It could be argued that selling a commercial property, or a property of any kind for that matter, is just as important as its purchase. This is because every property transaction is a two-way process between a buyer and seller. How you prepare as a seller therefore has an impact on how quickly the sale goes through, which can be important to facilitate an upcoming property purchase. There are also various checks that have to be made in order to reduce the risk of unexpected defects being found in surveys.
In this post, you’ll find everything sellers need to know to prepare a commercial property in the period running up to its sale.
Why sell a commercial property?
For a business, commercial property is an investment. An asset that often increases in value due to the actions of the business that uses it. For instance, a manufacturer might make improvements to the building air movement systems to enable certain processes and make its operations more sustainable. Even in cases where this holds true, there can come a time where there are many valid reasons to sell a commercial property. These can be:
- Obtain a profit – favourable market conditions can enable sellers to secure large sums of money for their property, which can incentivise its sale at that time.
- Risk vs reward – it can be a safer business decision to sell a commercial property that has substantial risks associated with it when compared to the benefits of the property (function).
- Need money – there can be many reasons why a commercial property owner might need money in the short term. They might need to fund an investment, shore up additional costs, or for a down payment. These are just a few examples.
- Step-up basis for sale – when the pre-existing owner of a commercial property passes, it can allow the inheritor to sell with the benefit of low tax liability.
- Tenant renewal – the recent renewal of a major tenant lease for a commercial property gives buyers confidence in the future of property. This can make it easier and more desirable to sell.
Establishing your reasons for selling is the first step in preparing a commercial property to be sold. This will allow your legal team to make certain considerations to maximise these goals and get the most out of the sale as possible. For example, those planning for retirement can benefit from commercial property solicitors who are skilled in maximising the liquid cash generated from the sale.
Tips for preparing a commercial property for sale
Once you’ve established the reasons why you want to sell your property, it is then necessary to value the property. This can be done in a number of different ways including through sales comparison, cost approach, income approach, and investment analysis. This is important, as it lets you accurately plan for the future by forecasting how much you stand to gain from the sale. The next step in the process of selling a commercial property is to prepare for the sale, which we recommend doing in the following ways.
Conduct repairs and maintenance work
One of the simplest ways to increase the value of a property is to take care of any repairs or maintenance in the days and weeks leading up to its sale. This can relate to the structure, interior and exterior of the property, as well as utilities. Doing this work is also useful as it helps avoid complications when the buyer conducts the property survey to assess the readiness of the property. The only exception is if you intend to sell the property as a renovation project, although this may make it more difficult to find potential buyers.
Gather documents
In the sale of a commercial property, there are certain pieces of paperwork that the seller is required to supply. It can save time to have these to hand before you settle on a buyer and begin the process proper. These documents include:
- Title deeds – registered properties will have electronic versions of the title deeds held at the Land Registry, as well as physical copies typically possessed by the previous owners.
- Property information pack – in cases where the commercial property being sold as part of a larger entity, sellers must provide details about service charges, maintenance responsibilities, rent, and other factor relevant to the buyer.
- Insurance – any insurance policies that apply to the building along with any documentation associated with them.
- VAT – certificates or other paperwork that serves as evidence of the property’s status.
- Compliance documents – paperwork relating to risk assessments and health and safety management. This includes fire, electricity, gas, and asbestos.
Contact details for third-parties
Any third parties involved in the commercial property should be listed along with their contact details. This will help the buyer by providing them will information they will most likely need. The end result being that the process of selling the property should progress more quickly.
Energy Performance Certificate
A valid EPC will provide a recent grading for the property based on its energy efficiency. If you don’t have one, take the time to carry out the necessary checks to get one for the property you wish to sell. Failure to present an EPC during the sale of a commercial property may result in you incurring a fine valued at anywhere between £500-£5000.
Notify tenants (if necessary)
If the property is being rented by commercial tenants, they must be notified of your intention to sell the property. It’s best practice to do this well in advance of your intended sales date. Note that this won’t impact any outstanding leases. For more information, read ‘Can a landlord sell a commercial property during a lease?’.
Legal support for commercial property
At Toomey Legal, we understand that selling a property you’ve had for years can be difficult for many reasons. Firstly, you need to source documents containing information that hasn’t been needed for a long time, then there are all the checks of the property itself, and at the end of it you might just be a little sentimental. Don’t worry. With an experienced commercial property conveyancer at your side, you’ll be able to prepare accordingly for the sale of your commercial property. Our team can provide valuable advice for both buyers and sellers of commercial property. Contact us today.