Purchasing Commercial Property – Things to Consider

Purchasing a property for business is a significant commitment. Whether you’re buying commercial property as part of a plan to expand your business or investing for the long term, understanding the process and potential risks is essential.

At AFG Law, our experienced commercial property solicitors can guide you through every stage of your commercial property purchase, from initial negotiations through to registration at the Land Registry.

With prices starting from £995 + VAT, our team offers expert legal advice for businesses of all sizes. You can contact us on 0161 515 2577 or email commercialpropertyenquiries@afglaw.co.uk to discuss your transaction.

When purchasing commercial property, there are a number of things that should be considered, including the following:

How to purchase a commercial property

The process of purchasing a commercial property typically begins with identifying suitable premises and making an offer through the estate agent. Once the offer is accepted, your solicitor will carry out due diligence, including reviewing contracts, conducting searches, and liaising with your lender if you are obtaining a commercial mortgage. You will then exchange contracts, pay a deposit, and complete the transaction on the agreed date. After completion, the deed will be registered at the Land Registry, and you’ll become the legal owner of the property.

Timescales for purchasing commercial property

The timescale for a commercial property purchase can vary depending on the complexity of the transaction, funding arrangements, and the responsiveness of all parties involved. On average, it can take between 6 to 12 weeks from the offer being accepted to completion. Factors such as delays in mortgage approval, outstanding planning permissions, or unexpected issues uncovered during due diligence can extend this timeframe. Setting realistic expectations and maintaining good communication between your solicitor, lender, and the seller helps ensure a smooth process.

What types of commercial property can you buy?

There are many types of commercial property, and the right one depends on your business objectives. Common categories include:

• Retail premises such as shops and showrooms
• Industrial units and warehouses
• Offices (serviced or independent)
• Mixed-use properties combining residential and commercial spaces
• Hospitality properties such as restaurants or hotels

An estate agent should be able to assist you in finding the right property for your business.

How do you finance a commercial property purchase?

Many businesses rely on a commercial mortgage to complete a commercial property purchase. A lender will typically assess the value of the property, your business income, and your credit profile before approving a loan.

Interest rates on commercial mortgages tend to be higher than those on residential mortgages, reflecting the increased level of risk for lenders.

Before committing, you should compare different financing options, including traditional bank loans, private lenders, and commercial finance brokers. Early planning ensures that your funding is in place when it is time to complete.

Do also bear in mind that most commercial lenders require a suite of security documentation. In addition to take a mortgage or legal charge as security over the property, they may also require a debenture over a company borrower and personal guarantees.

What due diligence should you carry out before buying a commercial property?

Legal due diligence is crucial in any property transaction. It ensures you understand what you are buying and helps prevent costly surprises later.

Your solicitor will review:

• The Land Registry title to confirm ownership and boundaries
• Any covenants or restrictions on how you can use the property
• Whether the property has proper planning permission for your intended business use
• Details of any tenants or leases (if you are buying an investment property)
• Local authority searches revealing issues such as flood risk or nearby development plans

Thorough due diligence protects your investment and avoids future disputes.

What is the difference between freehold and leasehold commercial property?

When purchasing a commercial property, it is essential to know whether you’re buying the freehold or taking on a leasehold interest.

• Freehold means you own the property and the land outright.
• Leasehold gives you the right to occupy the property for a set number of years, subject to any covenants or obligations in the lease.

Leasehold properties may include restrictions or obligations, such as maintaining the building or contributing to service charges. Your solicitor will review the lease terms and advise on how they may impact your operations.

Do you need a survey before purchasing commercial property?

We believe so, yes. It’s always advisable to have a survey carried out before buying. Structural issues identified later could lead to significant repair costs, and once completion takes place, you will likely have no recourse against the seller.

A survey can highlight issues with the roof, electrics, drainage, or foundations, allowing you to renegotiate the purchase price or decide not to proceed.

What taxes and additional costs should you expect?

When budgeting for your commercial property purchase, you should consider more than just the purchase price.

You may also need to pay:

• Stamp Duty Land Tax (SDLT) – calculated based on the purchase price and type of property.
• VAT – some sellers “opt to tax” their property, meaning VAT must be paid in addition to the purchase price.
• Professional fees – including legal, valuation, and survey costs.
• Business rates – an ongoing tax charged on most commercial premises.

Your solicitor can assist in calculating these costs in advance to help you plan your budget effectively.

How do planning permission and intended use affect your purchase?

Before completing your purchase, it is advisable to check that the property has the correct planning permission for your intended business activity.

For example, a property currently used as an office may require permission to be converted into a restaurant or warehouse.

If your transaction is supported by a commercial mortgage, your lender is likely to insist that all planning permissions are in place before completion. Failing to secure the appropriate planning permissions may lead to enforcement action by the local planning authority.

What are your responsibilities after completion?

Once the transaction completes, your solicitor will handle several post-completion steps:

• Paying any SDLT due to HMRC
• Registering the deed at the Land Registry
• Notifying your lender (if applicable)

You will then take full ownership and responsibility for the property, including maintaining it, managing business rates, and ensuring compliance with health and safety regulations.

How can buying a commercial property help you expand your business?

Purchasing a commercial property can be a strategic move to expand your business. Owning premises gives you long-term stability, control over costs, and the ability to adapt or develop the property as your company grows.

It can also offer investment potential, for example, renting out part of the property or benefiting from future increases in value. However, the decision should be balanced with your cash flow needs and long-term business goals.

Should you get legal advice before making an offer?

Absolutely. Early legal advice can save time and money. Before making or accepting an offer, your solicitor can review the Heads of Terms or Memorandum of Sale to ensure that your interests are protected.

They can also explain any complex clauses and identify risks in the early stages, avoiding misunderstandings or delays later in the process.

How can AFG Law assist?

Our commercial property solicitors assist a wide range clients across all sectors, from start-ups buying their first premises to established businesses growing their property portfolios.

We handle every stage of the process, including:

• Reviewing contracts and transfer deeds
• Conducting due diligence and searches
• Liaising with lenders for commercial mortgage funding
• Calculating stamp duty land tax
• Completing registration at the Land Registry

We also offer advice on comparing a residential property investment to a commercial one, ensuring you choose the structure that suits your goals.

If you are thinking about buying a commercial property, contact our specialist team today.

Contact commercialpropertyenquiries@afglaw.co.uk for further information or call us on 01615152577.

We’ll provide clear, practical advice to make your commercial property purchase as smooth and efficient as possible.