The monthly magazine providing news analysis and professional research for the discerning private investor/landlord

Purchasing Commercial Property as an Investment

David Slade, a Partner in the Commercial Property team at Wright Hassall, comments

As with any major purchase, the devil is in the detail when it comes to investing in commercial property. For the prospective purchaser, thorough pre-purchase investigations will pay dividends several times over. There are four main areas that need careful attention: the pre-purchase report into the property; the contract of purchase; tax considerations; and whether or not the property is classified as a ‘transfer of a business as a going concern’ (TOGC).

The report
Careful assessment of the leases to ensure they will provide you with a secure, predictable income is probably the most important part of your solicitor’s job. Your solicitor should be looking for upwards only rent reviews, where relevant; and an assurance that you, as landlord, will get a clear rent, a pure profit from the property and that the tenant will pay all the costs. In other words you need to know that any outgoings are kept to a minimum in order to maximise your rental income. Specifically you will want to know about:

  • the rent
  • any ongoing or future hidden rent free periods
  • any oddities in the rent review clause
  • any service charge shortfalls
  • any exclusions from the tenant’s repairing obligation
  • any residual construction liabilities arising from a new or recently constructed building
  • any break clauses in the leases which weren’t known at heads of terms stage.

The contract
The investment sale and purchase contract is a rather particular animal and there are specific things to look out for including:

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