Buying commercial premises. What things to consider?
Discussion
I have found a property that suits my needs well and I have the cash for the deposit so I'm thinking of giving up our serviced office space and buying this place. I will be seeking legal and tax advice this week but as it's buzzing round in my head right now I was hoping the kind people of pistonheads wouldn't mind helping me fill in the gaps on my fag-packet maths.
It's a bit larger than what we need so I'm planning to let out half of it for a year or two while we grow. If some of the building is empty, are council rates still payable?
Other than the place itself, what costs are involved. At £250k there will be stamp duty. There will also be conveyancing (£?), lease agreements (£?), anything else?
I don't think I'll struggle to find a tenant as I know hundreds of small buiness owners. If I did, what kind of fees do surveyors charge to find tenants?
Any other things I may be overlooking? It's a two storey office block on a business park.
It's a bit larger than what we need so I'm planning to let out half of it for a year or two while we grow. If some of the building is empty, are council rates still payable?
Other than the place itself, what costs are involved. At £250k there will be stamp duty. There will also be conveyancing (£?), lease agreements (£?), anything else?
I don't think I'll struggle to find a tenant as I know hundreds of small buiness owners. If I did, what kind of fees do surveyors charge to find tenants?
Any other things I may be overlooking? It's a two storey office block on a business park.
Edited by Dick Dastardly on Sunday 25th July 14:59
Full rates payable on RV at or over £18,000. 2010/11 below this no empty rates at all. This is being reviewed annually it would seem.
Purchase costs: Stamp Duty Land Tax, Solicitors inc. searches, Valuation Surveys.
One-Off costs. Fit-out, IT infrastructure, furniture, security, comms.
On-going costs. Insurance, Rates, Utilities, Refuse disposal
Responsibilities: Asbestos Management Plan (hopefully building too new to be an issue). Disabled Discrimination Act issues considered. Fire Risk Assessment.
Agents letting costs generally 10%.
Purchase costs: Stamp Duty Land Tax, Solicitors inc. searches, Valuation Surveys.
One-Off costs. Fit-out, IT infrastructure, furniture, security, comms.
On-going costs. Insurance, Rates, Utilities, Refuse disposal
Responsibilities: Asbestos Management Plan (hopefully building too new to be an issue). Disabled Discrimination Act issues considered. Fire Risk Assessment.
Agents letting costs generally 10%.
Are you getting advice on the purchase? I believe there are good deals around for those with cash to spend. The company I work for reckons the Cardiff Market to be ok for investors relative to other uk cities. If looking at renting I believe rent free periods is still the norm although I guess you are thinking shorter term leases?
Are you getting advice on the purchase? I believe there are good deals around for those with cash to spend. The company I work for reckons the Cardiff Market to be ok for investors relative to other uk cities. If looking at renting I believe rent free periods is still the norm although I guess you are thinking shorter term leases?
Dick Dastardly said:
Thanks guys.
A couple of other questions that popped into my head last night:
1. Is VAT payable on the purchase of commercial property?
2. Instead of a two-floor office building, can it be split into 2 x one-floor offices as then the ratable value would be below £18K each?
1. VAT is not payable unless the exemption has been waived. In the case of most modern property this will be the case as the developer will have claimed the VAT back from the build cost.A couple of other questions that popped into my head last night:
1. Is VAT payable on the purchase of commercial property?
2. Instead of a two-floor office building, can it be split into 2 x one-floor offices as then the ratable value would be below £18K each?
2. Bit of a open ended question. Depends on size and local values. As long as each suite can sit independently (i.e. you don't need to go through one office to get to the stairs, common entrance etc allowed obviously) the Rateable Value should be equivalent to the rental value on 1 April 2008.
davidjpowell said:
Responsibilities: Asbestos Management Plan (hopefully building too new to be an issue). Disabled Discrimination Act issues considered. Fire Risk Assessment.
The seller would be required to provide a copy of the Management Survey (Old Type 2)so you can include it as part of your Asbestos Management Plan.The Fire Risk Assessment is subject to the type of operation you are going to undertake on site as no two companies are the same or operate in the same way
Morning. I've been slightly slow to spot this, but would be happy to have a chat over some of the things to consider.
We act only for occupiers of commercial property, dealing with acqusitions, lease arrangements (lease renewals, rent reviews etc), building surveying, valuations etc etc. For more information the website is www.trilogiecre.com and we act throughout the UK and abroad.
Please feel free to give me a buzz and I can have a chat through some of the factors to consider.
Tim
We act only for occupiers of commercial property, dealing with acqusitions, lease arrangements (lease renewals, rent reviews etc), building surveying, valuations etc etc. For more information the website is www.trilogiecre.com and we act throughout the UK and abroad.
Please feel free to give me a buzz and I can have a chat through some of the factors to consider.
Tim
I have no idea, I'l leave you to second guess
Just offering an opinion which along with everything you read on a forum, you should take with a pinch of salt. Which is why I still maintain that if you are getting preofesional advice on legals etc you should probably also get it to check that your £250k investment is a good deal in the first place.
Just offering an opinion which along with everything you read on a forum, you should take with a pinch of salt. Which is why I still maintain that if you are getting preofesional advice on legals etc you should probably also get it to check that your £250k investment is a good deal in the first place.
TimCrighton said:
Morning. I've been slightly slow to spot this, but would be happy to have a chat over some of the things to consider.
We act only for occupiers of commercial property, dealing with acqusitions, lease arrangements (lease renewals, rent reviews etc), building surveying, valuations etc etc. For more information the website is www.trilogiecre.com and we act throughout the UK and abroad.
Please feel free to give me a buzz and I can have a chat through some of the factors to consider.
Tim
Small world. I used to work with one of your colleagues - Dave King.We act only for occupiers of commercial property, dealing with acqusitions, lease arrangements (lease renewals, rent reviews etc), building surveying, valuations etc etc. For more information the website is www.trilogiecre.com and we act throughout the UK and abroad.
Please feel free to give me a buzz and I can have a chat through some of the factors to consider.
Tim
TimCrighton said:
SIG per chance?
I know Dave pretty well, we joined TCRE at the same time. As you say a small world, particularly in property!!
Nope before that. He used to work for the family firm, that I was then a Director of. My brother still keeps very much in touch with him - and he's somehow on my other half's Facebook Friend list!I know Dave pretty well, we joined TCRE at the same time. As you say a small world, particularly in property!!
Yup. Doing a similar thing to yourselves, but on a much smaller scale for a few select clients. http://www.property-professionals.co.uk/
Thanks for the advice guys. It's a bit of a bugger as VAT is payable, which pushes it up into the higher stamp duty bracket, which also means more VAT is paid on top of the extra duty (if I've been informed correctly).
It's a self fulfilling cycle of tax increases and may be killing the deal for me.
It's a self fulfilling cycle of tax increases and may be killing the deal for me.
TimCrighton said:
Morning. I've been slightly slow to spot this, but would be happy to have a chat over some of the things to consider.
We act only for occupiers of commercial property, dealing with acqusitions, lease arrangements (lease renewals, rent reviews etc), building surveying, valuations etc etc. For more information the website is www.trilogiecre.com and we act throughout the UK and abroad.
Please feel free to give me a buzz and I can have a chat through some of the factors to consider.
Tim
Tim helped me with a lease negotiation and rates issue. I can highly recommend him, saved us a few bob and very nice guy as well.We act only for occupiers of commercial property, dealing with acqusitions, lease arrangements (lease renewals, rent reviews etc), building surveying, valuations etc etc. For more information the website is www.trilogiecre.com and we act throughout the UK and abroad.
Please feel free to give me a buzz and I can have a chat through some of the factors to consider.
Tim
It should be possible to split the grd flr from the 1st flr for business rates. In the ideal world you would create a common lobby on the ground floor which provides access from the front door to the staircase. Its not essential. I do know a 250.000 sq ft warehouse which was split into 2 assessments based ourley on a yellow line painted on the floor!
The sum of 2 parts are oftewn greater than the whole as a smaller floor area can be a jigher rate per square metre, but the common lobby should sort that. As mentioned the current limit for an empty property is £18,000 and in theory that will drop to £2,600 in April. Its anyones guess what will happen in April and whether it will stay at £18,000 or drop back to £2,600.
Depending how long it is to be empty for you could use S44a. This entitles you to relief on buildings that are being occupied in stages. You could for example occupy 50% of the ground floor and get S44a on the rest for 3 months (it is offices isnt it), then after 3 months occupy all the ground floor, and get 3 months s44a on the first floor. Then occupy 75% of the whole etc. S44a is discretionary but is designed for new businesses establishing themselves and is paid for by central government so should be given!
The sum of 2 parts are oftewn greater than the whole as a smaller floor area can be a jigher rate per square metre, but the common lobby should sort that. As mentioned the current limit for an empty property is £18,000 and in theory that will drop to £2,600 in April. Its anyones guess what will happen in April and whether it will stay at £18,000 or drop back to £2,600.
Depending how long it is to be empty for you could use S44a. This entitles you to relief on buildings that are being occupied in stages. You could for example occupy 50% of the ground floor and get S44a on the rest for 3 months (it is offices isnt it), then after 3 months occupy all the ground floor, and get 3 months s44a on the first floor. Then occupy 75% of the whole etc. S44a is discretionary but is designed for new businesses establishing themselves and is paid for by central government so should be given!
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