When purchasing a commercial property there are many i's to dot and t's to cross to secure the sale. It is so much more than picking a property and paying for it, the legal costs of buying a commercial property add additional financial strain to the process if you are not aware of them.
Arranging the legal paperwork, conveyancing and other legal aspects of the sale will need the help of professionals that come with associated costs.
Employing a commercial property surveyor (a chartered surveyor) will make the process easier, identifying issues early and examining the terms and property value to make sure you are getting the right price on the property. They may also identify ways in which you can maximise the value of your new acquisition.
Property surveyors typically charge between 0.5% and 3% of the total cost of the property purchase, but there is often scope for negotiation on this fee, depending on the depth and complexity of the work they will be required to undertake.
To undertake the process of conveyancing (the process of transferring the legal title of the property) you will need to hire a conveyancer or solicitor to handle it. Solicitors have more extensive knowledge of the legal aspects, while conveyancers are lawyers who specialise in property.
If there are complicated legal issues involved, such as divorce, it is worth going with a solicitor, but for more straightforward sales a conveyancer is a good bet.
Solicitor’s fees tend to be between 0.5% and 1.25% of the entire value of the transaction, and it also possible to negotiate these rates depending on the work.
You will likely require a commercial mortgage to finance the purchase of the property. With terms, up to 30 years mortgage lenders typically fund up to 75% of the purchase costs based on your business profits and ability to make monthly payments.
There are various costs associated with setting up a commercial mortgage:
- Valuation fees – Prices start at around £500 for a valuer to visit the property and send a report to the lender. The fees tend to be based on the quotation which is payable to the lender when the offer has been accepted.
- Arrangement fees – Usually 1%-2% of the mortgage loan amount up to £1million, these fees are typically added to the loan after it is approved. Some lenders to ask for arrangement fees earlier to cover themselves in case you don’t accept their offer.
- Broker fees – If you are using a mortgage broker for advice and support, they usually charge 1% of the loan value for their services.
Your final legal costs when buying a commercial property will vary depending on the property you are buying, your legal circumstances and who you hire to undertake the work, but the above guide will give you an idea of what to expect in terms of fees.