BUYING YOUR FIRST COMMERCIAL PROPERTY – FIVE THINGS TO CONSIDER

Past uses and planning history

Thorough investigation should be carried out in relation to historic use of the property you are considering buying. Your solicitor will usually recommend local authority and environmental searches are carried out. These searches can provide valuable information in relation to past uses, planning history and any environmental factors affecting the property including sources of potential contamination and details of any previous environmental issues.

As the owner of the property you will be responsible for dealing with any contamination in the first instance an this can be a costly affair. Environmental issues may have a direct impact on the value of the property and if issues are revealed by the search results specialist advice may be required.

A local authority search will provide information on the planning history of the property and details of the uses for which the property can currently be used. A property can be used only for the purpose for which it is authorised under the Town and Country Planning (use Classes) Order 1987 which divides uses into broad categories. In some cases the authorised use of the property may be altered without the need to lodge a planning application. If the property does not have planning permission for your intended use and the authorised use cannot be altered, a formal planning application to change the use must be made. Making a planning application can in some cases be a lengthy process and you may not be able to obtain the permission you would like. It is worth considering this at an early stage as you may wish to consider making an offer to purchase a property conditional on obtaining planning permission for specific use.

It is also important to establish whether the property is being used in breach of planning legislation. The owner of the property will be responsible for dealing with any enforcement action whether or not they were responsible for the breach. You will need to be sure that any past alterations or development works have been carried out in accordance with the planning permission granted. If significant breached are revealed it may have an impact on the value of the property.

Condition of the Property

An offer to purchase a property should always be made subject to satisfactory survey. Defects and problems may not be obvious to the untrained eye so a qualified and experienced surveyor should be appointed to carry out a thorough inspection of the property.

One the purchase of the property has been completed, it is not possible to claim compensation from the seller if you find out down the line that there are problems with the condition of the property. Serious issues may have an affect on the value of the property and may require significant expenditure to rectify.

If you are borrowing money to fund the purchase the lender will always seek a satisfactory survey.

Energy Performance Certificates and Energy Efficiency

An Energy Performance Certificate (EPC) is required for most properties and provides information about the energy performance of the property. The seller is responsible for producing the EPC. Each property is given an energy rating which can range from A (the most energy efficient) to G (the least energy efficient).

The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 sets out minimum levels of energy efficiency in rented property and pursuant to these regulations, landlord’s will be unable to let properties with F or G ratings after 2018 (except in certain circumstances). The regulations do not apply to property being sold but consideration should be given to the possibility of any future lettings and the ability to sell the property in the future. There are severe penalties for failure to comply with the regulations.

Costs

There are various costs (in addition to the purchase price) that need to be taken into account when purchasing a property.

Professional fees including those of solicitors, surveyors and any other specialist advisors will need to factored into your budget. Fees will depend on the value and complexity of the transaction but it is fairly common for fixed fee quotes to be given which can be helpful for budgeting purposes.

Stamp Duty Land Tax is payable on completion of the purchase of a property at the following rates:

Consideration

Rate

Up to £150,000

0%

£150,000 - £250,000

1%

£250,000 - £500,000

3%

Over £500,000

4%

Commercial properties are liable to business rates. The rates payable is based on the rateable value of a property which is set by the Valuation Office Agency (VOA). Rateable values are reviewed on a periodic basis with the next revaluation to take effect from 1 April 2017 and rateable values will be updated on the basis of market values as at 1 April 2015. This will mean that in areas that have seen the greatest rise in property values there may be a significant percentage rise in the business rates payable.

Time scales

The process of purchasing a property can take several months and longer if there are complications.

Once the purchase has completed, the property is unlikely to be immediately ready for use and fit out works might be required in addition to general decoration. In addition to fit out works, time (and budget) should be factored in to deal with obtaining any necessary planning permission or building regulation consent. You may also need the consent of neighbours or regulatory bodies. Suitable contractors will also need to be appointed to carry out the work.

Certain types of businesses will require additional licences and permits before they can start trading and in all cases, health and safety and fire regulation also need to be complied with.


by Alexandra Miller
Thursday 11th of August 2016 07:27:26 PM