Preparing to sell your commercial property

commercial property solicitors

Not only does commercial property account for 13% of the value of all buildings in the UK, the actual value itself was £883 million according to latest data. 

So, the question is, what’s the best way to go about preparing for the sale of your commercial property? There are many aspects to consider such as how to value your property, what information prospective buyers need, the costs of selling and much more. 

How much is my commercial property worth?

The value of your commercial property depends on a variety of factors such as:

Location: Where the property is based can greatly affect its value. A good location, or prime location, is usually defined by the property’s proximity to other commercial outlets and the success of these outlets. For example, if your property is situated near or in a shopping centre or retail park then this could positively affect the value. It also depends on plans for the surrounding area in terms of regeneration projects such as shopping parks, new housing estates and waterside developments. Another effective way to determine a commercial property’s value is customer footfall such as a tourist area or a popular high street. 

Market trends and the economy: Market trends and the state of the economy are big factors in determining the value of your property. Are we heading for a recession or is the market fairly stable? What’s the current inflation rate? Is this set to change soon? You should also consider unemployment levels in the area, disposable income and anything else affecting potential stakeholders in your business and the community. 

Type of property: Property types can include pubs, restaurants, retail outlets, warehouses and much more. Of course, this has a significant impact on the price of your commercial property. The property should also be worth more or is more attractive to a potential buyer if you include the fixtures and fittings. 

Income potential: The property value relies on income potential. If the property is being sold as an investment with an occupational tenant with a healthy track record and the appropriate lease documentation in place, this can increase the value of the property or more the property more attractive than other such comparable investment properties on the market.  If you have established a business at the property and are looking to sell the goodwill of the business in addition to the property, if you can prove that you’re generating a healthy profit from the business, then this could easily increase the purchase price by selling the business as a going concern and the property.

Capital Allowances: Properties can be sold with capital allowances potential which can make property more attractive than other comparable properties. Capital allowances may be claimed on plant and machinery, moveables, repairs and other works such as works to remove Japanese knotweed and asbestos. You are recommended to collate your capital allowances information early, as this could be used as marketing tool. You need to determine whether you are willing to pass on the capital allowances or retain these. It is recommended that the capital allowances form part of the heads of terms once an offer has been accepted, to ensure that the parties are aware of the initial agreement as to whether capital allowances will be passed to the buyer or retained.

Property condition: Just like a residential property, the condition of the property is one of the biggest factors affecting the property value. This includes plumbing, electricity, heating, the roof, the structure of the building and so on. 

Supply and demand: If there are several similar commercial properties in the area then the supply could be higher than the demand. However, it depends on the condition of the other properties, their income potential and the state of the commercial property market. 

Selling costs to expect

Solicitor fees: We’ll start with the service we know best – commercial conveyancing. We will act as your property solicitor, as well as offering all the legal advice and guidance you need along the way. 

Commercial selling agent fees: Many commercial selling agents usually charge between 1% and 3% of your property’s value. In some cases, the agent’s fee could be negotiated. 

Capital Gains Tax: Put simply, this is the tax you’ll pay on any profit made on your commercial property. This includes business assets, property that isn’t your main residence or your main residence if you’ve used it as part of your business or let it out. There is a tax-free allowance. You should speak with your tax advisor to ensure you proceed with the sale in the tax year which is most tax beneficial to you. . 

Moving and storage costs: You may incur removal and storage costs if you’re relocating your business. However, depending on your situation, you may want to sell your items as you’re selling your entire business. You can negotiate a price with any potential buyers if they want to take on the entire business, including the items in the building. 

Mortgage fees: If you pay your mortgage off early then you may have to pay a redemption fee. But this does depend on your lender, so it’s always a good idea to ask. If you need to transfer your existing mortgage then this could also incur a mortgage arrangement fee for your new mortgage. 

What information does the buyer need?

Prior to putting your property on the market, you’ll need to ensure you can provide all the information any potential buyers may need. This includes, but is not limited to, planning permissions, energy performance certificates, asbestos surveys (depending on how old the building is!), capital allowance information, any letting documentation, information on Stamp Duty Land Tax (SDLT) and business rates

Before you can market your property, it is important to understand what your buyers will be looking for. Their main considerations are likely to be location, suitability and property price. It can be a good idea to prepare a buyer pack to give to prospective buyers, so that they have everything they need to make a decision.

What will the solicitor do?

Solicitors play a significant role in the sale of commercial property. We take care of deposits, organise the exchanging of contracts (completion), providing advice and guidance on the process. 

Accepting offers

You may receive multiple offers on your property, so it might be difficult to choose the best one. There a few factors you should take into consideration when accepting offers. For example, the buyer’s financial status, whether they’re a cash buyer or need a mortgage and whether or not they already have a mortgage / mortgage offer.

Are you ready to sell your commercial property? Talk to our specialist property team today:
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