Commercial property abroad is usually purchased by investors, entrepreneurs or business immigrants. Of course, the prestige of owning land, office, commercial or industrial premises in another country is hardly the main motive for such purchases.
Investors view overseas property as a reliable way to preserve and grow their capital. Entrepreneurs expect to receive a stable income from rent. Business immigrants use commercial property for their entrepreneurial activities abroad.
For many years United Kingdom has remained one of the most attractive jurisdictions for purchasing commercial real estate. Here are the advantages of such an investment in the United Kingdom: five most obvious
1. High and stable rental income
Commercial property in England generates higher rental income for the owner than residential property. Rent can be higher than average market values if the property is in a favourable location or if it is leased for a long term. Incidentally, commercial property in the United Kingdom leased for long periods, usually providing investors with a stable and predictable source of income.
2. Capital growth
Commercial property prices in the UK show significant growth in the long term. Thus, by investing in this asset, you will not only protect your funds from inflation but also receive additional income from capital gains. Investors often increase the value of their commercial property in England themselves by carrying out repairs, renovations or extensions.
3. High liquidity
Despite their relatively high cost, commercial properties in the United Kingdom are in high demand. Investors can sell their English properties at any time and recoup their investment.
4. Diversification
Buying commercial property in England can also be used to diversify your investment portfolio. After all, land, office space and non-residential buildings are fundamentally different classes of investment assets than company shares and government bonds.
5. Reliability
British commercial real estate, unlike many other investment instruments, exists physically. Tangible assets are more reliable than securities. They give investors a sense of security and control.
Our article would not be objective if we focused solely on the advantages of renting or buying investment property in the UK. Even in the prosperous United Kingdom such transactions involve a certain set of risks. These include the need for significant capital investment, a huge number of different offers, possible market fluctuations, operating costs, and responsibility for managing investment property.
Experienced investors and entrepreneurs know that thorough legal due diligence and professional advice are crucial to successfully resolving issues related to the purchase or rental of British property. The staff at London-based Imperial & Legal offer turnkey support for transactions of any complexity, from finding a suitable property to registering legal ownership rights.
Types of commercial property in the UK
In the UK, commercial property is usually divided into types depending on its intended use. This classification is also used by British banks to determine the maximum loan-to-value ratio when calculating commercial mortgages.
Offices
Offices include premises used for any operational or administrative functions, as well as for providing financial, real estate and employment agency services, or other professional services, if they are not related to medicine.
Retail properties
This type of commercial property is intended for companies that sell their goods or services directly to end consumers. Such activities include:
- retail sale of goods not classified as hot food;
- display of goods for sale;
- post office services;
- sale of sandwiches or other cold snacks to take away;
- sale of tickets or travel vouchers;
- hairdressing services;
- funeral services;
- rental of household appliances, clothing and certain other items;
- dry cleaning services, as well as clothing and shoe repairs.
Retail properties in the UK can significantly vary in size, location and cost. They can be entire shopping centres housing numerous shops, restaurants and entertainment venues, clusters of shops with shared parking, or individual retail outlets on high streets.
Warehouses
This class of property includes large buildings and premises used for the storage and distribution of goods: wholesale warehouses, distribution centres, industrial warehouses and storage facilities.
Warehouses are classified as commercial real industrial estate. Industrial properties also include buildings and premises equipped with production and assembly facilities (factories, plants, workshops) and multi-purpose facilities that combine offices, production and storage.
Restaurants, cafes and bars
Commercial real estate properties where food and beverages are sold for consumption on the premises.
These establishments include cafés, restaurants, snack bars and coffee shops serving hot food and drinks, as well as bars and pubs – premises designed for the sale and consumption of alcoholic beverages. Takeaways serving hot food are classified as a separate category in the UK.
Buildings and complexes for rent (BTR / build-to-rent)
This class English commercial real estate includes apartment buildings, townhouses, residential complexes and student dormitories built for rent.
In addition to apartments, BTR residential complexes usually have large communal areas: roof terraces, gyms, laundries, convenient parking, etc. Although such properties are effectively residential, they are considered commercial real estate if they consist of four or more apartments.
Other types of commercial property
To keep our overview from turning into a long list of all possible commercial property, we have included only the most promising for investment options in England.
You can also invest your funds in hotels, guest houses and apartments, entertainment and sports facilities, boarding schools, kindergartens, clinics, medical centres, art museums and exhibition spaces.
What type of commercial property is in demand among investors in the UK?
The most popular British type of real estate for investment has been and remains office space. Over the past few years, they have grown significantly in price, so offices are considered one of the most profitable options for investing in real estate. Preference is given to properties located in large cities of the United Kingdom. Buildings on central streets, which house various cafes and banking institutions, are in particular demand.
Buying your first property in England
If this is your first experience investing in overseas property, give preference to warehouses rather than offices or shops. In the UK, it is much easier to purchase a warehouse, demand for such properties has grown by 28%, and supply has fallen by 17%. This means that investing in such properties is very profitable – they pay for themselves in a very short time.
Regardless of the type of commercial property you plan to purchase, it is best to entrust the selection of suitable options and all the documentary support for the transaction to professionals. Our company only employs specialists who not only have the necessary theoretical knowledge, but also extensive experience in real estate transactions. This will allow you to avoid any difficulties during the purchase and reduce time and financial costs.
Stages of purchasing British commercial property
All investors interested in acquiring non-residential property in England are bound to be interested in the sequence of actions that will accompany the purchase process. Our company’s lawyers divide the purchase algorithm into the following stages:
Initial consultation
At the initial stage, we find out our client’s needs. For what purpose is being purchased commercial property in the United Kingdom, and how will it be used? What are the requirements for the property being purchased? Where should it be located? How much does the buyer plan to spend on this investment? What sources will be used to finance the transaction?
Analysis of market offers, search for suitable options
Based on the information, obtained during the initial consultation, Imperial & Legal staff conduct a detailed analysis of current offers on the commercial real estate market. To find properties that best meet the client’s requirements, we consider all offers, including those that are usually closed to unrelated individuals and companies and are sold before they are published in open sources.
As a rule, Imperial & Legal staff provide investors with several attractive commercial options property to choose from. Depending on the investment objectives, the selection process considers transport links, the proximity of the property to clients or employees, the location of shops, restaurants, etc.
Comprehensive property inspection
This is the most labour-intensive stage of purchasing commercial property in England, which can take up to 8 weeks. Once the investor has decided on a suitable option, the following questions should be answered before the deal is concluded:
- What is the condition of the property?
- Will it be possible to expand the property in the future through renovation, extension or major repairs? If such a possibility exists, how long will it take to get the project approved by the local authorities?
- What is located in the vicinity of the property?
- What are the historical characteristics of this place?
Take this stage of the purchase very seriously and use the services of qualified specialists to objectively assess your future property. After all, once the deal is closed ,, any structural problems not identified during the inspection stage, as well as costly maintenance work not carried out on the property by the seller, will have to be paid for and carried out by the new owner!
Imperial & Legal staff can take care of the legal inspection, as well as the inspection of the condition of commercial property. The solicitor’s report usually includes the results of checks with local authorities, planning authorities, environmental assessments, and information about the drainage system and water supply. In some areas of the UK, checks may be carried out to determine whether there are coal mines or tin mines near the property.
If you are buying commercial property with a mortgage, the British financial institution providing you with the loan may require additional checks to be carried out.
Agreeing the terms of sale with the seller
The next important step is to negotiate with the seller the price and terms of purchase and their agents. Novice foreign investors often forget that estate agents in the UK usually represent the seller’s interests. To ensure that the deal is profitable, the buyer will need the assistance of qualified solicitors during the negotiations. Our specialists formulate a reasonable offer for the seller’s representatives based on the data obtained during the comprehensive inspection.
The result of all negotiations and agreements, which in some cases can take several weeks, is a memorandum of sale – a document that sets out the terms of transfer of ownership of the property and, importantly, the sale price. The parties’ representatives will then use the main provisions of the memorandum to draw up a contract of sale.
Transaction support
Agreement on the details of the transaction
In the process of interacting with the seller’s agents, our employees clarify the details of the transaction. As a rule, the seller’s representatives send the buyer’s lawyers a package of documents, which usually includes:
- a draft purchase agreement;
- title documents for the property;
- EPC – energy performance certificate;
- CPSE – answers to standard questions about commercial real estate.
Our lawyers also handle communication with the bank if the investor is purchasing commercial property on credit.
Exchange of contracts, deposit payment
When all the terms of the sale and purchase agreement have been agreed upon by the parties, the seller and buyer exchange signed copies of this document. The title transfer agreement and mortgage agreement (if applicable) are also signed.
The buyer pays 10% of the purchase into price their solicitor’s account and agrees on a date for the completion of the transaction with the seller.
Completion of the transaction
The seller and buyers prepare for the transfer of ownership rights to the purchased property. The date of completion of the transaction may coincide with the date of transfer of ownership to the investor, or the date of completion of the transaction may be set for the future by agreement of the parties.
At this stage, the buyer’s solicitor will also transfer the title deed to the buyer’s bank so that the funds can be withdrawn. The amount transferred by the bank to the buyer’s solicitor’s account consists of the remaining part of the purchase price after the deposit has been paid, as well as the stamp duty and Land Registry fees.
On the day of the transaction, the purchase money is transferred by the investor’s representatives to the seller. Once the seller’s solicitor confirms receipt of the money for the commercial property, the transaction is considered closed and our client becomes the full owner of the property.
How to make money from real estate in the UK?
What do you need to know before buying a property?
After-sales support
This stage is entirely the responsibility of our lawyers. As part of this stage, we take the following steps:
- We submit an application for registration of the mortgage to the British Land Registry if the commercial property was purchased by a limited liability company. The application is submitted no later than 21 days after the completion of the transaction.
- We prepare and submit a declaration for the calculation of stamp duty. We pay stamp duty within 14 days of the transaction being completed.
- Once items 1 and 2 of this list have been completed, we submit an application to the Land Registry of the United Kingdom to register the title to the commercial property purchased.
Professional support in purchasing commercial property from the specialists at Imperial & Legal
Our company’s employees offer a unique service to foreign investors planning to purchase commercial property in the United Kingdom – legal support for the entire turnkey purchase process.
Negotiating with estate agents and carefully studying a huge number of options can be a very tedious task. Imperial & Legal specialists can compile a list of options suitable for your business, saving you invaluable time and effort. We have extensive experience in finding various types of property, from commercial modest office spaces to huge production sites.
In addition to the search for real estate itself , we can offer our clients:
- analysis of the options found as a result of preliminary selection comparative ;
- organisation of personal viewings of properties;
- a comprehensive property inspection with a final report;
- selection and appointment of real estate agents;
- management of the property transfer process (if necessary);
- negotiation of the sale/rental price;
- building business relationships with landlords;
- assistance in obtaining a mortgage from a British bank;
- registration of transfer of ownership rights;
- organising the redevelopment or renovation of the purchased property.
Our company’s professional lawyers will be indispensable assistants also for those investors who prefer to purchase commercial property in the UK through a limited liability company or a trust.
Want to invest in commercial property in England?
We provide full support at all stages of the search, negotiation and signing of the property purchase agreement. Contact us today to discuss your requirements.
