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Buying Commercial Property: Everything you need to know before taking the plunge

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Buying Commercial Property: Everything you need to know before taking the plunge

Commercial property can be a fantastic investment and help elevate your business even further.

But there are some things you need to be aware of, including the financing, conveyancing and tax implications.

In this article, Hannah Martin outlines everything you need to know before ‘taking the plunge’.

What is Commercial Property?

Commercial property are properties that are used by businesses as shops, offices or even warehouses.

Properties which are a combination of commercial units and residential property (i.e. a shop with flats above) are referred to as mixed property, but treated as commercial property.

How do I get started in commercial property?

Often people will purchase commercial property either for the purposes of their own occupation if they are setting up or running their business or as a way of investing.

Commercial property can be a good investment opportunity and provide guaranteed income for landlords, as commercial tenants often occupy property under long-term leases and pay rent regularly.

Despite the many benefits, buying commercial property can be risky and there are often large costs involved, especially at the beginning. For this reason, we would always recommend speaking to an accountant or financial advisor first.

You should also consider whether you want to buy commercial property as an individual or as a company. Both options have their benefits. Again, a financial professional will be able to advise you.

Can you borrow money for a commercial property?

Yes, there are many ways that you can borrow money to go towards the purchase of a commercial property. Including the Commercial Mortgages and Bridging Loans.

In my colleague Patsy Whitford’s article, she looks at how these loans work and weighs up which is best. You can read it here.

Can you mortgage a commercial property?

Yes, you can mortgage a commercial property. A commercial mortgage is similar to a residential mortgage, in that it is a loan on a property that needs to be repaid (plus interest) to the lender (usually a bank or building society).

Mortgage rates for commercial properties are higher than that of residential homes, as commercial mortgages are seen as being higher risk for the lender.

Find out more about commercial mortgages, the rates and how to get one here.

What deposit do you need to buy a commercial property?

When contracts are exchanged, you’ll need to pay a 10% deposit to the seller.

This is usually paid before any financing is acquired, such as a loan or mortgage, so make sure that you have the means to pay the deposit!

You may also have to pay a reservation deposit to the agent, to ensure that you reserve the property. Make sure to ask your agent if this is a requirement before making any offer.

How much does commercial conveyancing cost?

Commercial conveyancing costs can vary depending on your solicitor.

At Frettens, we will always be up front and transparent with our pricing and will provide a bespoke quote depending on the level of work required and the value of the property.

You can get in touch with us for a quote on 01202 499255, or by filling out the form at the top of this page.

Do you pay VAT when buying a commercial property?

If the seller has elected to tax the property, you should be aware that VAT may be payable on the purchase price.

When viewing a property, you should ask whether VAT is payable as this will need to be considered when preparing the finance for the purchase.

Do you pay stamp duty land tax when buying a commercial property?

Yes, Stamp Duty Land Tax (SDLT), is also payable on commercial property.

The amount of Stamp Duty you pay depends on the type of property and the ‘value’ of the associated transaction. This may not be simply the purchase price paid.

Find out more about stamp duty rates, and the exemptions, here.

Specialist Commercial Property Solicitors

Our bright Commercial Property Team have vast experience in buying, buying to let and renting commercial premises and would be happy to assist you.

We can provide tailored advice on your circumstances and assist you in all legal aspects of purchase.

You can call us on 01202 499255, or fill out the form at the top of this page, for a free initial appointment.

The content of this article, blog or video is not intended as specific legal advice. For tailored assistance, please contact a member of our team.