Commercial Property Letting

[Remster500]

Any advice appreciated.

I am currently owner/shareholder of a Ltd Company that operates from it's own Freehold property. As I'm selling off the business, I'll be left with the property as the Companies only asset. I have x2 options going forward that I've been researching. The first is obtaining residential planning permission (5 properties) and selling on to a developer/builder with the option of personally purchasing a couple of the houses to let. The 2nd is to spend some of the business sale proceeds to convert the building into individual small business units/offices and then become the landlord. I have done a feasibility study with drawings involving the local council with the 1st idea and have had replies back which pose a few problems but may be able to sort with a planning consultant. I have no experience of the 2nd commercial idea, so would welcome any advice.

Edited by Remster500 on Saturday 31st December 17:09

[PurpleMoonlight]

A Registered pension arrangement cannot own residential property without considerable adverse tax consequences.

It can own commercial property though.

[Remster500]

PurpleMoonlight said:

A Registered pension arrangement cannot own residential property without considerable adverse tax consequences.

It can own commercial property though.

Thanks for the clarification, I have edited original post.👍

[Chrisgr31]

How many commercial units would you be creating? You'll need to manage them, and certainly initially have legal advice for the creation of the licence to let them on. Developments of small units can be very successful but they will need lots of proactive management, and you need to factor in void costs.

[pkrplyr]

It sounds like obtaining planning and selling the development opportunity would be the best and potentially most lucrative option.
If you could actually develop the residential homes yourself, that would yield even more.

Which part of the world is it?

[951TSE]

Remster500 said:

Any advice appreciated.

I am currently owner/shareholder of a Ltd Company that operates from it's own Freehold property. As I'm selling off the business, I'll be left with the property as the Companies only asset. <SNIP>

I must have missed something here? As the accountants on this list are frequently telling us a ltd company is a separate legal entity from the directors / shareholders. So as you say the company owns the freehold, how will you retain it once the company is sold on unless you're going to buy it back from it.

[KevinCamaroSS]

951TSE said:

I must have missed something here? As the accountants on this list are frequently telling us a ltd company is a separate legal entity from the directors / shareholders. So as you say the company owns the freehold, how will you retain it once the company is sold on unless you're going to buy it back from it.

This, if you sell off the company (that is, sell all your shares in the company) the company assets are no longer in your control, they belong to the company, not you.

[CrouchingWayne]

You can sell/buy assets only - the purchaser may have simply bought the "business assets" from the OP's company and then the existing Limited firm sits with whatever the purchaser didn't negotiate into the deal.

For example if OP was a Widget manufacturer who happened to own the warehouse he manufactured in, if a bigger company wanted those Widgets they might take the staff/order book/lists/machinery and move into their existing premises (to save costs) and leave he property with the OP in the Limited Co wrapper as they don't want/need it.

[Remster500]

CrouchingWayne said:

You can sell/buy assets only - the purchaser may have simply bought the "business assets" from the OP's company and then the existing Limited firm sits with whatever the purchaser didn't negotiate into the deal.

For example if OP was a Widget manufacturer who happened to own the warehouse he manufactured in, if a bigger company wanted those Widgets they might take the staff/order book/lists/machinery and move into their existing premises (to save costs) and leave he property with the OP in the Limited Co wrapper as they don't want/need it.

Perfectly explained and exactly what I've done. The property is the only asset left in the Ltd company after selling off the machinery, tooling, order book etc. Therefore any developing/selling of the freehold property has to be done within the Ltd Co. and then proceeds extracted to director/shareholder by normal means or the company closed down and then funds extracted after taxes paid.

The property is an unusual but attractive Victorian building set in an affluent rural Leicestershire village. It stands alone with enough land to put x2 new 3/4 bed properties on the site whilst converting the existing building into x3 other dwellings. From a commercial perspective it could be divided into either 1-2 modern offices and then 3-4 small 1,000 sq/ft light industrial or 1-2 larger. There is already adequate 3 phase electrics for the above. The council have initial indicated problems with x2 new residential builds on the site as it contravenes planning policy but this could potentially be challenged. I'm just weighing up the pros and cons of each option before spending and more money. Obviously, I want the best yield but have to consider the hassle and problems/risk associated with each idea versus the reward.

[CrouchingWayne]

in your position and presumably with a bit of capital available as a result of the sale I would get in contact with the local commercial agents and see what they view as the optimum unit size for the area (as all industries are different what works well locally to Joe Blogs will be different to Jim Blogs 200 miles away) and then plan a way to maximise the commercial usage and invest a little up front to set it all up (fire exits, nice finish on communal areas, car parking). Presumably you could do it over a few phases for cash flow as well which would be handy.

I know someone who has a similar prestigious building / location that has it as several units of commercial property. Over the term it has been in their ownership it has done very well for them in terms of appreciation and chucking off rental consistently.

Long leases, sensible transparency via accounts and the reduced exposure to chancers would send me commercial over residential leasing.

Residual income vs one off receipt is a more personal choice.

[Chrisgr31]

If going the commercial route I'd definitely be keeping it as ultimately it will almost certainly go for residential conversion. At present isnt planning relaxed for office to resi conversions? Not sure on qualifying period nor when it expires.