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Changing your commercial premises? Everything you need to know about moving your business

Owning a commercial property has a wealth of advantages for business owners. It means greater freedom to use your space effectively, potential to make a profit through renovation, and you could even benefit from tax relief through capital allowance (AIA).

When the time comes to find and re-locate to new premises, however, there are a number of essential considerations to watch out for that could end up saving you a great deal of time and hassle later down the line. These include:

  • Checking the property is fit for purpose
  • Finding a mortgage
  • Assessing the costs

Let’s take a look at each of these in more detail.

Checking the property is fit for purpose

When buying any property, either commercial or residential, it’s advisable to call in a surveyor to check over the building before you commit. In a nutshell, a chartered surveyor will help you to determine three things: whether the price is right, whether there are any underlying structural problems, and whether any plans that you have to alter or renovate the building are feasible.

Although it’s tempting to leave this stage out of the process (as many people inadvisably do when they’re buying a residential property), unless you are a cash buyer then a survey will be imperative for you to secure a mortgage. But regardless of obligation, a buildings survey is advisable because it your surveyor will be able to provide you with information and guidance regarding the state of the market, the true value of the premises, assess the property’s condition and investment value, and even help to negotiate a better price.

Finding a mortgage

In many ways, buying a commercial property is very similar to buying a home to live in. The first big payment you’ll encounter is the deposit for your mortgage. However, whereas for a residential property you can realistically secure a mortgage with just a 5% deposit, lenders for a commercial mortgage will typically ask for at least 25% of the property’s value to be put down upfront.

In addition, the rates charged for commercial mortgages are not pre-determined like they are for residential mortgages. Instead, the level of risk is calculated on a case by case basis. For best results, it’s advisable to go through a broker, who will be able to determine the most appropriate deal for your needs.

Assessing the costs

Like when purchasing a residential property, the buying process for business premises does not come cheap. As a rule, you can generally split these costs into one of two buckets: the immediate cost of acquisition, and the ongoing costs of residence.

Cost of acquisition

The first costs you’re likely to encounter are for the mortgage. In addition to the (typically) 25% deposit, you may also face other costs associated with your deal. These include arrangement fees, valuation fees and, if you find a mortgage through a broker, broker fees.

As we’ve mentioned previously in this post, you will need to call in the buildings surveyors. A surveyor will usually charge a fee of between 0.5 % and 3% of the total cost of purchase, depending upon the level of survey undertaken.

Stamp Duty Land Tax (SDLT) is payable on the majority of commercial properties, as it applies to any business premises or land valued at over £150,000. The amount payable works out as a percentage of your acquisition’s value and you can expect to pay between 1 — 4%.

In addition, you will be responsible for paying the legal fees of both the business and the lender. These can vary greatly from case to case, but as a benchmark, you can expect to receive costs of around £500 for each case.

Cost of residence

Business rates are charged on almost all non-domestic properties. The business rates bill is an annual bill based on the ‘rateable value’ of the property.

And don’t forget that with ownership comes responsibility for running costs or service charges, such as lighting, heating, and cleaning services etc. Before committing to a sale, you should have already seen an Energy Performance Certificate (EPC), which will give you a good indication of how much you can expect to pay out in bills.

Likewise, there’ll be no landlord to call in the instance that repairs and maintenance are required. As a precaution, it’s advisable to take out a buildings business insurance policy, which will cover you for damage through things like fire, floods and storms and vandalism.

Over to you

Purchasing a property is a huge decision that will impact your business’ finances in a number of ways. However, for some businesses it’s a key part of the growth strategy and a visible demonstration of your commercial worth to customers, suppliers and partners alike.

Here at Aldrock, we’re specialists in providing professional help and advice to a range of property buyers, including commercial. For more information or guidance, don’t hesitate to get in touch to speak to one of our expert advisors about your individual case.

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  • 20th May 2014