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Most small and new businesses will not have the capital to buy property and renting commercial property may be a better option. However, if you do have the capital, buying your own commercial property can offer a number of advantages.

Advantages of buying business property

The pros of purchasing business premises includes:

• Giving you peace of mind knowing that you do not have to worry about lease renewals or potentially substantial rental increases.
• Financing commercial property eventually becomes less expensive in the long-term as you pay off your commercial mortgage.
• Having a commercial mortgage you may have the option of refinancing the property to free additional capital for business investment.
• Giving you the freedom to use and alter the property as you wish to meet the ongoing demands of your business.
• As the property owner you have more flexibility over the management or repair of the building
• You could potentially profit from the property when you sell it, if it gains in value.
• You have the option of subletting part of the property to another business or letting the entire property in the future. This can open up another income stream for your business.
• Relocate when the need arises by putting the property up for sale - you won't be tied to a fixed-term contract like you could with rented property.
• More accurately forecast your costs. This is particularly true if you have a fixed-rate mortgage in place.

Disadvantages of buying business property

However, there can also be disadvantages of buying business premises, these include:

• Ties up a lot of your capital, which could instead be used to set up and invest in your business. It may be difficult to recoup the capital quickly, or at all, if you decide to give up the business when there is a downturn in the property market.
• It isn't as easy to relocate as opposed to if you were renting commercial property - it may take more time and cost you money to sell your property, especially if the property value has depreciated.
• Leave you with negative equity or the threat of repossession if you cannot keep up with mortgage repayments on the property.
• Cost you a lot of time if you need to make alterations or do some building work.
• Make you responsible for the safety of the building. For example, you need to keep up to date with and implement regulations for fire precautions and health and safety. Bear in mind that some leases also require this. See fire safety responsibility.
• Commit you to ongoing costs - see costs of buying business property.
• It can be a burden managing tenants and any associated building risks if you decide to let or sub-let the building.
• You may be less agile to react to changes in the markets. For example, the global coronavirus pandemic has led to staff from businesses across the world working from home. This has given rise to a mind shift in how and where employers see their employees doing their work. You may end up with a large commercial property that is no longer required at least not in the same capacity as before.

Making your decision to buy or rent property

Before committing to buying commercial property you should work out whether you should rent or buy business premises and also weigh up the advantages of renting commercial property.

When you purchase a commercial property, you'll have to budget for a number of expenses such as:

• fees for the surveyor and solicitor and any other professional advisor required to complete the purchase of the property
• VAT (not in every case, and if you're registered for VAT you may be able to claim it back) and Stamp Duty Land Tax - see buying commercial property: concluding the sale
• fees for making searches or enquiries with the local council or Companies House or Land Registry fees
• alterations and fitting out the property for your business purposes

Ongoing property ownership costs

As a property owner, you will also need to consider the following ongoing costs:

• Business rates are based on what the property would rent for at a given date. Land and Property Services is responsible for these valuations. See how business rates are calculated.
• Commercial property insurance for your business premises.
• Property repairs, ongoing maintenance work and general upkeep.
• Running costs for the property - eg lighting, heating and charges for services like cleaning or security.
• Commercial mortgage payments - if you can't afford to purchase the property outright. See commercial mortgages and lenders. You'll need to assess carefully how much you can afford. Speak to your bank manager to find out how much the bank may lend and check what financial security this will require. See bank finance.
• Costs to make reasonable adjustments to improve disabled access to your business premises - see disabled access and facilities in business premises.

Energy Performance Certificate (EPC)

All sellers - or construction firms in the case of new buildings - are responsible for providing prospective buyers with an EPC with an energy rating. An EPC can give you a good indication of a building's energy efficiency and the likely energy costs. See EPCs for business properties.

Environmental performance of your business property

Air conditioning systems and boilers can have a significant effect on your overall energy bills. You can make considerable savings by keeping these well maintained and having them regularly inspected by a qualified engineer. See our case study on installing an efficient heating system - Marine Hotel (video).

Air conditioning inspection

You will need to check whether any air conditioning systems you have require an energy inspection. A valid energy assessment may already exist for any installed systems. Ask for this to be handed over by the seller. are required at least every five years for equipment greater than 12kW.

When you think you have found the right business premises, compare the price with other similar properties in the area. If you are satisfied that the price is fair, you can then make a conditional offer to the property agent. This means telling the property agent that you want to buy the property for a particular price, provided that certain conditions are met, such as:

• a satisfactory building survey
• being able to raise the finances to complete the purchase of the property
• planning permission for any property alterations is granted

The property agent is obliged to forward your offer to the client, the vendor. If the vendor is happy with the price you propose, the offer will be accepted. If not, you may want to negotiate further to reach a mutually agreeable figure.

Reaching an agreement to buy a property

Make sure you get a lockout agreement when your offer to purchase the property is accepted by the seller. This means that from now on, the agent will not market the property or negotiate with anyone else about selling the property. However, you should note that if another offer is received, the agent is still obliged to pass this on to their client. Your part in the agreement is to make sure that all the necessary checks are made and that you have raised the money to buy the property.

If you have applied for a mortgage, you will need to have a written offer from the lender before committing yourself to buy. See commercial mortgages and lenders.

It is advisable to seek professional expert financial advice when purchasing commercial property.

Before buying property or taking on a lease, you need to know of any problems that the building may have prior to committing yourself to the purchase. The surveyor's role is to carry out a survey which assesses the value and structure of the property you want to purchase. It is wise to have a full structural survey carried out, so that there are no nasty surprises later. A full survey will reassure any mortgage lender that the property is a sound investment. .

What can surveyors help with?

Surveyors can help:

• prevent legal disputes arising from buying, selling, leasing or letting commercial property
• avoid nasty surprises and expensive repair bills
• weigh up whether the asking price for the property reflects its true value
• give you the upper hand during negotiations as you will have a detailed report on the current building condition
• prevent you paying too much for the right insurance cover or getting the wrong insurance policy
• identify potential future maintenance requirements of the building usually with cost-estimates

How does a building survey work?

The chartered surveyor starts with a visual inspection of the building structure by examining floors, walls and ceilings. They will pay particular attention to signs of settlement, damp or timber decay. The existing state of roof coverings, gutters and downpipes will be noted, as will the condition of doors or windows which may be approaching the end of their useful life.

A chartered surveyor would not report in detail on the heating or electrical equipment in the property or on the underground drainage system. Other items normally excluded would be the presence of damaging materials such as high-alumina cement. Specialist surveys are available to cover asbestos and the terms of the Disability Discrimination Act.

It is vital that any commercial property survey is undertaken by a suitably qualified and experienced surveyor and that they are a member of the Royal Institution of Chartered Surveyors (RICS). .

For further information, .

Buying commercial property is often a significant investment for your business. It is important you take the time to make the right decision and seek professional legal advice when doing so. Choose a solicitor who specialises in commercial property law. They will help you understand exactly what is in the purchasing contract and what your responsibilities will be if you sign it.

You will need to pay a fee for using the services of a solicitor for commercial property legal advice so be sure to get an estimate from the solicitor from the outset so that you can factor this cost in to your overall project budget.

Choose a solicitor for your business.

Buying business property: solicitor duties

A good solicitor will:

• make sure the seller has a good title to pass on to you - in other words, that everything about the ownership of the property is in order and that you can use the property for business purposes
• negotiate and obtain the best contract terms for you
• help you understand any contractual terms and agreements
• deal with any legal enquiries with the seller's solicitors
• carry out land searches to check if there are any problems with the property
• arrange a survey to be carried out on the property, if required
• satisfy your bankers or other lenders that the property is a good investment
• help you to complete your purchase as quickly as possible

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There are a number of steps you need to take before completing the purchase of a commercial property and you become the owner. Once you are committed to buying the business premises you will need to exchange contracts. This is when the solicitors representing the buyer and seller of the property post the signed contracts to each other.

Exchanging contracts when buying property

You will be ready to exchange contracts with the person selling the property when:

• both sides are happy with the contract and agree on the price
• the surveyor or solicitor has made all the necessary checks and land searches on the property
• any planning permission, if applicable, has been granted
• you have raised the necessary money to purchase the property

Once you have exchanged contracts, the purchase becomes legally binding.

Deposit for buying a property

If you are paying part of the purchase price upfront - known as a deposit - you do this when you conclude contracts. Once the solicitor has received the agreed deposit from the buyer they will pay this to the seller. The deposit is non-refundable.

Completing the sale

Once the contract is agreed you can make arrangements for the completion date. You are then ready to complete the purchase and become the owner of the property. Prior to the completion date, make sure you have adequate commercial property insurance in place. On the completion date, your solicitor will hand over the purchase price - paid by the mortgage company or lender - to the seller's solicitor. Your repayments to the mortgage lender begin. See commercial mortgages and lenders.

Stamp Duty Land Tax for commercial property sales

You must pay Stamp Duty Land Tax (SDLT) if you are buying non-residential land or property. The current threshold for non-residential properties is £150,000. However, you must still send an SDLT return for most transactions under £150,000. You must send and SDLT return to HM Revenue & Customs (HMRC) and pay the tax within 14 days of completion.

How much you pay for SDLT will depend on how much you pay for the business property – .

For further guidance see .

Land Registry

When there is a sale of a property within Northern Ireland the title must be registered in the Land Registry. There will normally be a fee due for this. Your solicitor can assist with the Land Registry.

Finally, your solicitor receives the deeds to the property. These are the papers giving details of the property and the owner. The deeds are then sent to the lender, if a mortgage is used to complete the purchase of the property.

Read further information .