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The Top Three Things To Know When Buying Commercial Property

Mar 30 2011

Commercial Property

Buying commercial property can be an excellent investment.  Not only can you benefit from good capital growth but you can also take a good income from the rental payments your property generates.  However, as with any investment, there are advantages and disadvantages of commercial property.  Our guide looks at three things you should always bear in mind when buying.

Get a good survey: A seller is not obliged to reveal any defects in a commercial property that they are selling.  So, the old motto 'caveat emptor' ('buyer beware') applies when purchasing commercial property.  It is up to you to make sure that you carry out a survey and valuation to discover whether the property you are buying is structurally sound.

Whilst major structural defects (such as underpinning) may have to be disclosed, other structural problems do not.  So, the onus is on you to uncover any problems during the buying process.  Finding issues after you have completed will leave you with precious little or no recourse to the vendor.

It is therefore generally recommended that a full structural survey is carried out on any commercial property that you are seeking to buy.  The only real exception to this is if the property is a brand new build.  A valuation will also establish whether there have been any extensions or alterations to the property which might have needed planning permission or building regulations approval.

Beware of restrictive covenants: A restrictive covenant may affect your ability to change the usage of a commercial property or to redevelop it.  For example, such a covenant may stop you turning a large building into several self-contained flats.  Consequently, it is important that you find out whether any such covenants apply to the property that you are buying.  You can so this by searching the Land Registry information and obtaining a copy of the property's registered title.

Once you have done this, you should examine the Charges Register.  This shows any covenants or rights that the property is subject to.  Any restrictive covenants which apply to the building will be outlined here.  Such a charge could have a significant impact on your plans for the commercial property that you are planning to buy.

Get the right searches: When buying a commercial property it is vital that you obtain the correct searches.  A Local Authority Search takes around 2-3 weeks and costs in the region of £2.  It will cover issues such as traffic and road schemes that may affect the property, breaches of building regulations, planning conditions, compulsory purchase orders and any enforcement notices that apply.

A Drainage and Water Search takes a few days and costs around £14.  It will tell you whether surface water and foul water and sewerage drains from the property to an adopted mains sewer within 1 ft of the property as well as confirming there is a water supply to the property and whether that supply is metered. 

An Environmental Search takes a day or two and costs around £18.  It confirms whether the property has ever been sited near a building which may have had potential for contaminating the soil and whether the property is in a flood risk area.  Failing to obtain such a report could mean you face a bill for thousands of pounds for cleaning up contamination on the site of the property.

Buying a commercial property can be a great investment.  However, as with any property transaction it is vital that you take great care to make sure there are no problems with your investment.  By following the three pieces of advice above you can help ensure that you are buying a good quality investment property.

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

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