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If you are the owner of a commercial property and want to sell it, there are several important facts that you need to first understand, including possible hurdles that you might face during the selling process and the costs that could be involved. The guide below provides that information, along with advice on how to sell a commercial property quickly and at a fair price.
- What is the definition of a commercial property?
- The potential costs involved with selling commercial property
- Knowing what asking price to seek for your commercial property
- Preparing your commercial property for sale
- Consider preparing a buyer’s pack to help sell your commercial property
- Three options for how to sell your commercial property
- Top questions and answers about selling commercial property
What is the definition of a commercial property?
Commercial property in general terms refers to any type of building that it used as the location of a business activity, although some solicitors and other experts might differ on the precise definition based on the type of work done at a property and how often it occurs. This means commercial property could cover everything from a newsagent to a large warehouse.
But in more specific terms, the government-approved definition of commercial property in the UK is set out in The Town and Country Planning (Use Classes) Order 1987, which divides the various different types of properties into several broad “use classes” or categories. Each of those categories also has its own sub-categories of commercial property that it’s important to understand.
Broadly, the five main types of commercial property recognised in the order can be divided into retail, leisure, offices, industrial and healthcare. If you are the owner of a commercial property and you want to sell it, knowing which category your commercial property fits is crucial before trying to find a buyer.
Retail Property: Refers to anything that involves shopping, and can range from a corner store in a small village through to a large national brand outlet and even shopping centres
Leisure: Covers any type of building that houses a pub, restaurant, hotel, café or other similar venue, and it also applies to gyms and other types of sporting facilities
Offices: This type of commercial property space refers to office space used for various types of business purposes, for example an accounting company or professional service
Industrial: Differs from the other categories because these buildings tend to be much larger and used for a company’s storage or production, such as factories or warehouses
Healthcare: Another broad category that includes any property which is used for medical purposes, including health centres, nursing homes, private hospitals and more
The potential costs involved with selling commercial property
Selling a commercial property can potentially be more complicated than selling a residential property. That’s because of the various business taxes and other liabilities, as well as demands from a buyer’s solicitor for information about the property, and gathering these details can take time and money – and often requires hiring a solicitor who can handle the necessary paperwork.
There can be a number of potential costs associated with selling a commercial property, although you might be available to avoid some of the charges depending on the method that you use to find a buyer for the property. For example, you will have to pay potentially a significant amount in commission if you use an auctioneer or an estate agent to sell your commercial property. But you won’t pay any fees for selling to a fast property buyer because they never charge commission.
Below you’ll see a summary of some of the most common expenses that sellers have to pay when trying to sell a commercial property, as well as tips on how to lower overall costs.
Capital gains tax – Not all commercial property owners will have to pay capital gains tax, which is tax paid on profit from an asset, such as a retail shop that you own. If you bought your property as an investment, you may be required to pay capital gains tax on any sale profit. If you’re uncertain about your tax liability, you should ask a financial expert for advice.
Costs for emptying premises – If you are able to sell your commercial property but it still has furniture, electronics or other equipment still inside, you’ll have to spend money on hiring a removal company that can clear all of those assets out of the property. However, these items are sometimes included in commercial property sales and therefore are left behind.
Legal fees – Many, but not all, commercial property sales require hiring a solicitor to help navigate the potential legal and financial complications, which can be greater than a typical residential property sale. Depending on the method that you use for selling, you might need to hire a legal professional and this will be another cost to consider. Calling around various solicitors’ offices will get you a range of quotes for the price of their services, so don’t simply settle for whatever price you’re given by the first solicitor you talk to.
Commercial property legal information from the Law Society
Mortgage redemption fee – If you’re in a situation where you still have a current mortgage on your commercial property and pay it off early as part of the sale of the property, the terms of your mortgage agreement might require that you pay your lender an early redemption fee.
Mortgage arrangement fee – In the event that you have a mortgage on your current commercial property and cannot transfer the loan, you might have to pay your lender an arrangement fee.
Commercial estate agent fees – If you use an estate agent to sell your commercial property, they will handle the work of developing a listing that features photographs designed to make the property look attractive to buyers along with text about its main features, such as total square footage. Estate agents expect to be paid for this work, and you can expect to pay a fee based on a percentage of the property’s sale price if they find you a buyer. One way to avoid this cost entirely is to use a fast buyer like LDN Properties, because the reputable quick property buying companies promise to never charge sellers any fees.
Knowing what asking price to seek for your commercial property
Just as there are several common steps involved with selling a house or flat, there are a number of stages for the process of selling a commercial property such as a shop, restaurant, warehouse or office. One of the earliest steps is trying to decide what asking price you’d like to seek for the property.
You’ll need to have an estimate of how much the property is worth, and there are several ways that you can attempt to do this. One option is to browse a major property sales website such as Rightmove so that you can see the current and past prices at which properties like yours within the same area have sold.
Yet another option for getting an idea about the value of your commercial property is to contact a fast buyer such as LDN Properties. Within the first hour of talking with you, our experts may be able to make an initial offer for purchasing the property whether it’s a shop, office, or anything else. This can be a great way for you to get an honest and speedy valuation of your property, and also help you to save time compared to calling many different estate agents, because the fast buyer will be quoting an honest price at which they would buy the property.
Preparing your commercial property for sale
When homeowners sell their houses or flats, it’s highly recommended that they make an effort to remove clutter and clean each room of their property in order to make it look as attractive as possible to buyers on viewings, where they come to tour the interior and exterior. The same rule applies for a commercial property, because making sure that it looks in pristine condition might make all the difference between someone offering to buy it or losing interest completely. First appearances matter with every type of property, so make sure yours appears at its best.
Some property experts are predicting that the demand for commercial properties might slow down slightly from 2022 whilst demand increases for houses and flats, according to a post on LinkedIn. That means you could be trying to sell in an even-more competitive market, which further underscores the need to make your property visually ready for selling.
Consider preparing a buyer’s pack to help sell your commercial property
The considerations that buyers will have for what makes an attractive commercial property can differ significantly from residential properties. For example, someone looking to buy a house or flat might put a premium on finding a home that is on a quiet street in a mostly residential neighbourhood. By way of contrast, a retail company might want a city centre store that has the perfect amount of square footage for its stock, and is priced within the company’s budget.
One way to help make buyers look more favourably at your property is to ensure that they can swiftly be provided with all of the information that will require ahead of making an offer, ranging from data about utility costs through to mandatory paperwork required by the UK government.
A popular way to present this information is through a buyer’s pack, which consolidates many items and can be given to any person or business that shows an interest in buying your commercial property. If you have decided to hire a solicitor to help with the sale of the property, they will help you will collecting this information and putting together the buyer’s pack.
Planning permission is a critical category for a buyer’s park, because this will let someone who is interested in your property know about any restrictions that might be in place for any future physical changes they would like to make to it. Buyers will also want to know about the specific use classes for the property, so that they can be confident that it can be used for their company. You should be as upfront and honest as possible with information on any restrictions or permissions, because you could face litigation if you lie about or do not disclose them.
Another important piece of information to disclose in the buyer’s park is whether your property has the require commercial Energy Performance Certificate (EPC). This is a document legally mandated by the UK government starting in 2007 for England and Wales, and it ranks properties based on their energy efficiency when they are built, sold or let. EPCs grade properties from the highest and most energy efficient level of "A" to the lowest level at "G" which is for the least efficient properties. Practically every commercial property requires an EPC, and once an EPC has been issued it is registered with the government for 10 years. If you don’t already have an EPC you should get one before attempting to sell your commercial property.
Other important items that you might have to include in your buyer’s back include the results of an asbestos survey is one is required for your commercial property, details of commercial business rates, details on the typical utility rates and other costs of doing business in the property, the level of stamp duty land tax that applies to the property, and anything else that a prospective buyer might ask from you.
Three options for how to sell your commercial property
Once you have collected all of the information that buyers might want or need to see, you’ll next have to decide which method you will use to sell your commercial property. The three main options to choose from are using a commercial estate agent, using a property auctioneer, or selling to a fast property buyer. All three methods have unique advantages, although some of the choices also have disadvantages that you should understand before making a decision. What’s right for one seller based on how quickly they want to sell their property and how much profit they want to make might not necessarily be the best option for another seller.
Selling your property using a commercial agent
The first option for selling your commercial property is to use an estate agent, and you’ll find that some companies specialise solely in selling these properties, whilst other estate agents might have one division that sells commercial properties and another that sells houses and flats. You should ensure that whichever estate agent you use has experience with selling a commercial property, otherwise they might find the process overwhelming and fail to find you a buyer.
If you opt for this method of selling, you may want to try finding a commercial agent who belongs to an officially acknowledge and accredited organisation for the industry, for example the Royal Institution of Chartered Surveyors (RICS). RICS promotes stringent standards for valuing, managing and developing land, infrastructure, real estate and construction, and therefore agents with RICS accreditation are considered highly professional.
One reason why it’s important to find an accredited agent is that the reputable ones will offer personal insurances, and those will cover any potential damages that you might suffer as a result of receiving negligent advice. Your agent will assess your commercial property and usually give you an in-depth report on it ahead of trying to advertise it to potential buyers.
Similar to using an estate agent to sell residential property, a commercial agent will charge you commission for the work that they do in marketing and finding a buyer for your office space, warehouse, retail unit or whatever other type of commercial property you are trying to sell. You will have to deduct the cost of their fees from the final sale price in order to get your net profit from selling your commercial property. Speak with several commercial real estate agents to get a range of quotes for fees, and see if you can negotiate lower commission rates.
Selling your commercial property through an auction
The second option for selling your commercial property is by using a property auction, where there is no certainty about whether the property will sell nor about the value at which it might sell. Your target is for at least two buyers to want your property, so that they keep outbidding each other by offering increasing prices for it. However, there is no promise that this will actually happen. And you might not receive any bids, which means that the property does not sell and you will have to start the entire process of selling from the beginning.
When selling this way, the auctioneer will ask you to set a reserve price, which is the lowest value at which you can accept your commercial property selling. Budgeting at this step is crucial, because you need to pick a price that you are happy with after you subtract the commission that the auctioneer will charge you for their work. You might only get a single bid at the reserve price, and that is a legally enforceable sale.
Depending on the auction house, you could have a choice between a traditional or modern auction. A traditional auction happens when you list your property for sale, the listing is advertised for weeks, and then the auction takes place on a specific date, when bids are accepted either in person, by telephone, or online. A modern auction happens when your property is listed for sale for a certain amount of time, such as a month, and people can place bids at any time of the day during that period until the listing expires and the top bid wins.
Selling at auction can be a faster way to find a buyer than using a commercial estate agent, but there can still be some delays involved. For example, you will have to wait a number of weeks between the date on which your property is listed for sale and on which the auction takes place. If the property successfully sells at auction, there’s usually a wait of 28 days whilst the buyer completes the paperwork and other aspects of the sale. Some auctioneers set a shorter deadline, others give buyers more time, so you should always ask for specific schedules.
The aforementioned fees can also be a major disadvantage depending on how much commission the auctioneer will charge you for selling your commercial property. Ask to see whether you can pass some fees on to the winning high bidder, as this might be possible. Some auctioneers could also be willing to negotiate their commission and reduce it slightly, which could help you to increase the overall amount of profit that you can make from the auction.
It’s vital that you find an auctioneer that knows how to sell commercial properties and not just residential buildings like flats and houses. If the auctioneer has never successfully sold a commercial property in the past then there is no assurance that they will have the marketing and sale skills required to find a buyer for your commercial property at a profitable selling price.
Selling your commercial property to a quick buyer
The third option for selling your commercial property is to contact a quick buyer such as LDN Properties. We have extensive property experience and may be able to consider buying your commercial property throughout London and the UK. Our experts provide a straightforward, no-hassle and zero-stress way for you to receive an offer that is both fast and competitive.
We promise that you will never have to pay any commission when selling your property to us, because we believe owners should get to retain the full proceeds from whatever price we offer for buying their properties. Compare that to commercial estate agents or auctioneers who will charge you commission, often at quite high amounts, for successfully selling your commercial property, which will in turn reduce your overall sale profit. If your aim with the sale is to ensure a speedy sale, using a quick buyer can be a good choice.
Another top advantage of selling your commercial property to a quick buyer is – as the name suggests – we can typically complete the various steps for purchasing the property within just a handful of weeks, including paying you the proceeds and exchanging contracts. We believe this is often a swifter timeline than you might expect when selling your property via other methods.
Next, we will have one of our representatives visit your commercial property so that they can inspect the interior in person. This is also a chance for you to ask our team member any queries that you’ve still got about selling.
The final stage is when we work with your solicitor or other legal representative to finalise the sale, making for a very streamlined approach when compared to other alternatives. We aim to complete the process in weeks rather than months, which can make all the difference with commercial properties.
Top queries and answers about selling a BISF house
Property owners thinking of selling their commercial property quickly usually have a few questions for us, ranging from the how long a sale typically takes through to the condition required for selling. Here are some of the top questions we’re asked about selling a commercial property:
Top questions and answers about selling a commercial property
Residential property includes freehold and leasehold houses and flats that are used for people to live in. Commercial property covers a wide range of properties of all shapes and sizes that are used by companies and other entities that aim to make profits from their services. Examples of commercial properties include shops, offices, cinemas, private hospitals, and more.
If you own a commercial property and would like to sell it, you can choose between using a fast buyer such as LDN Properties, trying your luck with an auction house that has experience with selling commercial properties, or using an estate agent that can handle such sales. The right choice will depend on your specific needs, such as how quickly you want to sell.
No. If you use a fast buyer to sell your commercial property, the legitimate companies will never charge you any fees, which means you can maximise your profit. Estate agents will typically charge a fee based on a percentage of a commercial property’s sale value, whilst auctioneers may charge even higher fees, although these are sometimes negotiable.
Using an estate agent to sell your commercial property can take several months, and it might even take more than a full year before you receive a serious offer from a buyer. Auctions can take at least two months, including the time it takes to list a property and complete the sale. Fast buyers are the speediest option as they can finalise the sale within a few short weeks.
Commercial property sales can often require significantly more information for prospective buyers than conventional residential house or flat sales. Some of the facts that buyers might want will include any planning permissions for the property, details on Energy Performance Certificates, business rate summaries, taxes and liabilities, and various other issues.
Ask a fast buyer whether they are registered with the independent organisation known as The Property Ombudsman (TPO), which issues rules to protect property owners against fraud in the quick buying industry. All TPO members must adhere to those regulations, giving you extra peace of mind. Be cautious about selling to a non-TPO member because it might be a scam.
If you have decided to use an estate agent for selling your property, it’s important that you find an agent who specialises in commercial property sales. And for your security, you should consider using an agent who has accreditation from a reputable organisation like the Royal Institution of Chartered Surveyors, as this usually signals that they have a high level of professionalism.
