Buying A Commercial Property With Tenants

Commercial property is often advertised for sale with a tenant in situ. But what are the implications of this type of purchase? Buying a commercial property with tenants does come with rights and obligations. For example, the tenant will be able to continue to occupy the property even after it has been acquired by a new owner but this will have to be subject to the terms of the existing tenancy agreement. Just because the property has changed hands, it doesn’t mean that the terms of the existing tenancy agreement are no longer valid.

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What are the pros and cons of buying a commercial property with tenants?

Pros:

• You won’t need to find a new tenant so rent will be receivable straightaway.
• There should be no requirement to spend money to ensure that the property meets the relevant health and safety standards. When the property was originally let to the tenants, it would have been a legal requirement that these standards had been met at the time. It should be noted that regulations can change so adherence to the latest rules is important.
• If the tenants are happy to stay at the property, it is likely that they are quite happy with their surroundings so there will be no need to spend money on any refurbishments.

Cons:

• One of the major disadvantages associated with buying a commercial property with existing tenants is that everything may not be as it seems. If for example the previous landlord was not legally letting the property, you may have to invest time and money in meeting the required standards. Bearing in mind there will be a tenant in the building carrying out their daily business, this will not be without its challenges.
• The tenant might be in occupation by virtue of an oral agreement with the landlord. As such, establishing the exact nature of these terms could prove challenging.
• You could face fines from the council if they discover breaches in health and safety were made before you have had the chance to rectify them.

So there are pros and cons to buying a commercial property with tenants in situ, and this decision will very much depend upon your own personal circumstances. If you do decide to proceed with this type of purchase let your solicitor know as soon as possible so that all necessary checks can be carried out.

Are there any other things to consider when buying a commercial property with tenants?

• Rental Deposit Deed. You should ensure that a rent deposit deed to secure the commercial tenant’s deposit has been set up. The terms of a rental deposit deed will state that the deposit remains the tenant’s property but should they default on the lease, then the landlord can use the funds from the deposit. A rent deposit deed also protects the landlord from losses and expenses.
• Managing agents. Often, a commercial landlord will use managing agents to look after a property on their behalf. If this is the case with the property you are about to purchase, check the terms of the contract with the agents as if you wish to terminate this agreement, there may be costs and notice periods to bear in mind.
• Utilities and other services. If you intend to change the utilities companies (gas, electricity, broadband etc.) that currently supplies the property, remember that there may well be a notice period before termination and as such, the sooner you start the process after completion the better.
• The day of completion. Completing the property purchase on the day the rent is due is the ideal scenario but if this can’t happen, the rent will be apportioned according to days remaining before the next rent payment

How we can help

We have a proven track record of dealing with commercial property purchases that have tenants in situ. We will guide you through the process and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.

How to Contact our Commercial Property Solicitors

To speak to our Commercial Property solicitors today, simply call us on 0161 929 0121, or allow a member of the team to get back to you by filling in our online contact form. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.

Authored by Ben Posted in Commercial Property, News Tagged as