Three Vital Things to Remember When Buying a Commercial Property

Purchasing commercial property is normally a great investment. You can benefit from reliable capital growth and take a regular income from rental payments that the property provides. There is, however, as with all investments, pros and cons to commercial property. This guide examines three fundamental things you should always bear in mind when buying.

Get a good survey: Sellers are not obliged to disclose defects in a commercial property that they are selling. Therefore, it is down to you to do the homework on your purchase .The old motto of 'caveat emptor' ('buyer beware') applies when purchasing commercial property more than at any other time. It is your job to make sure you commission a survey and valuation to uncover whether or not the property in question is actually worth buying at all.

Although major structural defects (such as underpinning) may have to be revealed by law, lesser structural problems do not. So, the emphasis is on you to find any potentially costly problems during the buying process. Discovering problems after you have purchased the property will leave you with scant little recourse to the vendor.

It is then generally sound advice that a full structural survey is completed on the commercial property that you are planning to buy. The only exception to this rule is if the property is brand new. Having an independent valuation will also give you a clear picture as to whether there have been any extensions or alterations to the property. You should look out for all alterations which may have needed planning permission or building regulations approval, you don't want to buy a property that is in breach of planning regulations.

Beware of restrictive covenants: Restrictive covenants will affect your ability to alter the use of a commercial property or to develop it. An example of this might be when a covenant stops you turning a big building into several self-contained flats. Consequently, it is vital that you discover whether any covenants apply to the property that you are purchasing. You will need to search the Land Registry information and obtain a copy of the property's registered title.

After the Land Registry check comes the checking of the Charges Register. You will need the registered title obtained from the Land Registry to make things easier. This register will show in more detail what rights and covenants the building is subject to and outlined in the register, if you find anything that halts your plans for the commercial property, then it is probably best to alter plans or walk away.

Searching... Database searching just doesn't stop at Land Registry and the Charges Register, if anything it's just the tip of the iceberg. When it comes to commercial property it becomes more vital to make these searches to avoid any nasty surprises or bills, so a Local Authority Search is one of the more important ones to take. It will cost in the region of £200 and take two or three weeks to complete cover areas such as planning and building regulations, CPO's, Enforcement notices and see what applies to your property and whether they are all up to date.

A Drainage and Water Search will confirm the supply of water to the property and whether this is metered. It also tells you whether water and sewerage drains to a mains sewer within 100 feet of the commercial property. It costs around £140 and takes a few days to complete.

An Environmental Search establishes whether there is a likelihood of soil contamination from any building situated near the property. This is important as it can cost thousands of pounds to clear a site of contaminated soil. It also tells you if the property is in a flood risk area. It costs around £180 and takes just a day or two to complete.

In order to profit from commercial property it is vital that you undertake all the due diligence when buying. Failing to obtain a good survey or the right searches may save you a small amount of money in the short term but could end up costing you thousands of pounds in the long run.


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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.