March 9, 2017
Thinking of Selling Your Commercial Property? Some Helpful Hints
If you are considering selling your commercial property then it’s worthwhile getting prepared before you call your real estate agent.
We all want to believe our property is going to sell in a short period of time for a premium price, but unfortunately, this is rarely the case. Demand for commercial property on the Fraser Coast is not as high as in capital cities and therefore will be on the market for longer. It’s important that you have your conveyancing in place.
It is not uncommon for a commercial, retail or industrial property to be on the market for 12 months or more. So, when that buyer comes along the easier you can make the process of selling, the greater the likelihood of your property proceeding to a sale.
By assembling documents and information relating to selling your commercial property at the outset, you will save time and money. Often a contract falls over or is substantially delayed because documents and/ or reports either don’t exist, or need to be arranged. The prospective purchaser then cools off because it is taking too long to get the documents and reports within their due diligence period.
Alternatively, they may find another property, or get worried and suspicious if certain reports are unavailable. A prospective buyer will frequently pull out of a contract under their due diligence clause.
There is also a cost factor to consider if a purchaser requests reports which are unavailable. It is prudent to be aware, particularly regarding reports, of the potential additional cost before putting the property to market.
Whilst it would be easier to dismiss a buyer’s request for information/reports, the request is likely to be coming from the bank organising the finance. So, if you want the sale to proceed there is often little choice. If you choose not to provide the documents/reports and the prospective buyer walks away, you could be waiting an extended time before another buyer comes on the scene. Then, usually the same situation arises and the same requests are made, so be prepared and make sure all reports/documents are ready and available for the buyer.
These document requests are normally solicitor to solicitor, so if you are prepared and organised there is a saving in time and money for all concerned.
Whilst the following list is not exhaustive it is an example of some requests made during due diligence of selling your commercial property:
- Title reference and search and copies of leases and outgoings
- Copy of permits /development approvals for tenant’s business
- Copy of bank guarantees or details of other lease securities
- Bank statements to show rent payments (if the property is not professionally managed)
- Copy depreciation schedule
- Insurance and outstanding claims
- Fixtures and fittings – list of inclusions and exclusions
- Parking allocation, rights of way / shared access
- Contaminated Land Register and history of chemical spills and remediation
- Details of any underground fuel storage
- Copy asbestos report and hazardous materials register
- Details of builder and construction date for work in the last 5 years
- Copy of survey reports
- Copy of drainage reports and plumbing certification
- Details of any heritage listing
- Copy of Certificate of Classification
- Copy of Pest control report
- Details of air conditioning, lifts and any maintenance contracts
- Does building comply with regulations and fire safety certification
- Copy of certification by engineer (concrete slab)
- Council development consents and conditions and existing and planned zoning regulations /changes
- Details of easements, covenants or restrictions
There can be a lot of paperwork and particularly so when you are dealing with older buildings, or buildings which have had damage or problems in the past.
When you are considering a contract with Special Conditions like finance and due diligence, be realistic about the time frames. Unrealistic time frames can lead to requests for extensions which can be problematic. Your solicitor, accountant and real estate agent can work through the due diligence requests with you but, it pays to be prepared.