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So you’ve done all your background research and scoping and decided that purchasing a property is the right decision for your organisation.
Now comes the potentially hard task of finding a suitable property that meets your needs and is in the right location within your budget.
This section of our website covers:
- the process of drawing up a brief for your property search (this is covered in detail on a separate page)
- all about carrying out a property search including:
Your property search
How long will it take?
Buying commercial property can be very time-consuming, so it is important to plan your move well in advance. The length of time it takes to look for and choose a suitable property depends on a number of factors including:
- the type of property you are looking for
- the state of the local market
In general, though, it would be wise to allow a minimum of six months between starting a search and completing on a purchase.
If your organisation is currently renting space your solicitor will be able to tell you what your options are for exiting your lease
. If you are planning on exercising a break option it is likely that you will have to give six months' prior written notice. In this case you should start looking for buildings before you give your notice in order to get a feel for the market and understand whether you are able to afford what you want and then be in a position to move when your lease comes to an end.
If your organisation occupies space within a building you own, the amount of time it takes to sell your existing premises will affect when you should start looking. It is worth seeking advice from your local property agent
, who should be able to give you a guide as to how long it will take to sell your current premises, based on the level of demand for freehold buildings at that time. If the charity requires a specific type of building it might be better to look fora s site to develop to its own requirements than to acquire a second hand building for adaptation. Seek advice on this at the initial stage.
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Using an agent
Both commercial property agents and chartered surveyors can act on behalf of organisations looking to purchase new premises. After staff costs, the costs of an organisation’s premises are likely to be their second highest annual outlay and so professional advice is strongly recommended.
Commercial property agents tend to specialise in a specific geographical area. By employing an agent you will benefit from their knowledge of the local market. A good agent will know:
- exactly what is available at any given time
- what is likely to come on to the market in the near future
- what has been sold recently
- the price that was achieved
You should always meet with any agent you are considering employing to discuss your requirements and ensure they have a good understanding of what you are looking for. An agent will generally carry out the following activities on your behalf:
- conduct a search of the market and compile a report setting out details of every property available at that time, plus those that are about to come to the market
- make a short list of potential buildings using your building brief
- accompany you on inspections and provide you with their professional opinion of the merits and otherwise of each property
- if you decide to go ahead and make an offer on a property your agent will advise you on an offer price and then manage the negotiations with the vendor
- ask for a report every two monts
Follow this link to find out more about choosing and instructing commercial property agents and surveyors.
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Buying at auction
To buy a property at auction you need to:
- have the necessary finance in place
- be able to make a decision on the spot
- be able to move to completion immediately
As a result, properties sold at auction tend to be bought by people looking to invest or develop rather than by occupiers. For this reason auctions tend not to be suitable for charities looking to buy property. One big problem for trustees is that they sensibly require valuation and building advice on their purchase. The auction route rarely allows sufficient time for all enquiries and investigations, so trustees might have to justify their purchase without the fall-back of third party reports. On the other hand the price may be less than if a property is exposed to the traditional market because many properties are bought by dealers who discount the price to allow for their profit.
Local authority buildings and asset transfer
The 2007 publication, Making assets work: The Quirk Review
, reviewed the community management and ownership of public assets. Following its publication, public bodies are being encouraged to look at ways in which they can make under-utilised properties available to community organisations.
If charities and community groups can demonstrate that they can deliver a social or environmental return, they may find there are opportunities in their area to buy property owned by the local authority for less than market rates. Groups seeking to acquire an asset from a public body should be aware of the following:
- there is no doubt that public bodies have the power to dispose of (sell) property at less than full market value where they are satisfied that there is a social or environmental return. This power stems from the Local Government Act 1972. However, as the Quirk Report identified, there is insufficient awareness of this among many local authorities.
- public bodies seem more comfortable with transferring assets to community groups by way of long leases rather than freehold transfer. This allows the public body to show that it is retaining some interest in the asset and that the asset may be returned to it in the event of failure of the project.
- public bodies transferring assets at an undervalue are likely to want to ensure that those assets cannot subsequently be used for private gain and so are more likely to transfer assets to organisations with an ‘asset lock’, such as charities or community interest companies.
- whilst the building may be transferred on a long lease at a minimum rent, it should not be viewed as 'free'. Under the lease, the tenant will be acquiring significant liabilities, eg. in respect of repair and compliance with legislation. There is also quite likely to be an obligation on the organisation acquiring the property to carry out renovation or refurbishment works to make it fit for purpose. The business plan must anticipate and cover these costs
- if a charity or community group identifies an under-utilised property held by a public body that it wishes to acquire and the public body is not willing to discuss the option of transferring the asset, there is a legal power called the Public Right to Order Disposal (PROD). The Secretary of State can be required to investigate whether a public building is under-utilised. The Secretary of State then has discretion to require a disposal of that land.
See also 'Asset Transfer'
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