When considering an Investment Property, there are a few criteria that you need to consider:
One of the first things you need to look into are the terms of the current tenant’s leases. Ensure you have been sent full documentation of all of the leases including “side letters” or “Schedules of Condition” which may be attached to the leases as this could diminish their liability on keeping the premises in good repair and condition or may limit their responsibility in contributing financially in any future works/repair that you undertake to the property.
When checking any leases, check the lease expiry dates and any break options (whether landlord or tenant), ensure these dates and terms have been adhered to.
Ask to see the current tenant’s company accounts and check if there are any outstanding rent demands etc, are all the tenants up to date on rent? The agents acting on behalf of the vendor should be able to supply you with this information.
Find out when the last works to the property were undertaken; are they overdue, do all works that have been undertaken meet current Health and Safety Regulations as well as Building Regulations.
Commercial Investment Property in London can be marketed in various different ways. Some properties will be put to the “open market” and have no time scale for submitting an offer. Others will have a “deadline date” where all offers must be made by a certain time/date and will be either by “Informal Tender” or “Sealed Bids”, your agent will be happy to assist you.
All offers must be made in writing. Advise the agent if there are any conditions to your offer (i.e. your offer is unconditional, subject to any lease renewals or submitted subject to survey). Supply proof of funding to the vendor together with your solicitor details and a realistic time scale when you can exchange and complete on the purchase. Please note that on some purchases, the vendor may have set the exchange and completion dates, check with your solicitor that you are able to meet with this time scale. Try to supply as much information as possible to the vendor supporting your offer.
Once your offer has been accepted, the vendor or their agent will send Heads of Terms out to all relevant parties, including your solicitor. Once Heads of Terms have been agreed and solicitors instructed, ensure that the property is then put “Under Offer” and ask for the property to be taken off the market and that no further viewings will take place. The vendor’s solicitors will then send a “legal pack” to your solicitor, which will include a draft contract and Report on Title. This will then allow your solicitor to apply for local searches and raise any enquiries with the vendor’s solicitor.
An exchange of contracts takes place once both parties have agreed and signed the contract and the deposit monies have been transferred to the vendor’s solicitors (this is normally 10% of the purchase price). As a general guide, allow 4 weeks from receipt of all legal documentation to your solicitor and exchange of contracts. Check with your solicitor with regard to any insurance that may be required on the property between the exchange and completion date. This is also a good time to look into the management of the tenanted property. Do you have a preferred agent that you use or maybe you wish to start negotiations with the current management company to continue managing the property on your behalf.
Completion will take place once all remaining monies have been transferred to the vendor’s solicitors. As a general guide, from exchange to completion allow 2 to 6 weeks. Your solicitor will inform you when completion has taken place as it is at this time that the vendor will release the keys to you.
Once you have completed, ensure that you have adequate insurance in place, pay any outstanding Stamp Duty Land Tax (if applicable), register your ownership with Land Registry. Finally, ensure that any meter readings that you are responsible for are taken when keys are handed to you.
You also need to ensure that your tenants are aware of the new ownership and give them your full company and bank details so that the next payment date is a smooth transition for both landlord and tenant.