.: SERVICES :. Seymour Major Solicitors .:

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SERVICES

Commercial Investment Property

If you are buying or selling commercial property, the chances are that you are already have considerable knowledge about what you are dealing with or the type of market you are involved in. At this firm, we are able to handle any deal that you agree upon, no matter how complex. Each transaction is different but there are some common themes. Some of these are discussed here.

Auction Properties
Valuation and Survey
Already tenanted properties
Rent review clause in a commercial lease
VAT and Stamp Duty Land Tax
Flats above Shops

Auction Properties

Many commercial investments are sold through auction. The Auctioneer will provide you with some information, including a copy of the contract and the contract conditions. You may also be able to get some title information from the solicitor acting for the owner. Whatever is available should be checked before you go to the auction. Apart from that, there is very little other due diligence that you are likely to be able to carry out prior to auction (particularly in relation to inspection valuation). Once your bid is successful, you will enter into a binding contract to buy the property within a specified time (usually 28 days). Unless you are experienced with If you are thinking of purchasing commercial property through an auction, the chances are that you will not get much of an opportunity to carry out any form of due diligence. This is very much a market for those with acquired knowledge.

Valuation and Survey

Solicitors do not get involved in the valuation of either the capital value or likely rental yield. However, this aspect is extremely important. You should always obtain your own independent information about the valuation. We advise that use a surveyor in every case. When carrying out the survey, the surveyor will not only advise you on the state and condition of the property (which is extremely important). He will look at the lease and advise you with regard to the tenant's liability to carry out repairs or maintenance. He will also advise on the valuation of the property taking into account the provisions of the lease and the rent review clause (see below) and the date that the lease expires. In England and Wales, the statutory right to renew a lease at the end of the term can be contracted out. If this has, this will also be taken into account. Some surveyor's reports will go further than that. They will investigate the business of the tenant. Such a report is known as a Pinder report. Pinder reports are sometimes insisted upon by mortgage lenders if the "bricks and mortar" value of the security does not quite meet the lending criteria. Finally, the surveyor will be able to provide information for completion of your commercial insurance proposal form, if the answers to the form can only be obtained by inspection.

Already tenanted Properties

If the property is already tenanted, it is the solicitor's job to investigate the lease, tenancy agreement or other legal relationship between Landlord and Tenant that exists and advise on it. This means examining documents and, where necessary, raising enquiries. The enquiries will yield information about the tenant himself and his record as a tenant.

Rent Review Clause in a commercial lease

If the property is commercial property, there is one other aspect to the solicitor's due diligence work that is directly related to assessment as an investment. These is the scrutiny of the rent review provisions and a consideration of the lease as a whole. When we examine a rent review clause, we check the mechanism and the criteria for the rent review. This requires looking at the lease holistically, assessing the hypothetical lease and advising the client on any weaknesses in the rent review provisions.

VAT and Stamp Duty Land Tax

VAT is exempt for residential property but not commercial property. If you are buying commercial premises and VAT is applied, the amount of Stamp Duty Land Tax payable is determined by the aggregate of the price plus VAT - not the price alone. Effectively, this means that the stamp duty land tax thresholds are different. For example, one premises that is subject to VAT costs £212,000 and the unit being sold next to it costs £213,000. On the premise which cost £212,000, the aggregate of the price plus VAT is £249,100. Stamp duty land tax is at 1% and therefore £2,491. On the other property, the aggregate of the price and VAT is £250,275. Because is is over the £250,000 threshold, stamp duty land tax is charged at 3%, i.e. £7,509. For more information on Stamp duty land tax, click here.

Flats above Shops

The freehold of these premises may be classified as part residential and part commercial investment property. Care should be taken to ensure that the commercial activities of the shop do not infringe upon the activities of the tenant and vice versa. Look particularly at access and disposal of refuse. Always remember that the laws are different if there are difficulties with either of the tenancies. Insurance policies, which relate to the whole building should be checked with care to ensure that any special conditions are complied with. The apportionment of the insurance premium between the two parts of the building should be weighted according to value, rather than space area. When buying premises which are part commercial and part residential, bear in mind that VAT may be payable on the Commercial element of the transaction but not the residential part (see also re VAT and Stamp duty Land Tax above).