, with the different classes laid out in the Town and Country Planning (Uses Classes) Order 1987 which you can find here.
As you would with a residential property, when visiting a commercial building you should inspect the condition to ensure it is worth the sale price. Keep an eye on things like damp, cracks, plumbing issues, windows, heating and insulation systems. Noticing any issues will not only ensure you pay a fair price and avoid dealing with unnecessary issues when moving in, it can also put you in a better negotiating position.
Weigh up the full cost of buying the property
You may be expecting to pay a deposit on the property once the contracts have been exchanged, with the rest delivered after a completion date has been set. But there are also a number of other costs that have to be taken into consideration.
This includes things such as:
- Stamp Duty Land Tax: If you buy the property for more than £150,000 you must also pay stamp duty. For properties that cost between £150,001 and £250,000, the rate for each tax band is 2% and for properties over £250,000 the rate is 5% per tax band.
- VAT: This is not applicable to all buildings, but it may be required for some.
- Professional fees: If you have used a commercial property agent, lender or solicitor there will be fees to be paid to these professionals.
- Equipment costs: The cost of buying any additional furniture or equipment to become operational and fitting out the space.
- Set-up: Infrastructure costs – i.e. IT and internet charges
- Moving costs: Paying a removal company to transport items to the property location
There will also be a variety of costs that have to be paid whilst you are occupying the property. This includes things like insurance, additional services such as cleaning and security (if not already included with the service charge), paying for local authority waste collection and commercial mortgage repayments.
Energy costs are another bill that will have to be paid, which is why it is important to get an Energy Performance Certificate (EPC) from the seller. This will tell you how energy efficient the space is based on its insulation, and how much your bills could be. By law, every commercial building must have a rating of at least ‘E’ and it is illegal to have a rating of either ‘F’ or ‘G’, the two lowest brackets.
You will be liable to pay business rates, which is a tax due for companies using non-residential buildings. To get an estimate of how much your business rates may be, multiply the rateable value of the property (determined by the Valuation Office Agency) by the Uniform Business Rate. If you are looking to buy a commercial property to lease out, the occupier of the property must pay the business rates e.g. the tenant. If the property is unoccupied it is the responsibility of the owner / landlord. You can find out more about business rates in the London borough of Brent here.
The Valuation Office Agency will re-evaluate the rates in 2022, and every 5 years, as the current figures are based on their 2017 review. The business rates will be provided by the local authority every year and you may be eligible for some exemptions, depending on the size and type of business you run.
Securing a Mortgage
Most businesses – especially smaller companies – will need a financial helping hand in order to buy a commercial property. This is often the case with buy-to-let investors. As you would do with a residential property, you can go to a financial organisation to secure a commercial mortgage to organise a structured repayment plan.
Before you can secure a deal for your business you will need to have your business details organised to present to the lender, including a business plan, business bank accounts and statements and your proposed repayment plan. Finance lenders want to reduce the risk on their part and ensure you are in a stable enough position to repay the loan over the agreed period.
For buy-to-let investors, you’ll need to provide information on how much money the property is expected to generate. The lender will then ‘stress test’ this usually around 125% (but can be as much as 145%) to ensure you’ll generate enough money to cover the mortgage repayments. They will also conduct personal checks similar to a residential mortgage e.g. credit checks, affordability, existing mortgages / loans, etc.
Put down an offer for the property
The first stage of making an offer on a commercial property is to submit it in writing to the owner’s commercial property agent.
Depending on how many offers they have received, and how competitive they believe your offer to be, they will then decide to either accept, reject or negotiate the deal. They will also factor in your viability as a buyer, especially if you are involved in a commercial property chain (which can slow the buying process down).
If you have an offer accepted, you should ask that the property is taken off the market so no further offers can be submitted and you have more control over the next few steps. The seller does not have to do this, but it is normal practice to agree to your request.
You can then carry out local searches to see if there are any structural issues with the property that could affect the deal. This will check everything from the condition of nearby land, to flood assessments and building regulations. It’s an important step as it ensures you do not miss any problems that could affect the value of the property once you become the owner.
Finalising the deal
Hire a solicitor for the final stages of the deal, who will oversee the drafting of the heads of terms document containing all the main points of the sale. It will include things such as the sale price, proposed timescales and how the purchase is being financed.
It is a good idea to request an exclusivity (lock-out) agreement, which will allow you to conduct the relevant checks and searches needed within an agreed time frame, while also meaning that the property cannot be sold to another party during this period.
The solicitor will oversee the survey which will check the structural condition of the property, and highlight any issues that need to be addressed before the contracts are exchanged. This is also the period to put forward any planning permission requests you need if you intend to make any structural changes to the property when you move in.
Negotiations will carry on between both sets of solicitors until seller and buyer are satisfied with the details of the contract. As long as you are happy with the contract and the survey details, and have all the finances required for the deal, the contracts can then be exchanged. It is at this point that the sale becomes legally binding. Any cancellation after this point could mean losing all of the money tied up in the deal.
Your solicitor will oversee all the final details such as paying Stamp Duty Land Tax, updating Land Registry details and confirming if the property needs to registered for health and safety. Once all the outstanding funds have been paid, including to the seller, you can then prepare to move into your new commercial property on the agreed move-in date.
Looking to buy commercial property in North West London?
Whether you’re a business searching for the perfect premises or an investor looking to add to your commercial property portfolio, Regal Estates can help. We have a portfolio of commercial properties for sale in Willesden Green, Neasden, Dollis Hill and the surrounding North West London areas. Our team of commercial property agents can help you find the ideal commercial property matching your exact requirements. For more information, contact us today on 020 8459 2530 or email us.