Selling Retail Property

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If you own any type of shop, it’s likely considered to be a retail property, and you might face some additional complications with selling it compared to a private residential property. However, it doesn’t have to be a difficult process, and depending on how you choose to find a buyer, you could still manage to make a decent profit when selling, and do so speedily.

1. What is considered to be a retail property in the UK?
2. Can you sell a retail property with a home above it?
3. Fees you may have to pay with selling a retail property
4. Calculating the best asking price for your retail property
5. Help the sale of your retail property with a buyer’s pack
6. Options for how to seek a buyer for your retail property
7. Frequently asked questions about selling a retail property

What is considered to be a retail property in the UK?

There isn’t a single comprehensive definition of the term “retail property” set in UK statute or regulation that covers all possible situations. But it’s still possible to have a general understanding of what qualifies as a retail property based on law, rules and precedent.

A business that one person considers to be a shop that should be designated as retail might be something that another person deems to be another commercial or other use of the building. That’s why it’s useful to look at legislation called The Town and Country Planning (Use Classes) Order of 1987, from which we’re able to get a better idea of what qualifies as retail property, and what doesn’t qualify.

The statute sets out various categories known as commercial “use classes that are broad definitions of several different properties. Within those use classes there are sub-categories that offer more specific distinctions between how certain businesses are defined. Commercial property is a broader term than retail, because the former can refer to more types of operations.

First enacted in 1987, the purpose of the legislation is to specify when these buildings that companies operate out of as one of the use classes do not require planning permission when the property’s use switches from one of the defined services in a specific class to another service also within that same class, and it covers properties in England and Wales.

Commercial properties in these classes are sorted into leisure, healthcare, industrial, office and retail, and it’s useful to know what falls under each in order learn what qualifies as retail before listing your property for sale.

Leisure – These are buildings used for hotels, pubs, cafés, restaurants and the like, but the use class can also include sporting facilities like gyms and other businesses

Healthcare – Properties within this use class are those providing life services to people, which includes but is not limited to private hospital, nursing homes and health centres

Industrial – Any property that is covered by this category will tend to be significantly bigger than other use classes, as it typically refers to warehouses, factories and similar

Office – As the name suggests, this applies to properties that are primarily used for the purpose of providing office working space to a company’s employees

Retail – The most relevant category for this guide, it designates retail property as being anything to do with shopping, from a small village shop to a major shopping centre

Generally, if you’re selling a retail property then it will fall under the fifth category, and it covers many different types of shops. The legislation says that uses can include use as a travel agency, hairdressing, selling cold food to eat off-premises, as a post office, for the retail sale of most goods except hot food, for funeral directors, displaying goods for sale, for receiving goods that are to be repaired, cleaned or washed, and for hiring personal or domestic goods.

It’s important to note that the legislation setting out these use categories was amended in 2020, establishing three additional use classes. The updated Town and Country Planning (Use Classes) (Amendment) (England) Regulations 2020 created a class for learning and non-residential institutions such as libraries and museums, a local community use class that includes shops that sell essential goods and are no larger than 280 square meters, and a commercial, business and service category that includes retails, office and other services that are “appropriate to provide.”

Can you sell a retail property with a home above it?

Whether your retail unit is located in a village, town, city centre or anywhere else, there’s a chance that there might be a residential property located directly above it. It’s a common sight in the UK, with flats available for people to rent above all different types of shops and businesses.

If you own a retail property but not the flat above, there are no restrictions on trying to find a buyer for your unit, regardless of whether someone is currently living in the upstairs property. You should feel free to proceed with trying to sell and finding your preferred method of locating a buyer, with a later section in this guide outlining the pros and cons of the various options.

But if you’re the owner of both a retail unit and the residential property immediately above it, you will have to decide whether you are looking to sell both, or just the shop.

Note that this assumes you are the freehold owner of the entire property, both the retail unit and the residential unit above, because freeholders own properties outright and can sell them as they choose. The alternative is being a leaseholder, where someone has the right to live in a property for the duration of a lease agreement of up to 125 years – you’ll find that many flats situated above retail units are typically leasehold, but this is not always the case.

Regardless, there are few restrictions on selling a retail property when there is a home located directly above it, so you shouldn’t let that factor dissuade you from trying to sell your unit.

Fees you may have to pay with selling a retail property

Selling a retail property will incur fees and other costs much like some of the expenses that you’d have to pay when selling a freehold or leasehold house or flat. But none of the fees or other charges that you might be liable for should ever be a total barrier to finding a buyer.

Below is a quick summary of a few of the most common expenses that people who own retail properties have to pay when selling, although they don’t apply in every situation.

Costs of emptying the property: When you sell a home, you have to remove all of your fixtures and fittings, and the same applies with retail properties. If the unit has equipment like electronics, furniture or anything else inside after you find a buyer, you’ll probably have to pay for a removal team to collect these assets, unless you’re willing to move the items yourself. It’s also possible such items might be left behind if they’re sold as part of the property.

Fees for legal professionals: In situations where the sale of a retail unit is very simple, you may only need a solicitor or other legal representative to help with signing the documents to formalise the sale at the end of the process. But some complicated sales could require the help of a legal professional throughout, and they will charge fees for the work that they do.

Commission from third party seller: If you choose to use an estate agent or auctioneer to sell your retail property, you will have to pay them commission if they are successful in finding a buyer. This fee is taken out of the sale proceeds, which lowers your eventual net profit. Later in this guide you’ll learn about the zero-fee alternative method of selling to a fast property buyer.

Mortgage arrangement fee: Should you still have a mortgage on your retail property and you’re not allowed to transfer that loan, your lender could charge you an arrangement fee. Be sure to consult with your mortgage provider before selling, so you are aware of any charges.

Capital gains tax: This won’t apply in all scenarios, but it’s possible that you might be liable for paying some capital gains tax when you sell a retail property if you initially purchased the unit for investment purposes. You could be required to pay the UK government capital gains tax on the amount of profit generated from the sale of the property. It’s always advised to consult a tax expert for their advice, in order to avoid overpaying or underpaying any tax you may owe.

Mortgage redemption fee: Another potential fee associated with mortgages can occur if you have an outstanding balance on a loan for your existing retail property, and are able to pay off the remaining debt thanks to the sale of the unit. Many mortgage lenders include a term in their loan agreements imposing a fee in the event you pay off the loan ahead of schedule.

Calculating the best asking price for your retail property

Just as finding the right asking price for a residential home is key, it’s also important to spend some effort researching what might be the most suitable valuation for your retail property.

It might seem overwhelming at first, because there are so many factors that can affect demand for specific types of retail properties – everything from the area in which it’s located facing a string of shop closures through to the problem of too many similar retail properties for sale in the same area. But it doesn’t have to be a stressful or difficult path to finding the right value.

Start by visiting property sales websites such as Zoopla and browsing listings for retail units that are similar to yours, both in your neighbourhood and other locations. This can be a good initial step to get an idea of how much properties like yours are actually selling for, and also to learn which prices are likely too high to secure a sale.

Another step you might want to consider is asking estate agents to give you a free quote for the price at which they think you’ll be able to sell the retail property. Just beware that some estate agents are likely to quote a price that’s far above what they truly believe they can get for your property, as they want to entice you into selling via them, so that they get your commission.

Calculating an average of all the values from property sales websites, fast buyers and estate agents should give you a much more accurate idea of a decent asking price for your unit, rather than just relying on a single value that you obtain from one of the options outlined above.

Help the sale of your retail property with a buyer’s pack

There are a few steps that you can consider taking which might make your retail property more attractive to buyers, which could help to reduce the time it takes to secure a sale.

First impressions matter, and that’s why you should ensure that your retail property looks in great condition for any potential buyers that might visit the unit on a viewing ahead of deciding whether to make an offer. A clean, spacious property is far more likely to generate serious offers from buyers compared to a dirty unit with flaws such as chipped paint or broken windows.

You may also want to prepare a buyer’s pack for the sale of your retail property, which contains a host of information about your unit that will be of interest to any prospective buyers.

Some of the facts that might be included in a buyer’s pack are any restrictions on planning permission for the property, details on the unit’s commercial Energy Performance Certificate ranking, details on the results of an asbestos survey if you had one done for the property, the amount of stamp duty land tax as it might apply to your unit, specifics on retail business rates, and more.

Buyers might look more favourably on your property if they have such a pack in hand, because it could answer a lot of questions upfront that they might have before making an offer, simplifying the process and avoiding potential delays in getting answers to those queries.

Options for how to seek a buyer for your retail property

After you have gone through all the steps of preparing your retail property for sale, including determining your goal asking price, you next have to decide on a method for finding a buyer.

Typically, your options are to choose between trying your luck with a property auction, using the services of an estate agent, contacting a speedy property buyer like LDN Properties, or attempting to find a buyer for the retail property on your own without any third party assistance. Consider the details of each as outlined below, and find the one that best suits your situation.

As you weigh the advantages and disadvantages of each approach, be honest with yourself about how they fit in with your budget for selling, which includes the amount of time, money and effort that you’re willing to invest in finding a buyer, and whether you want to pay any fees. This should help you to realise which choice is best for finding a buyer quickly.

Trying your luck with a property auction

Selling this way can be a gamble, because the final sale price for your property is unpredictable, and it might not even sell. You’ll be asked to choose a reserve price, which is the lowest value at which you’re willing to sell the retail unit, and if anyone bids at that value then the property is considered sold – and this is deemed a binding legal agreement that the buyer can enforce.

Make sure that you choose a reserve price that works for you after paying the auctioneer their fees, otherwise you risk only breaking even on the sale, or possibly selling at a loss. Most auction houses charge commission based on your property’s final sale price, and this fee will be deducted from the proceeds before you receive the rest.

A benefit of selling this way is that you won’t have to put in much effort, because the auctioneer will be responsible for preparing and advertising a listing that describes your retail property and includes photographs of the interior and exterior. They will also host the auction, so if you’re looking for a selling option with minimal work on your part, this could be a viable choice.

However, you should be aware that this can be a rather slow process of selling compared to other choices like using a fast property buyer. You can expect to wait several weeks or longer between the day on which your first list your retail unit for sale and the day on which the auction takes place. And if someone does successfully buy your property at the auction, they usually then have about 28 days to complete all of their required steps for finalising the purchase.

Using the services of an estate agent

You can reduce your workload with selling when contacting an estate agent, as they’ll handle the tasks of preparing a listing, advertising it, organising viewings for potential buyers to you’re the property, and dealing with any genuine purchase offers that you might receive.

But a major downside of selling property through an estate agent is that they will charge commission, based on whatever final sale price you’re able to get for the unit – although some estate agents might may you pay more. This fee is subtracted from the final sale proceeds immediately, which naturally will reduce the net sale profit that you can make.

Even if an estate agent is skilled at selling retail units, there’s no guarantee about when you’ll find a buyer, and it could take an entire year before a buyer makes a serious offer. That’s far from perfect if your main priority when selling your retail property is finding a buyer quickly.

Contacting a speedy property buyer

Fast buyers, like the London-based company LDN Properties, have the financial capability to immediately purchase retail units without having to wait for many weeks or months to first get approval from a lending company for a mortgage to cover the cost of the purchase. As a result, they can complete the process of buying most retail property within a handful of weeks, and that covers all of the required steps including exchanging contracts and paying you the proceeds.

The speedy buying schedule is not the only benefit of selling this way, because quick home buyers will also never charge you any fees for purchasing your retail property.

Quick property buyers are also typically able to make offers on a much wider range of units than other methods of selling. Whilst you could struggle to find an estate agent with knowledge of how to sell a shop, experienced fast buyers will have no problem making a swift offer.

Another reason why many people selling retail properties turn to fast buyers is that they can make offers on units even if they have structural problems, unfavourable locations, or any other issue that other buyers might consider to be dealbreakers that make them lose interest.

This can make quick buying companies a good solution in cases where you might own a retail property that has a flaw like dry rot or subsidence, but you lack the funds or time available to correct the problem prior to selling. Speedy home buyers will still make an offer that is competitive and fair regardless of the condition, age, type, size or shape of your property, allowing you to find a buyer without having to first pay for repairs to the unit.

Attempting to find a buyer on your own

Yet another option is to attempt selling the retail property on your own, which means without any assistance from a third party like an estate agent. This can be an intense amount of work, and it’s not something you can usually do in your spare time. It may require a lot of money, time and effort, and it’s only recommended if you have any prior experience selling retail properties.

It could be many months or longer before you generate any serious offers from buyers when selling this way, and there are few clear advantages from pursuing this method of selling.

Perhaps the only obvious benefit that some might consider with this approach is the fact you wouldn’t have to pay a third party any commission when you eventually find a buyer. But it’s possible to get this exact same result, with zero stress, using a no-fee fast buying company.

Top queries and answers about selling retail property

Property owners thinking of selling retail property (shops, offices, commercial etc.) quickly typically have a few questions for us, ranging from the amount of repair work needed before selling through to selling in bad condition. Here are some of the top questions we’re asked about selling retail property:

Your top questions when selling retail property