Buying Your First Commercial Property

Buying Your First Commercial Property

There are many benefits to owning your own property for commercial purposes, but there are also many pitfalls to be aware of before investing.

Commercial Property accounts for around 13% of the value of all buildings across the UK, according to the PIA Property Data Report 2017. The majority of the commercial property sector is made up of:

  • Offices
  • Retail
  • Industrial warehouses and factories
  • Leisure properties restaurants, pubs, cinemas, gyms, and hotels

Buying commercial premises can be a good investment – owning a property gives your business stability and the property itself can become a significant asset. However, it is a major step and before you commit to a mortgage, it is important to think carefully about the pros and cons.

Advantages of buying business premises

There are considerable advantages to securing a mortgage to buy business premises, including:

  • Save on tax. LBTT rates are lower for commercial property as opposed to residential property i.e residential purchase at 200k the tax is £1,100 but for commercial only £500
  • ADS – No ADS payable on commercial property so can take 4% tax (on purchase price) by selecting to purchase a commercial property over a residential property. You can own as many commercial properties as you want without paying additional tax
  • If you are buying as an investment then choose to rent the property out, then a commercial lease shall be drawn up. Most commercial leases are “full repairing & insuring” leases which obligates the tenant to maintain the building and pay for any repairs. This is another attraction to buying a commercial property over residential as you can rent out the property without the day to day hassle that a residential tenancy can bring.
  • Before buying, want to ensure the usual due diligence is carried out. Every commercial property should have an Energy Performance Certificate (EPC) which any incoming tenant will want to see. An Asbestos Report may also be required.
  • You will also see commercial properties on the market where there is already a Tenant in situ. If this was the case, you would replace the Landlord within the Lease, but be obligated to continue with the existing lease terms. This can be attractive to investors as there is already an income, but the lease terms should be checked by your solicitor.