Four Vital Things To Know When Letting A Commercial Property

Buying a commercial property can offer you great returns both in terms of income and capital growth. However, once you have completed on your commercial mortgage and taken ownership of the property you then have to worry about leasing the property, which will often be done through a commercial letting agent.

Although your agent may look after much of the specific details of the letting, there are certain responsibilities that you retain as the landlord of the property. Our guide outlines four of the most important things you should know when letting a commercial building.

Arrangement or Booking Fees: Banks, like all service sector industries, charge for as many of their services as they possibly can. Banks charge arranging fees for negotiating your mortgage for you. These are often not rigidly enforced and often open to negotiation. They can often depend on other factors such as the interest rate that you are being charged. On average you are likely to pay a fee in the region of 0.5 to 1.5 per cent of the total value of the loan, but it is becoming increasingly common for lenders to add the arrangement fee to the value of the loan.

Valuation fee: The property has to be professionally valued before it can be purchased and both the purchaser and the lender will need to have access to a full valuation of the property. The valuation fee that you will have to pay will depend on the size and the value of the property that you are interested in, but it can become more costly if a full survey is needed. As a rule of thumb a survey is always a good idea.

Your lender may require an in depth valuation if the property is in an area of concern such as a flooding area or a place where the land is subsiding, in which case the valuation fee would be more expensive. You may also want such a survey doing for yourself to know that you are not buying a property that has significant structural issues that may need to be addressed later, as fixing structural damage can be more costly than paying for a good valuation to be done.

If you do not provide the EPC, you can receive a hefty fine, so it's just not worth the bother. Make sure that you get an EPC sorted out so that prospective tenants will know how energy efficient the premises are.

Disability Discrimination Act: Assessing he needs of people with disabilities and taking reasonable steps to ensure that disabled people have good quality access to a commercial property is one of your major responsibilities as a landlord. You are obliged by law to comply with the Disability Discrimination Act, particularly if your tenants plan to open up the premises to the general public.

Fees for Mortgage Advice: If you use a mortgage adviser to research the market and broke your commercial mortgage then you may incur fees for their services. Depending on your adviser, you may be able to agree for the fees to be paid to them direct from the lender by way of commission. The fees charged really do depend on the adviser so you would need to have a discussion about their remuneration.

Many mortgage brokers are paid by the lender involved whilst others will charge a fee directly to you. It is generally better that you pay the fee yourself because at least you can be sure that you're not getting the advice a lender wants to sell you. Fees for broker services tend to range from £300 to around 1 per cent of the total value of the commercial mortgage.

When you are working out the cost effectiveness of your development plan, and the relative cost of purchasing property, don't leave additional costs off the balance sheet. It is tempting to make a deal look better than it actually is by leaving certain costs to one side. This is a false economy and won't help you to fully judge whether a commercial purchase is right for you.