Running a shop can be a time consuming occupation. From dealing with customers and suppliers to stock taking and filing accounts, you will need a variety of skills to be successful. If you have decided that running a shop is for you, you will need to decide whether you are going to rent or are in a position to buy the property.
In this article, Buying A Shop, we take a look at the process and mechanism involved.
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What kind of shop do you intend to buy?
Before you start looking around in the marketplace for a shop to buy, it would be prudent to have a clear idea in your mind exactly what kind of shop you are intending to purchase. What is the nature of your business? Do you have a business plan? Is this a new business or are you expanding/downsizing?
All these considerations will play a part in determining the type of shop you should be looking for. Be aware of the current use class of the unit. You will likely need to apply for a change in the shop’s use classification if you intend to make modifications to the building or conduct business that is not allowed by the current use class. Before making any final decisions, you should consult with the local council and an experienced commercial agent.
When going on viewings, keep an eye out for any obvious symptoms of the shop’s condition, such as broken windows, roof damage, questionable electrical wiring or dead zones on the internet connection. A survey will likely expose these problems, yet it helps to have an early estimate of how much repair work would be required.
Location, location, location.
The old adage of the three most important things when considering buying a house can also apply to buying a shop. Consideration needs to be given to the following factors:
- Is the shop in a busy part of town or on a quiet side street that no one walks down. If this is the case, what will your passing trade be?
- Is there anywhere to park near the shop? Parking is vital for a shop to succeed. With the best will in the world, although public transport is useful, people still like to use their cars and if they can’t park, they will go somewhere else.
- Public transport. Notwithstanding the point above, is there good public transport such as buses, trams and trains?
- How far is the shop from staff, supplier and customers? If you are buying a shop in the middle of nowhere, these factors will become even more pressing.
- What is your competition like? If there is a massive Tescos supermarket 50 yards down the road and you intend to set up a small convenience store, how do you intend to compete?
Have you thought about your budget?
You undoubtedly already know that there are additional expenses beyond the initial investment required to acquire a shop. So, when figuring out your financial plan, you need to also consider:
SDLT
If the acquisition price of your store exceeds £150,000 (at the time of writing), you will be subject to stamp duty (in England and Northern Ireland)
Market and Legal Expenses
Consulting with experts like lawyers, banks, and commercial agents will set you back additional fees.
Utility costs
You can learn a lot about a property’s energy efficiency and possible energy costs by looking at its Energy Performance Certificate.
Operating expenses
You should consider the ongoing expenses of the shop once you have bought it. If you plan on renting out the space, you can even try to negotiate a split with the tenants. Insurance premiums, council tax and business rates, upkeep and maintenance, service charges, and maybe value-added tax also fall under this category.
Get your finances in place
If you want to acquire a shop, you will probably need a commercial mortgage. Loans of this sort can be obtained from most major high street banks and building societies. You could also benefit from consulting with a commercial mortgage broker. As always, doing your research is essential for getting the best price.
Lenders want assurances that you can reliably make your loan payments. Moreover, it may require any of the following:
- A business plan.
- A repayment plan for the loan
- Financial records, receipts and bank statements
Arrange a viewing
If you’re ready to move forward with the purchase, the next step is to schedule a viewing with the property owner. This will allow you to get a feel for the place and ask any additional questions you have.
When evaluating the business, you should keep certain things in mind. Preparing some questions to ask ahead of time will help you get the most out of it.
Make an offer
If you have found your perfect shop, now is the time to make an offer. Carry out as much due diligence and research into the local marketplace so that you know what the going rate is for a shop of this type. Negotiating with the seller may be necessary if they do not accept your initial offer, just like when buying a house.
Once an agreement has been reached, however, it is prudent to secure a lockout clause that removes the shop from market.
It should be remembered that all offers should go through the agent and ideally be in writing.
Agree Heads of Terms
The Heads of Terms is a preliminary agreement that will be developed into a full contract. A solicitor will handle all of the paperwork involved in the transaction on your behalf.
Exchange and Completion
Contracts can be exchanged once both parties are satisfied with the terms of the contract, and funding has been secured.
Once contracts have been exchanged, neither you nor the vendor may back out of the agreement without paying a hefty penalty. If a deposit is needed, you’ll have to put down money for it.
When all the documents are signed and the remaining balance is paid to the seller, you will officially be the shop’s new owner.
How we can help
We have a proven track-record of helping clients purchase retail units. We are a multidisciplinary firm and have all the expertise inhouse to satisfy the most exacting requirements of our clients. We will guide you through all the necessary legal due diligence in a comprehensive and timely manner. We firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.
Deciding when (or whether) to incorporate, what kind of ownership
How to Contact Our Commercial Property Solicitors
It is important for you to be well informed about the issues and possible implications of buying a shop. However, expert legal support is crucial in terms of ensuring a positive outcome to your venture.
To speak to a member of our New Enquiries Team today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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