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Legal tips for optimising the sale value of commercial property

View profile for Ian Barnard
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If you are reviewing your commercial property portfolio, you may decide that the time is right to sell some of your property.  It goes without saying that you will want to get the best possible value from the sale.  Prices are strongly affected by the local property market which is linked to the level of activity in the wider economy.  Although you cannot change the market, there are things you can do to make your property more appealing and optimise your return, especially if you work together with an experienced property lawyer.
 
If you plan well ahead, you give yourself the best chance of a smooth sale at a good price’, says Ian Barnard, Director in the commercial property team with Crombie Wilkinson Solicitors. ‘The key is to put yourself in the shoes of a possible purchaser and think about what they want to see and pay for, and what might put you in a stronger negotiating position.’ 
 
Selling as an investment
If your property is likely to make a good investment purchase, then you should focus on getting a strong tenant in place to create a reliable income stream.  A lease with at least five years left to run will be more attractive to a buyer than a shorter term.  Your solicitor can help you negotiate a letting on standard market terms. Ideally, the tenant should be responsible for repairing the property and for covering the cost of insurance, rates, utilities, and any other services provided.
 
If you already have a tenant, make sure that there are no unresolved problems or disputes (for example, failure to repair or unauthorised alterations) and no arrears of rent.  Again, your solicitor can help you to get any issues resolved.  
 
Selling a vacant property
If your property is currently empty, you should focus on what potential occupiers will want to see.  For example:
  • Is the property in good repair and well-presented?  Could you make it more attractive with some small improvements?
  • Is there adequate parking and is it well-lit?  If there is currently no parking space, could you create some?
  • Are fences and gates in good condition and is the property secure?
  • Good broadband is a key requirement for most businesses.  If high-speed internet services can be secured, this will make your property more attractive.
  • Think about energy efficiency.  You should aim for an EPC rating of at least E, but a higher rating should make your property more attractive.  You may be able to increase the EPC rating by making relatively inexpensive changes, such as switching to energy efficient lighting and adding insulation.
Spot problems before they arise
Once you have found a buyer, you will want the sale to go as quickly and smoothly as possible.  If your buyer discovers an environmental issue when they do their searches or their solicitor points out a problem with the legal title to the property, they will either walk away or try to negotiate a discount.  
 
There is a lot you can do in advance to stop this happening if you take steps to identify and deal with possible problems.  Your solicitor can check for things like:
  • missing title deeds;
  • restrictive covenants limiting how the property may be used or developed; and 
  • proper rights to use access roads, parking, and storage areas.
These can usually be dealt with by getting the right documentation in place, getting out-of-date covenants removed or, if necessary, by taking out an insurance policy.  
 
If you allow time to do this before you market the property, potential buyers will see a clean trouble-free investment which is likely to be more attractive.  Even getting outdated entries removed from the legal title held at HM Land Registry can remove friction from a sale.
 
If you know or suspect that the property has been used in the past for something that may have caused pollution, or you are aware of protected species like bats or newts on the site, you will need professional advice on how best to deal with it.  Your solicitor may be able to include wording in the sale contract that will protect you against any environmental claims in the future.
 
Thinking ahead about making your property appealing and cleaning up any practical and legal title problems will make it easier for a buyer to say ‘yes’ to your property at a price you are happy with.  If you undertake a legal audit in advance, you could also save time and money during the sale process because there should be no nasty surprises to create unexpected delays and costly negotiations.
 
For further information, please contact a member of our commercial property team at any of our offices in York, Malton, Pickering or Selby.
 
 
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.