Four Vital Things to Know When Letting a Commercial Property

Using a commercial mortgage in order to purchase business premises is a wonderful investment, however there are things that you need to know about being a commercial landlord before you enter into any mortgage contracts.

First of all, you may need to rent out your commercial premises via an estate agent. Doing it this way will mean that some of the landlord responsibilities will be looked after by them, however there are still other things that you will need to know about in order to make the right decision about whether to become a landlord.

Arrangement Fees For Setting Up The Mortgage: The arrangement fees are commonly a charge of around 1% (but can be slightly higher or lower), and they are charged by the lender for the administration involved with setting up the loan for you. In some cases, the lender will allow you to add the fee to the value of the mortgage, to save you having to pay more money up front although you should be aware that you will be charged interest on it if you do add it to the loan amount.

These facilities could include bathrooms for staff and customers, a kitchen or canteen for staff to have their lunch and so on. You will therefore need to think about whether you are prepared to undertake the work to have these put in if the building does not already have them. The interiors may also need updating in order to attract more tenants - especially for retail premises and offices where customers would be going inside.

Energy Performance Certificates: These days the law dictates that you must pay for and provide your tenants with an energy performance certificate (EPC). A commercial EPC can be costly, so you will need to keep this in mind. Depending on the building, this can cost a few hundred pounds.

Legal and Professional Fees: Buying a commercial property will also involve legal and professional fees. A solicitor will have to be employed to draw up a contract and to gather together all the relevant legal documents that are needed for a property to be bought. Other professional fees need to be taken into consideration such as those for insurance and for site surveying.

Disability Discrimination Act: Assessing he needs of people with disabilities and taking reasonable steps to ensure that disabled people have good quality access to a commercial property is one of your major responsibilities as a landlord. You are obliged by law to comply with the Disability Discrimination Act, particularly if your tenants plan to open up the premises to the general public.

Not only that, the commercial tenants will also have to sign documentation to confirm that they agree to work within the law, including complying with the Disability Discrimination Act. You may need to get planning permission and consent from your mortgage lender in order to alter the building to comply with the law.

The Dangers of Asbestos: You will need to have the building checked over by professionals to ensure that the property does not contain asbestos, as this has been deemed to be a dangerous and toxic substance. If any is found then you will need to ensure that any works are taken care of to ensure that it is not dangerous to anyone inside the building, and any surround areas.

When you are working out the cost effectiveness of your development plan, and the relative cost of purchasing property, don't leave additional costs off the balance sheet. It is tempting to make a deal look better than it actually is by leaving certain costs to one side. This is a false economy and won't help you to fully judge whether a commercial purchase is right for you.


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Timothy Frodsham writes for Just Commercial Mortgages the UK's No.1 site for the latest commercial mortgage rates and commercial property finance news.