Call me back, please

Unique Method of Selling Tenanted Commercial Property

Property Saviour » Commercial Property » Unique Method of Selling Tenanted Commercial Property

Selling a tenanted commercial property couldn’t be easier.  We absolutely love to buy tenanted commercial properties because they are income-producing from day one and aren’t costing money in terms of business rates, insurance, and maintenance.

If you want to sell your tenanted commercial property, you will be pleased to know that we are genuine cash buyers with funds available to buy any commercial property.

We are ready, willing, and able to purchase any commercial property, from a small shop to a large warehouse and anything in between.

We see tenanted commercial as assets and that’s why they always carry a premium as opposed to an empty commercial property that carries liabilities.

As professional commercial property buyers, we understand the importance of keeping great tenants in situ with no desire to break their lease and no indication that they will forfeit their lease.

In this article, we will look at the benefits of selling a commercial property with a tenant.

Table of Contents

Can you sell tenanted commercial property?

When a commercial property is sold, the tenancy continues as normal.  In reality, the terms of a tenancy agreement are legally binding and sold on to a new owner, who, in turn, becomes the new landlord.

If you approach a commercial estate agent, they will advise you to allow the lease agreement to come to an end before selling your property, particularly if the lease is due for renewal in the next 12 months.  Unfortunately, an empty commercial property is less appealing with rates liability, insurance, repairs and dilapidation costs. 

Your commercial estate agent will only have their interests at heart – so that they do not have to call your tenant and arrange a time to show any potential buyers.

 

A commercial property with strong tenants in situ is more than just an investment

Tenanted commercial properties are a proven business model.  The appeal of a tenanted property can be further enhanced by proving a strong history of payments via bank statements and no history of arrears.

An empty commercial property will always be seen as a going concern.  Don’t worry. We will still buy an empty commercial property.

Welder working in a commercial property
Tenants worry if they suspect a commercial property is being sold and could move out!

What are the methods of sale of commercial property?

There are four methods of selling a commercial property:

  1. private treaty
  2. sealed bids
  3. auction
  4. selling privately.

What fees do you pay when selling a commercial property?

These are some of the costs incurred by a commercial property owner when selling:

  • Commercial agent fee
  • Asbestos survey fee
  • Energy performance certificate fee
  • Legal fees
  • Preparing the property for sale such as decorating or clearing items after a tenant has moved out
  • Mortgage payments
  • Business rates if the property is empty.

How much does it cost to sell commercial property In UK?

Expect to pay between 2-3% of the final resale price.  Most commercial agents charge around a 2% fee.  Solicitor’s fees are usually fixed at around £1,500 to £2,000, depending on the complexity of the transaction.

squatter occupied commercial property with boundary dispute
Empty commercial properties can attract the attention of squatters. Above a commercial property in quiet part of Weston Super-mare.

How much notice does a landlord need to give a commercial tenant?

Your tenant’s rights are protected, and your commercial tenant agreement will continue as normal.

If your tenants decide to move on after tenancy ends this will terminate the commercial tenancy agreement.

If the tenancy agreement rolls on, either party will have to give three months’ notice.

How do I get rid of a commercial tenant?

If the property is in disrepair or its physical condition is deteriorating. As a landlord, you can seek eviction using Section 146 notice setting grounds for breach, giving the tenant a reasonable time to remedy this issue.

After this period, you can peacefully enter the property or apply to the court for a possession order.

Sell commercial buildings
With tenants refusing to allow viewings and uncertainty around their business viability when a property goes for sale, is it better to sell tenanted?

Documentation is key

Having evidence of a strong occupancy rate is key to a successful sale.  Whether you have an office with multiple tenants or a row of industrial units, if you can demonstrate that your commercial space is running at maximum occupancy, this is a very positive sign.

Conversely, if a potential buyer sees only 60-70% of a building being occupied, then he/she is very likely to consider offering you substantially less than your asking price.

Leases ending soon with no intention of renewing or no expression of interest from any potential tenants can weaken a commercial property’s appeal.  Equally, if tenants get wind of the fact that you are selling, they may not be comfortable with the uncertainty of building a relationship with a new landlord. 

If documentation demonstrates an 85-100% occupancy rate, then any potential buyer will immediately realise that this is a proven and profitable business model.

Any commercial property investor is interested in calculating their return on investment and if you can show forecasted monthly income, it can make selling your tenanted commercial property a very smooth experience.

Lease length figures

Serviced office spaces are known for offering short-term leases with just one month’s notice required to leave and often the very minimum length of lease – around 3 to 6 months.

If your commercial property has multiple tenants, how long they are likely to stay is a key metric.  It is not a problem if you have a turnover of tenants as long as you have a high occupancy rate.  Longer leases of at least 5 years give a sense of stability and a far more attractive proposition.

In longer leases, it is best to measure how many tenants are still in occupancy at the end of the lease, how many are left at their break clause period and how many tenants decided to extend their lease.

‘Hands off’ commercial property landlords do not wish to frequently market a property to show new tenants as they will have to appoint a commercial agent, which will eat into their potential profit. 

Current income

The forecasted rental income is great, but the real measurement of any commercial property investment is currently banked income.  As a commercial property seller, showing your rental income being collected verifies your claim.

We’ve been shown fake bank statements when we have requested proof of rental income by dishonest sellers.

derelict commercial building with a boundary dispute
Above a commercial property, a former estate agent's office with a boundary dispute and no formal rights of access.

What happens to a commercial lease when a property is sold?

When a commercial property is sold with tenants in situ, their lease is binding with their new landlord.  As a result, new buyers can’t simply acquire the property and raise the rent.  Rent can only be increased by rent review stipulated within the lease or once the lease expires.

The risk is that your tenant could find alternative accommodation for their business.  The most obvious issue will be the loss of rent.  There’s a strong possibility that word will spread around the community that new landlords are overcharging rent, and this could deter any potential tenants.

This is the worst-case scenario when selling a tenanted commercial property via the open market.  It is important that you are presented with a balanced view.

Looking at this from a marketing perspective, which sounds better – “5,000 square feet of office space available” or “Office space currently producing £20,000 per month with 90% of lease agreements signed for the next five years?”.

What’s your relationship like with your tenants?

If you are selling your commercial property with existing tenants on the open market, any potential buyer will want to know what to expect from the tenants and understand their plans.  Naturally, this reduces the risk for any commercial landlord.

However, it makes it very difficult for viewings, and potentially, you could fall out with your tenants.  This is because they may have to stop what they are doing during the viewing or be concerned that a rival firm may be snooping around for any sensitive information.  This is where Property Saviour offer you a real alternative when it comes to selling a tenanted commercial property.

Can I sell tenanted commercial property?

Yes you can sell a tenanted commercial property.

Whether you wish to sell a tenanted commercial property or have vacant commercial premises, our team at Property Saviour are ready to buy it with our cash.  There are no delays.

It is responsibility of owner to clean up a property prior to auction.
Tenants can leave stock behind. Above: A former polystyrene factory. Polystyrene is a hazardous material and was recycled following our purchase.

Do tenanted commercial properties sell for less?

Tenanted commercial properties tend to attract a higher offer when compared with an empty commercial property.  This is because they are income-producing and considered to be ‘well looked after’ by their current tenants.

How much notice do I have to give commercial tenants if I want to sell?

You do not need to notify your commercial tenants if you wish to sell.  However, this may alienate them if they find out.

We will buy your property discreetly.  Nobody needs to know that you have sold your property.

Once you have completed the sale, you can inform the tenants and introduce ourselves if you wish to do so.

Seamless sale of any commercial property

If you do have the documentation or you are trying to sell a commercial property with no formal lease agreement in place, we can still help.

Property Saviour are professional commercial property landlords. Depending on your situation, we can agree to buy a property based on its photos and a description of the condition, which may not need a viewing.  This can be ideal if tenants occupy your property.  We keep any disruption to their trading activity to an absolute minimum.

We are the buyers.  We are not commercial estate agents involved, and the best part is that you do not have to pay any fees or wait several months for a sale.

Our cash offer means you can sell today and complete the sale within 2 weeks.  We will also pay up to £1,500 towards your legal fees.

Sell with certainty & speed

auction hammer

Property Saviour Price Promise

  • The price we’ll offer is the price that you will receive with no hidden deductions.
  • Be careful with ‘cash buyers’ who require a valuation needed for a mortgage or bridging loan.
  • These valuations or surveys result in delays and price reductions later on.
  • We are cash buyers.  There are no surveys.
  • We always provide proof of funds with every formal offer issued.
calculator

We'll Pay £1,500 Towards Your Legal Fees

  • No long exclusivity agreement to sign because we are the buyers.
  • You are welcome to use your own solicitor. 
  • If you don’t have one, we can ask our solicitors for recommendations.
  • We share our solicitor’s details and issue a Memorandum of Sale. 
Sell

Sell With Certainty & Speed

  • Our approach is transparent and ethical, which is why sellers trust us.
  • 100% Discretion guaranteed. 
  • If you have another buyer, you can put us in a contracts race to see who completes first.
  • Complete in 10 days or at a timescale that works for you.  You are in control.
Share This Article:

Related Articles