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Demand for certain types of commercial property has significantly increased in light of the Covid pandemic and this may have prompted owners and landlords to consider a sale. Similarly, whether due to businesses failing during the pandemic, or a desire to take a different direction, there has been an uptick in transactions involving commercial properties.
So, how do you sell a commercial property?
Here we look at some of the main factors to consider.
Reaching a valuation
There are a number of routes to reaching a valuation for a commercial property. These include a market appraisal from an agent and doing your own research on the local commercial property market. However, one method that cannot be argued with by any potential buyer is a formal Valuation Report by a RICS Registered Valuer. RICS Valuation Reports, or Red Book valuations, take many variables into account, including the size /footprint of the property, its characteristics (purpose, location, Use Class, condition etc), location, and regional / national market data.
One of the main difficulties when selling a commercial property is getting the timing right. The building will need to be available, which is likely to mean serving notice on an existing tenant or exercising a break clause.
It may be that the freehold is being sold alongside a business, or that the existing tenant wishes to purchase the property. Both of these scenarios allow for greater flexibility in timings.
If the property has been left in a state of disrepair by the outgoing tenant, you may be able to have a dilapidations survey and serve a dilapidations claim. This will depend on the wording in the lease.
In an ideal world, you will want to have any works on the property completed prior to having it valued, and certainly before you start to market it to potential buyers.
If a property is still occupied but you want to try and avoid a delay in sale, you may try to have works undertaken. In this case, you will need to agree this with the tenant and negotiate on any costs. The services of a Commercial Building Surveyor can be very useful here as a dilapidations survey will identify what works are needed and the likely costs. From here, the Surveyor can negotiate with the tenant and agree a schedule and fees for the work required.
There are likely to be a number of costs to account for in the sale of a commercial property. The most significant of these are likely to be agent’s fees, mortgage redemption fees and Capital Gains Tax – although all of these will be payable from the proceeds of the sale. Solicitor’s fees, Surveyor’s fees and any removal fees are the other costs that will need to be considered.
Any buyer will need to complete due diligence on a commercial property, both for their own purposes and to meet the requirements of lenders. This will require you to provide detailed information and documentation, including the property deed and Land Registry title documents, use Classes and associated lawful use certificates, planning and Building Regulations paperwork, and a recent Commercial Energy Performance Certificate (CEPC). Any information provided must be accurate as in the event of information being falsified, the buyer could sue for misrepresentation.
Lea Hough’s Chartered Surveyors are on hand to advise business and commercial property owners regarding the sale of their property asset. Our Valuation Reports, Dilapidations Surveys and dilapidations representation can optimise the value sellers can hope to achieve. For more information on any of our services, please get in touch.
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