Importance of specialist advice on commercial properties
After the uncertainty created last year by the run up to – and fall-out from – Brexit, the commercial property market is now beginning to see rather more stability, with the North East performing particularly strongly in terms of new development.
While the topic of Brexit is of course still very much a factor, the North East, unlike other areas of the country, appears to have largely shrugged off any negative reaction. Indeed, this region has rather bucked the trend by seeing continued growth in retail investment, student accommodation and office and leisure and hospitality development projects, which bodes well for the continued growth of the North East’s reputation as a first-rate place to live, work and invest.
Whether buying, selling, leasing or developing commercial property, current market and economic factors make this a good time to do so. What is important in any of these situations is that proper legal advice is sought from a commercial property specialist – it is not an exaggeration to say that, in many instances, the quality of legal representation can even impact on the future value of your property, so it is vital to engage proper experts to act on your behalf.
Dealings with commercial properties necessitate a different and more involved approach to a residential property transaction – there is not a uniform approach in dealing with ‘property’ – with one essential difference being the more thorough and complex due diligence that is needed when dealing with a commercial property, which is certainly worth seeking expert assistance with.
For instance, one of the most crucial aspects when acquiring an investment property is a thorough examination to the detailed terms of the lease. It is fair to say the value of your investment rests in the quality of the lease. Consideration must be given to the potential for onward sale and also to funding. A detailed lease drawn up by a specialist will protect your investment, while offering terms that are accessible to tenants, or else your legal advisor can scrutinise any existing lease which is in place and offer comment as to how that can work in your best interests. The main issues to consider are liability for repairs, dilapidations and ongoing property costs, such as service charges, rent review provisions and renewability.
When purchasing a commercial property for your own business use, due diligence is of huge importance so that a comprehensive history as to the property can be investigated to give a potential buyer the complete picture of what they are taking on, and to establish the suitability of the property for your proposed use. The planning history of the property, alongside the current planning status, needs to be established, as that can restrict your intentions and future plans.
In acquiring a commercial property for development, whether that development may be for your own business or a commercial development to be occupied by anyone taking a lease of the property, a development appraisal must be carried out from the outset. In addition to planning permission, there could be preventative factors with regard to your development proposals such as access issues to the site, or the position of utilities. A specialist commercial property lawyer will be well versed in scrutinising title documentation, to establish whether there are any restrictive covenants which may curtail any future use or plans for development of the site.
As a seller, the need to appoint a specialist advisor is no less important. The expectation would be that a buyer’s solicitor will conduct a fairly intrusive and detailed due diligence process, and your solicitor must be able to answer that and give a wholly correct, comprehensive and transparent response. You do not want to find yourself in a situation where you have unwittingly provided a buyer with incorrect or misleading information, which can lead to 11th hour price chipping or even loss of a potential buyer. In a complex transaction, it is vital you appoint a lawyer with the specialist knowledge and expertise.
Furthermore, the quality of your legal advisor – and the quality of your legal advisor’s professional network – can also help with subsequent concerns such as accessing funding. A good solicitor should have strong connections with brokers, banks and other lenders, and understand the particular requirements that are needed to obtain funding for commercial property investment or development.
Finally, one the most important considerations when choosing your commercial property legal advisor is to make sure you engage a lawyer who takes the time and effort to understand about your business and why you are embarking on a particular transaction. Speaking from my own experience, I never carry out a transaction for a client on the basis that I am merely taking instructions to get the deal done – rather, I see it as the beginning or continuation of a relationship with a valued client. I approach every transaction as part of an ongoing investment in a client, whereby I can come to understand, share and support their long-term aspirations, and can advise them accordingly. Ensure your legal advisor takes the time to understand your business and ambitions, as that is something on which you really cannot put a value.