There are varying levels of experience in the commercial property market, from those that have been in business for what seems like forever and have an established brand, to those that are making their first forays into the business world on their own. No matter where you fall on this scale, there is always a question when taking on a new premises and that is: what are the costs that you need to make provision for when purchasing or taking a lease on a commercial property? This blog should tell you a little about what you'll need to look out for.
Providing that you use a solicitor, you will have solicitors’ costs to pay. Not only will you have the solicitor’s fees to pay but there will also be disbursements for searches, bank transfers & similar. In addition to your own legal costs when taking a lease, you may also be responsible for the landlord and or the outgoing tenant & in some instances the vendor on a purchase. When paying the legal costs of another party this is often at the outset & will be done by way of an undertaking provided by your solicitor once you have put them in funds.
Most people are fairly aware that when you purchase a property that stamp duty will be payable on the purchase depending on the properties value, however, it’s not so commonly known that stamp duty can be payable on occupational leases also, so it is worthwhile researching this on the HMRC website or being advised by your solicitor or accountant.
Valuation/ Finance Fees
If you require finance for your purchase you will also need to factor in any fees that will be required for the cost of the valuation or fees that you need to pay to the broker or your bank to provide this finance. Some of these may need to be paid up front, rather than being added to your loan.
If you choose to have a survey when you take on a property, this will give you some peace of mind & protection. However there is also an additional cost for this to consider.
Rent in Advance/ Service Charge/ Insurance
When you lease a property, you will normally need to pay an element of rent in advance this is quite often a quarter’s rent or an apportionment up to the next quarter day, whilst service charge & insurance will also be collected in a similar manner & can also apply to long leasehold & freehold property too.
When taking a lease for a commercial property, you can often pay an upfront fee to purchase that lease from the existing leaseholder which is called a premium. This will be payable on completion with a fraction payable on exchange of contracts if this takes place.
When taking a leasehold property in most instances a rent deposit will be required. A rent deposit should not be confused with rent in advance, whilst a large sum of rent in advance has it’s appeal to landlords, it is not the same thing as a rent deposit which provides more long term security. You may be required to pay either, or both when taking a lease of a commercial property.
This will be the sum you pay for the property if purchasing. In most instances, you will pay a deposit of 5 or 10% on exchange of contracts with the balance payable on completion. This may seem like a simple thing to know, but being certain of your purchase price is always crucial.
If you have any commercial property questions you'd like answered, please get in touch and you might see the answer feature in a future blog.