A Guide to Purchasing Commercial Property

Considering purchasing a commercial property?  Here are a few criteria that you should consider to help you on your way ..

Lease agreement document with keys and pen

Commercial Properties are divided into 4 main areas:

  • Retail – shops, supermarkets, hairdressers etc
  • Offices
  • Industrial – warehouses, industrial units, trade counter units etc
  • Leisure – cinemas, concert halls & non residential institutions, schools, nurseries, health centres.

These are again sub-divided but your commercial agent will be able to advise you on the correct user clause which is suitable for your requirements.

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Purchaser’s Considerations:

If you decide on purchasing a commercial property you’ll need to consider either Freehold or Leasehold.

Freehold is when you own property & land outright.

Leasehold is when you purchase the property but not the land that the building/structure is on.  A leasehold will revert back to the freehold when it expires. A leasehold interest can vary from a few years to 999 years.   At Davis Brown,  we can help and advise on the value of a leasehold interest as the lease length will be of significant importance in the value of the property.  It is worth speaking to your agent to discuss the lease length in detail as it is sometimes possible to purchase a longer leasehold interest from the head lessee.


Find out when the last works to the property were undertaken; are they overdue?  Do all works that have been undertaken meet current Heath and Safety regulations as well as Building Regulations?  It may give you some leverage in chipping the asking price of the subject property.

Submitting your Offer:

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Commercial Property in London can be marketed in various different ways.  Some properties will be put to the open market and sold by way of private treaty, 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 either be by informal tender or sealed bids.

All offers must be made in writing.  Be clear with regard to any conditions that your offer is subject to (i.e. your offer is unconditional 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.  If this is the case, 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.

Accepted Offer:


Once your offer has been accepted, the vendor or their agent will send Heads of Terms out to all relevant parties and their solicitors.  Once Heads of Terms have been agreed and solicitors instructed, the property will then be put under offer and you should ask for the property to be taken off the market and for no further viewings to 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.

Exchange of Contracts:

26 Fitzroy Square - External

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.


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 and it is at this time that the vendor will release the keys to you.  When you collect the keys, request that meter readings are taken at this time.

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 and finally contact the local authority with regard to any business rates which may be applicable.

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