Buying a commercial property is a major step, whether you are a business owner looking for premises or an investor expanding your portfolio. The process is more complex than buying residential property, with different rules, financing requirements and legal considerations. Understanding each stage is essential to avoid costly mistakes and ensure the property meets your needs.
Evaluating your needs and researching the market
Commercial property is a broad term that covers offices, retail shops, industrial units, warehouses, leisure facilities and healthcare buildings. Before you begin your search, it is important to identify what type of property suits your goals. For example, an investor might prioritise long-term rental yield, while a business owner may focus on location and accessibility for staff and customers.
Location is often the most important factor. You’ll need to consider transport links, customer demand and whether the property’s use class is appropriate for your intended purpose. Use classes are defined by planning law and restrict how properties can be occupied. Choosing a building with the wrong classification could result in costly delays or the need for planning permission.
Commercial property agents and platforms such as Rightmove or Zoopla can help you find suitable options. Market research should also include looking at comparable properties, rental yields and future development in the area.
Related: Buying a Property With a Restrictive Covenant: Risks & Advice
Financing and funding options
Purchasing a commercial property usually requires significant upfront funding. Most buyers will need a commercial mortgage, which is different from a standard residential loan. These typically require larger deposits – often between 20% and 40% of the purchase price – and have stricter lending criteria.
There are two main types of commercial mortgages:
- Owner-occupier mortgages, used when the buyer intends to run their business from the property.
- Investment mortgages, designed for buyers who want to rent the property to tenants.
Other funding routes include bridging loans for quick purchases, especially at auctions, or specialist finance products such as development loans for properties that need refurbishment. Your financing choice should align with your long-term objectives, cash flow and risk appetite.
Legal process and due diligence
Once you have agreed a price with the seller, the legal process begins. The first stage is usually the preparation of heads of terms, which set out the basic details of the transaction. These are not legally binding but provide a clear framework before contracts are drafted.
Your commercial property solicitor will then carry out due diligence to ensure there are no hidden issues with the property. This typically includes:
- Title checks – Confirming ownership and whether there are any restrictions or charges registered against the property.
- Local authority searches – Identifying planning permissions, enforcement notices or proposals for nearby developments.
- Environmental checks – Assessing risks such as contaminated land or flood zones.
- Building surveys – Ensuring the property is structurally sound and highlighting any repairs needed.
- Review of leases – If the property is occupied by tenants, checking the terms of tenancy agreements and rent schedules.
Contracts are drafted and negotiated between solicitors. It is important to include protections such as the right to withdraw if searches reveal major problems or if finance cannot be secured. Once both parties are satisfied, contracts are exchanged and a completion date is set. On completion, the balance of the purchase price is paid, and the buyer is registered as the new owner at HM Land Registry.
What this means for buyers
Purchasing a commercial property requires careful planning and a clear understanding of the legal and financial process. By identifying your needs, securing appropriate funding and carrying out thorough due diligence, you can reduce risks and protect your investment.
At Osbourne Pinner Solicitors, we assist clients through every stage of commercial property transactions, from reviewing contracts to managing negotiations and completion. With the right legal advice, buying a commercial property can be a smooth process that delivers long-term value for your business or portfolio.
To better understand your options, book a free 30-minute consultation by calling 0203 983 5080, emailing [email protected] or filling out the form below. As well as having offices in Harrow, Canary Wharf, Piccadilly Circus and Manchester, we’re happy to speak to clients remotely by video call – whatever works best for you.
