When Buying A Commercial Property, Keep These Three Vital Things In Mind

When Buying A Commercial Property, Keep These Three Vital Things In Mind
If you are 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 is not all plain sailing however, there is no investment golden goose out there, there will always be some drawbacks, so below we have 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.

Whilst the kinds of major structural defects that could ultimately render the property uninhabitable (such as a problem with underpinning) may have to be revealed up front (normally meaning that these sorts of properties are easy to spot), other less life threatening, but still extremely important structural defects do not, an example of this might be dry rot. It is your wealth at stake which means it is down to you to do the necessary investigative work to discover any issues during the purchasing process. Discovering problems after you have completed will leave you with no legal cover what so ever.

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 do not want to buy a property that is in breach of planning regulations.

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 you are purchasing a commercial property it is essential that you get the correct searches carried out. The most important is a Local Authority Search, which takes approximately 2 3 weeks to complete and will cost you about GBP200. It covers some fairly essential issues like traffic and road projects in your area that may affect the value of the property. It will also tell you about local authority actions that relate to the property such as breaches of building regulations, issues relating to planning conditions, any compulsory purchase orders on the property and all enforcement notices that apply.

The Drainage and Water Search takes a few days and costs around GBP140. IT is a report that is becoming more and more important. It will show you if surface water, foul water and sewerage drains away from the property to an adopted mains sewer within 100 feet of the property. IT will also show you if there is a water supply to the property and whether that supply is metered.

The Environmental Search takes about 48 hours and costs around GBP180. It shows whether the property has ever been sited near any building which might contaminate the soil and whether or not the property is situated in a flood risk area. IF you fail to obtain such a report it could mean you face a bill for thousands of pounds for decontaminating the site of the property.

Done correctly a commercial property purchase can be a great investment. That said, it is still crucial that you take the greatest of care to ensure that there are no problems with your investment, at the end of the day, no one can protect your money better than you can. Simply following the three golden rules above you can ensure that you are purchasing a solid investment, not a liability.

Howard O’Gollegos writes for Just Commercial Mortgages the UK’s No1 site for the latest commercial mortgage rates and commercial property finance news.

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