Leasing or buying commercial property: A step-by-step guide

Leasing or buying commercial property

Exploring the particulars of leasing or buying commercial property requires careful planning. This step-by-step guide, from preparing and researching to the final move-in, outlines the essential steps to secure the perfect space for your business, covering everything from initial budget considerations to legal formalities.

Step 1: Prepare and research

Identify requirements: Assess the size and type of property your business needs based on its nature and growth plans.

Buy vs. rent: Consider the pros and cons of buying versus renting. Buying may involve a commercial mortgage, which requires early inquiries with banks or brokers. If you’re considering renting, you will need to negotiate and agree on the heads of terms with the landlord. You also need to consider whether you require any alterations to the property and whether the landlord needs to agree to these.

This initial negotiation phase involves agreeing on the fundamental aspects of the lease agreement, which will provide the foundation for drafting the complete lease documents; a commercial property lawyer will represent you through this.

Budgeting: Understand what you can afford in monthly rent or mortgage payments (not forgetting business rates, utilities, possible VAT on rent, or service charges in a lease).

Property sourcing: Register with commercial property agents to find suitable premises in your desired location.

Step 2: Property investigations

Legal checks: Instruct a commercial property lawyer to conduct searches that may uncover, for example: planning permissions that could negatively impact your property, planning consent for the proposed use of the property, whether the property is listed, or if the land is contaminated.

When investigating the title of a property, the goal is to determine if there are any rights of way across the property or necessary for its use, to understand who is responsible for boundary maintenance, and to conduct other legal checks to identify any potential issues.

Restrictive covenants: As part of the title investigation your lawyer will investigate any potential restrictions, ranging from access times to limitations on how the premises can be used, and whether you can sub-let the property.

Physical and local enquiries: Your lawyer will also investigate utility supplies, environmental risks, and other local concerns.

Report on title or lease: Your lawyer will compile a report advising on any identified issues and possible solutions.

Fixtures and fittings: Determine precisely which fixtures and fittings come with the purchase. Ensure any arrangements made with the property owner are documented in writing. If letting, identify which of these items remain the landlord’s responsibility and which fall to you.

Step 3: Financing (if purchasing)

Securing a mortgage: Many businesses need a commercial mortgage, requiring a deposit and a thorough financial analysis of the business. Your lawyer will report to the lender on the property itself.

Information for lenders: Prepare business accounts, plans, and forecasts to demonstrate your business’s ability to meet mortgage payments.

Valuation and survey: Obtain a property valuation for the lender and consider a full survey to assess the property’s condition.

Step 4: Contract negotiations

Price and terms: Negotiate the purchase price or rent. Further negotiation of the terms may be possible considering the outcome of the property investigations.

Deposit and defects: Agree on deposit terms and address any property or title defects.

Contract finalisation: Ensure the lease or purchase agreement accurately reflects all negotiated terms and conditions.

Step 5: Exchange of contracts (if purchasing)

Deposit and mortgage: Confirm deposit payment and mortgage arrangement.

Legal commitment: Exchange contracts with the seller; making the agreement legally binding and setting a completion date.

Final preparation: Arrange the final balance payment, including applicable taxes and legal fees.

Step 6: Completion

Final payment: Ensure all funds are in place for completion, whether it’s the first rent payments or the purchase monies including any stamp duty and land registry fees.

Move-in arrangements: Plan for fitting out, redecoration, moving equipment, and setting up utilities and communications.

Insurance and signage: Arrange necessary insurance and update business stationery and signage. Depending on whether your landlord insures the building you may need only contents insurance rather than building and contents. If you own the property you will usually require both. Make sure you are clear on your insuring obligations and contact a reputable broker.

Legal formalities: Your lawyer completes final checks, registers the transaction with the land registry, and handles stamp duty payment.

Thinking of leasing or buying commercial property?

Talk to our property team now:

0117 435 4350


Send us a message online