Three Vital Things to Remember When Buying a Commercial Property
If you're looking for an investment vehicle then commercial property is a very good option to consider. With property prices ever going upwards, even in recession, steady growth in the property value is one of the major bonuses, not to mention the monthly income from rent which should leave some profit after commercial mortgage payments. It's not all plain sailing however, there is no investment golden goose out there, there will always be some drawbacks, so below we've put the three things every prospective commercial landlord should be wary of and watch out for.
Get a good survey: It is amazing the numbers of people who buy properties without checking to see if they are worth the paper the contract is printed on. Sellers are not legally obliged to reveal any problems with a commercial property they are selling. The old motto 'caveat emptor' ('buyer beware') applies before you consider purchasing commercial property. It is solely down to you to ensure that you conduct a survey and valuation to find out whether or not the property you are buying is structurally sound.
Finding problems once you have completed the purchase may cost you thousands and so it is vital that you uncover any issues through a valuation. Some major problems such as underpinning do have to be disclosed, but your surveyor will help you unearth any other issues with the property concerned.
The only way you can insulate yourself against this kind of problem is by having a full structural survey on any commercial property that you are planning to buy. This is the rule of thumb unless the property is a new build. The valuation of the property will also establish if there have been alterations or extensions to the building which might have required planning permission or building regulations approval.
Beware of restrictive covenants: Many people buy commercial property with a view to changing the usage or the layout of the property. However, a 'restrictive covenant' may prevent you from undertaking your plans. So, it is worth contacting the Land Registry to determine whether any such restrictions apply to the property that you are planning to buy.
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.
Get the right searches: When planning to buy a commercial property it is important that you get hold of the right searches on the property. A Local Authority Search takes about 2-3 weeks to complete and costs approximately £200. The search will cover potential pitfalls such as traffic and road schemes that may affect the value of the property, any breaches of building regulations, planning conditions, compulsory purchase orders and any enforcement notices that apply to the property.
A Drainage and Water Search takes a few days and costs around £140. It will tell you whether surface water and foul water and sewerage drains from the property to an adopted mains sewer within 100 feet of the property as well as confirming there is a water supply to the property and whether that supply is metered.
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.
About the Author
Timothy Frodsham writes for http://JustCommercialMortgages.com the UK's No.1 site for the latest commercial mortgage rates and commercial property finance news.
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