Posts Tagged ‘commercial finance’

All You Need To Know About Choosing The Commercial Property Solicitor That’s Right For You

Sep 4th, 11 / 0 Comments

Choosing the right commercial property solicitor can make or break your property deal.  Just as finding the right commercial mortgage lender is key to financing your transaction, finding the right legal representation can be critical to a smooth purchase. 

So it could be argued it is of the most vital importance you hire the correct solicitor, one who you feel is trustworthy, knows what they’re talking about and seems capable of getting the task done. We’ve put together a quick introductory guide below to help you identify such a person with the qualities needed.

Red Tape: Make sure you get a solicitor who is under the umbrella of the Solicitors Regulatory Authority, those that are in the RSA are regulated and fully insured members. This is advantageous as you know they’re not a stereotypical shady solicitor, as they’re insured it means you as the client are protected during the mortgage process as well as having an official outlet for complaints through the RSA if you feel the need to take that route.

Location: A locally based solicitor is likely to know more about the property, the local area and any local searches that may be required.  Whilst solicitors in other towns may be able to undertake the work for you, they may not boast the same level of local knowledge as a solicitor in your vicinity.

Cost: While you want someone local, that doesn’t mean to go for the lowest denominator, in other words the cheapest solicitor you can find. You will want someone you can trust and who will put the hours in to get the job done, and in most cases the cost reflects the quality. Talk to a number of firms and treat it as an interview to see what services they will offer during the process and pick the one that suits your requirements.

There is no set estimate of what the legals will total at the end, depending on the deal it can run from a few hundred pounds to thousands of pounds. Always keep an eye on the added ‘disbursement’ costs for things such as VAT or Local Authority Searches to keep costs under control.
When deciding on a commercial property solicitor, be sure you are aware how their billing works. Are you paying a fixed fee or are you being charged for the work that they complete for you?  The law obliges Solicitors to give you an estimate of the likely costs of a transaction. The fees should be consistent with this original estimate, and you should start to ask questions if for some reason they are not. When it comes to your money, don’t be embarrassed to ask about costs with a solicitor’s firm before you hire them.

Find an Experienced Representative: When deciding on a commercial property solicitor it is a good idea to find one with a long track record and experience in dealing with acquisitions like yours.  Feel free to ask them if they have worked on this type of commercial property before?  Investigate what experience the solicitor has and find out what similar properties they have worked on. Again, your money and your business future are at stake and you need to find out as much as you can.  It may be useful to discover how long they have been practising and  if they have Law Society accreditation

As well as sorting out costs and services, always make it a point to ask who exactly you will be dealing with. Even in a small local law firm there could be a few solicitors working in the practice, when you go to meet them you might just end up talking to the guy in charge and mistake him for the person who will be doing the work. You don’t want to end up with the graduate straight out of university being the lead on such a complex and expensive deal.

Choosing a commercial mortgage solicitor is just like choosing a commercial mortgage lender. There are dozens out there and searching the market and doing your research before settling on one firm is essential for the best service you can obtain.

Howard O’Gollegos writes for Just Commercial Mortgages the UK’s No.1 site for the latest commercial mortgage rates and commercial property finance news.

Mortgages

Commercial Mortgage Costs – 5 You Need to be Aware Of

Aug 29th, 11 / 0 Comments

Taking out a commercial mortgage is not always quite so straight forward as many may believe. There are a few things that you need to think about beforehand, and in this article we look into the costs involved with entering into a commercial mortgage contract.

Your cash deposit is not the only cost involved. The deposit is the amount of money that you must set down in order to stake the loan, and this is usually 25% to 50% of the purchase price for commercial loans. But there are other costs to take into consideration, which we will now explore to help you to fully understand the real cost of a commercial mortgage.

Arrangement Fees For Setting Up The Mortgage: The arrangement fees are commonly a charge of around 1% (but can be slightly higher or lower), and they are charged by the lender for the administration involved with setting up the loan for you.  In some cases, the lender will allow you to add the fee to the value of the mortgage, to save you having to pay more money up front although you should be aware that you will be charged interest on it if you do add it to the loan amount.

Valuation fee: The property has to be professionally valued before it can be purchased and both the purchaser and the lender will need to have access to a full valuation of the property. The valuation fee that you will have to pay will depend on the size and the value of the property that you are interested in, but it can become more costly if a full survey is needed. As a rule of thumb a survey is always a good idea.

Don’t discount the need for a thorough structural survey by a conveyor, wither you or the lender could demand this to ease any fears of what the valuation brought up, especially if it is an older building. Obviously this will send the costs of the valuation fee skywards and to be 110% sure you might need/want to get two surveys conducted by separate conveyors.

The Professional and Legal Fees: Next comes everyone’s set of favourite people to make the process more complicated, the lawyers and solicitors. Legal contracts need to be drawn up and need checking so there are no loopholes or grey areas. This may also cover the setting up of insurance policies and site surveys and reports, depending on the type of property and transaction you are going setting up.

Early Repayment Charges: When you sign up for a commercial mortgage, make sure you understand how any ‘early repayment charges’ may work.  These are a ‘penalty’ that you pay if you decide to repay the mortgage early; typically within the first three to five years.  Early repayment charges are often a percentage of the commercial mortgage amount and so can be quite substantial.

Broker fees: A mortgage broker can be a very useful service to employ when you are looking for the best deal, but as with all services, there is a price tag attached. Approaching a broker is a good idea because often they have access to rates that are not available on the high street, but many will charge a fee for their services.

Again, it is worth checking with your broker whether they expect payment from you upon completion in a lump sum or they might take a commission fee directly from the lender. The fees can range because of a variety of factors, so this is something you will need to discuss to get a ballpark figure, though you can expect the fee to be anywhere from £300 to 1% of the mortgage borrowed, a very broad spectrum I think you’ll agree.

When you are working out the cost effectiveness of your development plan, and the relative cost of purchasing property, don’t leave additional costs off the balance sheet. It is tempting to make a deal look better than it actually is by leaving certain costs to one side. This is a false economy and won’t help you to fully judge whether a commercial purchase is right for you.

Howard O’Gollegos writes for Just Commercial Mortgages the UK’s No.1 site for the latest commercial mortgage rates and commercial property finance news.

Mortgage Refinance, Mortgages

4 Topics You Should Be Aware Of When Letting A Commercial Property

Aug 23rd, 11 / 0 Comments

Buying a commercial property can offer you great returns both in terms of income and capital growth.  However, once you have completed on your commercial mortgage and taken ownership of the property you then have to worry about leasing the property, which will often be done through a commercial letting agent.

You must accept that this will be a fundamentally costly process for your business, though if you consider that the expenditure is an investment, it does make a lot more sense. You will have to put a considerable amount of business capital into the purchase of a commercial property. (typically you will need at least a 25 per cent deposit to be eligible for a commercial mortgage, a far higher percentage than in a normal mortgage). Alas, this is just the beginning of the expense, not the end. There are various other fees and charges that you will encounter when taking out a commercial mortgage or business loan.  The purpose of this guide is to explain five of the most common fees and charges that are incurred when taking out a commercial mortgage to buy retail, manufacturing or office space.

Arrangement or Booking Fees: Banks, like all service sector industries, charge for as many of their services as they possibly can. Banks charge arranging fees for negotiating your mortgage for you. These are often not rigidly enforced and often open to negotiation. They can often depend on other factors such as the interest rate that you are being charged.  On average you are likely to pay a fee in the region of 0.5 to 1.5 per cent of the total value of the loan, but it is becoming increasingly common for lenders to add the arrangement fee to the value of the loan.

These facilities could include bathrooms for staff and customers, a kitchen or canteen for staff to have their lunch and so on. You will therefore need to think about whether you are prepared to undertake the work to have these put in if the building does not already have them. The interiors may also need updating in order to attract more tenants – especially for retail premises and offices where customers would be going inside.

Energy Performance Certificates: These days the law dictates that you must pay for and provide your tenants with an energy performance certificate (EPC).  A commercial EPC can be costly, so you will need to keep this in mind.  Depending on the building, this can cost a few hundred pounds.

If you do not provide the EPC, you can receive a hefty fine, so it’s just not worth the bother. Make sure that you get an EPC sorted out so that prospective tenants will know how energy efficient the premises are.

Costs For Redeeming Your Mortgage Early: If you repay your commercial mortgage early you may have to pay fees to exit the loan.  Even changing to a new mortgage product can be classed as exiting the loan, as the commercial mortgage would be repaid in such an instance and so you need to remember this if you want to change lenders. The fees also apply if you sell the property within the early repayment period.

The requirements under the Disability Discrimination Act will already have been considered if your property has been recently renovated or modernised.  Both planning consent and building regulations will have taken these issues into account.  In addition, your tenant will be required to comply with all laws and regulations regarding this issue when they sign their lease.  So, as a landlord you should be prepared to allow tenants to undertake any work necessary to bring the property in line with these regulations.  This may include building access ramps or modifying communal areas such as hallways.

The Dangers of Asbestos: You will need to have the building checked over by professionals to ensure that the property does not contain asbestos, as this has been deemed to be a dangerous and toxic substance.  If any is found then you will need to ensure that any works are taken care of to ensure that it is not dangerous to anyone inside the building, and any surround areas.

As you can see, there are many costs to consider, so you will need a good amount of money behind you before you start thinking about buying commercial premises.

Howard O’Gollegos writes for Just Commercial Mortgages the UK’s No.1 site for the latest commercial mortgage rates and commercial property finance news.

Mortgage Refinance, Mortgages

Buying Commercial Property – The Benefits and The Drawbacks

Jul 11th, 11 / 0 Comments

Buying your own commercial premises can add some real value to your business, so it’s a great idea.  But it is a big thing to do and so you do need to think about it carefully and ensure that you’re making the right choices.  In this article we look into the good and bad bits of getting a commercial property and commercial mortgage.

Pros: There are plenty of advantages to buying your own commercial property.  One of the main reasons that many companies take out a commercial mortgage is that the repayments are often the same as rental payments.  Indeed it can often be cheaper to pay a commercial mortgage then your monthly rent.

Another good thing about commercial mortgages is that you can fix the rate of interest, so you will always know what the repayments will be – well, at least for the ‘fixed interest’ period, which is usually anywhere between 3 and 10 years depending on what you prefer to do.  This means that you are a little more stable, as often when you are tenant your rental payments can be increased at any time often with little or no warning from the landlord.

Subletting, if your property is large enough, or you bought big thinking of future expansion, then why not higher space out to another small business in the mean time? Through this option you can cover a last chunk, possibly even the whole mortgage payment by taking this option. The only pitfall here to check on is with your commercial mortgage lender, you might need permission to take this action.

If you do buy a property that is slightly larger than you need and rent part of it out to another business, you can also sit safe in the knowledge that you have the space there to expand the business later on if needed. This is a great way to go about it as selling the premises and buying a larger building can be costly, especially if there is an early repayment charge on the commercial mortgage.

Owning your own commercial property means that you also benefit from any appreciation in the value of the property.  Property prices tend to rise over the long term and so owning property means that you will benefit from any increase in its value when you come to sell it at a later date.  Furthermore, the interest payments on your commercial mortgage are tax deductible.

Cons: In two words, the deposit. Even in a booming property market, commercial mortgage deposits are eye wateringly high, you can expect the average deposit requirement to be circa 30% to 50% of the valuation. This could significantly drain cash out of your business which you made need for expansion or a rainy day, so think and plan carefully before you take a commercial mortgage on.

It will also be a more drawn out process if you need to relocate as well as an expensive one, either to expand into larger premises or because your location is not attracting much business, so think about the location and property size before entering into a commercial mortgage which may be difficult to get out of in the first few years.

As for the last round of negatives: the costs don’t stop with a just the mortgages, half a dozen insurance types and policies will be needed, liability, contents, building etc. Then let’s not forget the maintenance costs, which have to be dealt with quickly especially if you are subletting to other companies, so you can expect to fork out for any damage or maintenance needed that happens on their part of the property.

If you’re looking for solid grounding and foundations for your business (with an eye on future expansion) then taking on a commercial mortgage can be the more beneficial option to take. All we can say is just don’t go in blind, do your research and impartially balance all the positives and negatives and be firmly committed to the idea of a commercial mortgage.

Howard O’Gollegos writes for Just Commercial Mortgages the UK’s No.1 site for the latest commercial mortgage rates and commercial property finance news.

Mortgages

What You Need To Know About Buying Commercial Property at Auction

May 7th, 11 / 0 Comments

With people always looking to for an easier and cheaper step to get on the property ladder, it was only a matter of time before property auctions became much more popular. The saturation of property shows on the TV is considered one of the main factors in the property auction craze, in particular the show ‘Homes Under The Hammer’ has led to the general conception that every property at auction is a bargain.

When it comes to bidding for commercial properties at auction however, there are some vital issues that need to be highlighted. Most notably of course is that buying a commercial property at auction is a completely different experience and procedure from buying off a property in the normal fashion. Below you will find a quick guide to all the major differences and vital facts and obligations you will need to be aware of for purchasing commercial property at auction.

Sellers Packs: For any property about to go under the hammer, the solicitors of the seller will put together a ‘seller’s pack’ which is essentially a rundown of the properties status and condition. The paperwork and documentation provided are usually along the lines of a drainage search, environmental search, local authority search etc. Also included will be a title copy and any information is regards to leases and service charges on the property. It goes without saying that any properties you are seriously considering, seller’s packs for these properties should be acquired and give to your solicitors so they can double check the information.

Get a Surveyor: This is very important; people who employ surveyors don’t periodically get some very costly surprises on their new properties. Don’t worry if there are several bidders for a property, it is sensible to hire a surveyor to carry out a valuation/survey of the property before bidding at auction.  Fundamental issues that could cost big money might be revealed which would inform any decision to buy. A small, prudent cost at the start of the process could save a buyer big money and enormous stress in the long term.

Arrange your finance: Commercial property auctions require completion to take place very quickly and so it is vital that buyers have the funds available to complete the purchase.  If using a commercial loan to fund an auction purchase, buyers should agree the borrowing they need well in advance to ensure that the funds will definitely be available to them.

All buyers normally only have 30 days to complete  on the agreement, so trying to arrange a commercial mortgage after the auction cuts things far too fine, and it is the sort of amateurish behaviour that will gain you a bad reputation. It is therefore crucial that buyers organise themselves properly, get prepared early and set up their commercial mortgage. This must be done in order that they don’t fail to meet the completion date.

You agree to a contract on the fall of the hammer: On the fall of the hammer, a contract is forged between the seller of the property and the successful auction bidder.  The contract requires the buyer to pay a deposit on the day of the auction – generally around 10 per cent of the purchase price.

The buyer is also contractually obliged to complete the purchase of the commercial property by a date stipulated in the auction terms and conditions.  Buyers will therefore typically have only around 28-30 days to complete the purchase in full.

Failure to complete on time: This is the nightmare scenario for both seller and bidder. A failure to complete on the purchase of a commercial property can have expensive consequences.  If the buyer fails to meet the deadline, a seller can impose a ‘completion notice’ on them which means that after short period of time (normally a week to ten days) any further failure to complete will lead to the seller keeping the deposit and cancelling the contract.  Buyers will also to be penalised for the cost of the preparation of a completion notice.

Buying commercial property at auction is a very different process from a standard purchase.  The timescales are much tighter and there are strict deadlines to be met.  Whilst buying at auction can offer the opportunity to pick up great value commercial property, it is crucial that buyers know exactly how the process works.

Howard O’Gollegos writes for Just Commercial Mortgages the UK’s No.1 site for the latest commercial mortgage rates and commercial property finance news.

Mortgage Refinance, Mortgages

Obtaining The Right Commercial Property Insurance

May 7th, 11 / 0 Comments

If you have decided to take out a commercial mortgage to purchase retail, office, manufacturing or warehouse space, making sure you get the proper property insurance is a crucial part of the purchasing process. Just as you would make sure you had the correct buildings and contents insurance on your residential property, it is just as important that you safeguard your commercial property against a range of possible risks.

There are lots of specialist policies available in the market that can provide you with the insurance you require.  Indeed, many insurers will tailor a commercial property insurance contract to your specific requirements, based on the type of property that you own.

Whatever kind of commercial asset it is that you have purchased, you must to ensure that it is fully protected against the main risks such as flood, fire, storm damage, criminal damage or earthquake. The property alone must be insured against these various perils; as it is unlikely that a mortgage lender will even consider offering you a loan without it.

This is obviously going to soon add up into serious money, so how is it generally worked out? It all depends on the size of your commercial property and what it is being used/the businesses that are tenants. Insurers are going to more open and happy to insure if it’s an office block as it will be cheaper to cover. A manufacturer of factory is going to be more expensive as there will be a lot of expensive and specific machinery to be replaced if disaster strikes. Again, if you are in a black spot for flooding expect premium rates to be much higher.

An important extra service that owners of commercial insurance can add to their policy is ‘loss of rent’ cover.  If you are the owner of a commercial property, you might often count on rental income paid by your tenants in order to finance your commercial mortgage. This has risks, because if the building were to be rendered uninhabitable through fire or damage by the tenant, you could be left covering the mortgage payments without anyone to pay the rent.

The amount of loss of rent cover is normally a pre-determined percent of the asset’s sum insured (approximately 15 per cent) and it is normally restricted to a 12 month period. It is specifically created to compensate you for the loss of rent received if the building is unable to be let due to a risk covered within the commercial insurance policy.

Commercial Property Insurance is in some ways like a salad bar, you go up and pick what you like, there are many addition and add-on’s that can be acquired. From contents insurance, this will cover all fixtures, fittings and furniture in your property from theft to floods or whatever you decide in between.

Another popular option is ‘property owner’s liability’ insurance.  If a third party or their property suffers a loss due to your property – perhaps the chimney stack collapses onto a car – then this insurance will cover you.  ‘Legal expenses’ cover is another popular choice as it provides a sum of money towards court fees should you end up in a legal dispute regarding your commercial property.

As an owner of commercial property, insurance is something you cannot afford to ignore. It is important to safeguard your business against unplanned eventualities. Unexpected costs can leave you in financial limbo, and a loss of tenants can leave you without rental income.

That said, accessing the proper insurance policy isn’t difficult.  The soundest strategy is to consult an insurance broker. Most Brokers will have a wide range of cover policies and be able to create a tailored insurance policy for your particular needs.

Howard O’Gollegos writes for Just Commercial Mortgages the UK’s No.1 site for the latest commercial mortgage rates and commercial property finance news.

Mortgages

Advice For First Time Commercial Landlords

May 4th, 11 / 0 Comments

It is important that you are thoroughly prepared before deciding to be a commercial landlord. It is potentially one of the biggest financial decisions you will ever make. It is a market that can be potentially very lucrative if it is approached in the right way, or one that can be full of pitfalls for the uninitiated.

A single bad experience – a tenant who doesn’t pay their rent, for example – can taint your investing experiences almost before you have begun.  Buy to let investment is not necessarily a path to quick riches and so you should be prepared to take your time and work at your business in order to make it a success.

You must always have enough funds in reserve to fund the mortgage on the property if it remains empty for long periods. Commercial property has a longer ‘empty’ time than residential so be prepared to cover the mortgage payments until you find a new tenant.

As a landlord, you have a number of duties and responsibilities to your tenants.  For example, you may be required to spend money on repairs or maintenance to the property.  You will have to be on hand to fix leaking pipes or a broken boiler at any time of day or night which can be tough if the property is a distance from your home or you are away on holiday at the time.

As well as maintenance and repairs, you will also have to spend money on the upkeep of the commercial property.  You often have to spend more on a commercial property than a residential property in order to keep it well decorated and a pleasant environment for your tenants.

Many people believe that being a landlord is simple, and that a property can simply be signed over and the tenants can be ‘left to it’, but as you can see from what we have looked at above, there are many things that need to be looked after in a rental property, regardless of the property type.

Looking after your property means that you will have satisfied tenants who will want to stay in the property.  The rent that they pay will cover your commercial mortgage meaning that you will profit from your investment if you are a conscientious, responsible landlord.

For you commercial property to be successful and always have a tenant, it’s not just about finding a bargain property and sprucing it up. Location is more vital than in the residential sector, buy commercial property where you know there is going to be demand for certain businesses. In most cases, the easiest market to target are students and student areas, newsagents, off licenses and takeaways will all be busy and owning property that can attract these sort of tenants makes good commercial sense.

Remember to obtain buildings insurance for your commercial property. Most commercial mortgage lenders, similar to residential lenders, will require such insurance to be obtained as a condition of the mortgage, and the insurance will usually need to be obtain before contracts are exchanged.

The final point we want o offer is this, make sure both you and the tenant know who’s responsible for what and it’s written down to avoid arguments and legal cases. This is vitally important in commercial properties where health and safety law is stringent. Gas and electricity safety checks and matters along these lines should be the responsibility of the business and tenant, once this is all crystal clear, the blame game and finger pointing can’t fester for too long.

Howard O’Gollegos writes for Just Commercial Mortgages the UK’s No.1 site for the latest commercial mortgage rates and commercial property finance news.

Mortgage Refinance, Mortgages

Commercial Mortgage Market To Remain In Recession Through 2011

Apr 14th, 11 / 0 Comments

The amount of commercial mortgage lending and business finance that is available to the property sector is still comparatively low, according to a worrying report from a leading UK property company. Jones Lang LaSalle’s recent 2011 Lenders’ Expectations Report uncovered the fact that lenders were expecting to lend even lower amounts in 2011 than 2010.

The indications are that the number of organisation this year who are prepared to lend larger sums (in excess of a hundred million pounds) on commercial property will reduce compared to this time last year. This however may be offset as more lenders are prepared to help businesses who require less than this.

Jeremy Handley, director of Jones Lang LaSalle Valuation Advisory, said: “‘The rollercoaster of financial crisis and sovereign debt continues and it seems certain that the European banking crisis is going to have profound and long lasting implications for the commercial property sector.”

The report comes after recent Bank of England lending figures showed that commercial mortgages and lending to real estate over the fourth quarter of 2010 fell by £16 billion to £221 billion; the largest drop since the series began in 1987.

Lenders hope the commercial property market will begin a full recovery in 2012.  The Jones Lang LaSalle report detailed that some lenders hoped for larger commercial loan deals in excess of £600 million from 2012 onwards when it is hoped the market will pick up again.

The vast majority of those interviewed for the survey cited a ceiling Loan to Value (LTV) ratio of between 60 per cent and 70 per cent in 2010, though several believe this figure will stay below 60 per cent over the next couple of years. Most lenders do not expect commercial lending to be on offer at rates over 70 per cent in the next decade owing to legislation, new regulations and a lack of available cash.

However, many lenders expect commercial mortgages to be available at higher LTVs from 2012.  37 per cent expect the maximum LTV to be above 70 per cent although none expect to see loan to values above 80% by 2013.

The growing office sector is by far the most popular area in commercial property in attracting new lending. The sector an average weighting of over 40 per cent for each of the last three years.  Commercial lenders are confident that the commercial office market is the easiest to profit from and the most transparent which is why they are more likely to consider commercial lending in this area, especially in London.

Director in City Investment at Jones Lang LaSalle, Andrew Hawkins, pointed out that there were challenges in the lending market, but also opportunities. He said: “The lending markets are quick to change and fluctuate, and it has become clear throughout our interviews that credit conditions are shifting.  A year ago we were predicting greater liquidity than we are now experiencing and the outlook is similarly challenged.  There is without a doubt a polarising of debt provision with borrowers with strong existing relationships are well placed to access the lending markets, whilst although not impossible for new entrants, the challenges are still there.”

If you are thinking about building a portfolio of commercial property, it could still be a difficult couple of years ahead.  You are going to have to put down a higher deposit than you normally would have to (around 30-40 per cent) and there is also likely to be some major restrictions on which lenders you can do business with, particularly if you are looking for a large loan.

Howard O’Gollegos writes for Just Commercial Mortgages the UK’s No.1 site for the latest commercial mortgage rates and commercial property finance news.

Mortgage Refinance, Mortgages

The 3 Most Important Things To Remember When Buying a Commercial Property

Apr 8th, 11 / 0 Comments

Purchasing commercial property is normally a great investment. You can benefit from reliable capital growth and take a regular income from rental payments that the property provides. There is, however, as with all investments, pros and cons to commercial property.  This guide examines three fundamental things you should always bear in mind when buying.

Get a good survey: It is amazing the numbers of people who buy properties without checking to see if they are worth the paper the contract is printed on. Sellers are not legally obliged to reveal any problems with a commercial property they are selling.  The old motto ‘caveat emptor’ (‘buyer beware’) applies before you consider purchasing commercial property.  It is solely down to you to ensure that you conduct a survey and valuation to find out whether or not the property you are buying is structurally sound.

Whilst the kinds of major structural defects  that could ultimately render the property uninhabitable (such as a problem with underpinning) may have to be revealed up front (normally meaning that these sorts of properties are easy to spot), other less life threatening, but still extremely important structural defects do not, an  example of this might be dry rot.  It is your wealth at stake which means it is down to you to do the necessary investigative work to discover any issues during the purchasing process. Discovering problems after you have completed will leave you with no legal cover what so ever.

Unless the property is a brand new build, it is recommended that you instruct a full structural survey on any commercial property that you are considering buying.  This may also be a condition of agreeing your commercial mortgage.  A good quality valuation will also tell you whether there are any building regulations or planning issues you should be aware of.

Check There are no Restrictive Covenants: If you have plans to radically alter the property after purchase, then it would be a very prudent move to check there are no planning restrictions on the building. The most well known covenants are ‘listed buildings’ but there are other types of covenants less well known, so always check the Land Registry which will have any such information listed before you complete the transaction.

You will also need to examine the Charges Register.  This shows the prospective buyer a list of any covenants or rights that they have been placed on the property.  The restrictive covenants which relate to the property will be detailed there.  A charge of this kind could have a major effect on your designs for the commercial property that you are looking to purchase and might cause a serious rethink in your plans.

Searching… Database searching just doesn’t stop at Land Registry and the Charges Register, if anything it’s just the tip of the iceberg. When it comes to commercial property it becomes more vital to make these searches to avoid any nasty surprises or bills, so a Local Authority Search is one of the more important ones to take. It will cost in the region of £200 and take two or three weeks to complete cover areas such as planning and building regulations, CPO’s, Enforcement notices and see what applies to your property and whether they are all up to date.

The Drainage and Water Search takes a few days and costs around £140. IT is a report that is becoming more and more important. It will show you if surface water, foul water and sewerage drains away from the property to an adopted mains sewer within 100 feet of the property. IT will also show you if there is a water supply to the property and whether that supply is metered.  

An Environmental Search establishes whether there is a likelihood of soil contamination from any building situated near the property.  This is important as it can cost thousands of pounds to clear a site of contaminated soil.  It also tells you if the property is in a flood risk area.  It costs around £180 and takes just a day or two to complete.

In order to profit from commercial property it is vital that you undertake all the due diligence when buying.  Failing to obtain a good survey or the right searches may save you a small amount of money in the short term but could end up costing you thousands of pounds in the long run. 

Howard O’Gollegos writes for Just Commercial Mortgages the UK’s No.1 site for the latest commercial mortgage rates and commercial property finance news.

Mortgages

10 Top Reasons To Take On a Commercial Mortgage

Apr 8th, 11 / 0 Comments

A commercial mortgage gives individuals and companies the ability to buy property such as office space, manufacturing facilities and warehouses.  Here are our top ten advantages to taking out a commercial mortgage.

1. Ownership is everything: When you take out a commercial mortgage to purchase a property, you legally take ownership of that property asset.  As a general rule, property prices tend to rise over the long term in the UK, and therefore, if you hang onto the property for a given period of time you will be able to make a profit when you sell it on.

2. Commercial Mortgage Repayments Are Tax Deductable: The whole mortgage payment is not deductable, only the interest on the mortgage payment is. HMRC classes the interest as an allowable expense which boosts the balance sheet when the tax returns are due.

3. Less fluctuation in payments: If you rent a property from a commercial landlord, the rent you pay is subject to regular reviews (normally conducted annually).  During this time, the rent payments could leap significantly, making it hard for your business to budget, or in some instances, to continue.  A commercial mortgage offers you more stable payment terms meaning it is simpler to manage your outgoings.

4. Cheap Borrowing: Some businesses borrow commercial mortgages to consolidate other business debts, in much the same way that households have done with residential mortgages in the last ten years. If your business is paying a high interest rate on an overdraft, unsecured loan or credit card it might be more cost effective to use a commercial loan to pay these unsecured borrowings.

5. Rental incomes: When purchasing commercial premises, some businesses acquire property that is too large for their present needs.  While they can utilise the premises to expand in the future, it also creates potential for sub-letting the space in the immediate term in order to generate additional streams of income to help repay the mortgage. This is a legitimate practice, but you may need your mortgage lender’s permission to do this.

6. Easier cash flow: Payment plans on commercial mortgages normally extend for several years, giving you certainty in terms of your payments.  Rather than having to worry about your cash flow on a monthly basis, this allows you to concentrate on other aspects of maximising your profit.

7. You retain control: An alternative to a commercial mortgage would be to sell a share of your business or property to an investor.  However, such an investor would then expect a return on any growth in the property value.  By using a commercial mortgage, you retain full ownership of the property and a lender has no interest in the property value itself.

8. You retain the capital: When purchasing commercial property, raising investment capital using a commercial mortgage means that you won’t have to expend all the capital that you have available.  You can put forward a deposit and borrow the rest from a lender, allowing you to invest the remainder of your cash reserves in other more useful ways.

9. You Control The Property: As a tenant, there are no doubt many do’s and don’ts from the landlord you have to abide by, it can be stifling for your business and working practices. Furnishings, decorations, parking might all be restricted; it won’t be if your business owns its own premises.

10. Save money: In simple terms, a commercial mortgage payment is often less than the equivalent rent payment.  You may find that you actually save money on a monthly basis by borrowing, notwithstanding annual rent increases through the rent review process.

Howard O’Gollegos writes for Just Commercial Mortgages the UK’s No.1 site for the latest commercial mortgage rates and commercial property finance news.

Mortgage Refinance, Mortgages