Whether it’s a shop, an office, a warehouse, or a workshop unit on a small industrial estate, buying a commercial unit is a significant step for any business. It can provide long-term security for your premises and the opportunity to build value in an asset alongside your trading operation. It is also more complex than a residential purchase, with its own tax rules, conveyancing process, and a different set of risks to manage. The position differs in important respects between England and Wales, and this article touches on both.
Freehold or leasehold?
The first question to settle is what you are actually buying. Many commercial units, particularly those in parades, shopping centres and on industrial estates, are sold leasehold rather than freehold. The asking price might look attractive, but you need to understand the length of the unexpired term, the ground rent and service charge, the lease’s provisions on repairs and alterations, and how readily you could assign or sub-let the premises if your plans change. A short residue or onerous covenants can significantly affect both value and saleability. By contrast, with a freehold purchase you own the property outright.
How will you own it?
The next decision concerns the buying entity. You can purchase personally, through your trading company, or through a separate property-holding company that then leases the unit to your trading business. Each option carries different tax and risk implications. The right structure depends on your overall tax position, your plans for the business, and how you intend to extract value over time. This is a conversation to have with your accountant alongside your solicitor, ideally before you make an offer.
Surveys and condition
Before you commit to a price or a mortgage, you need to know what you are buying. A building survey by a chartered surveyor will identify defects, repair liabilities and likely maintenance costs. For older or industrial buildings, an asbestos management survey is also expected: the Control of Asbestos Regulations 2012 place a duty to manage asbestos on the person with control of non-domestic premises, and you will inherit that duty on completion. A measured survey may be needed if the floor area drives the price, and your lender will usually require its own valuation. If the building is in any way unusual, allow time and budget for specialist input.
Financing the purchase
Commercial mortgages work differently from residential ones. Lenders typically require a larger deposit, often 25% to 40% of the purchase price, and interest rates tend to be higher than for residential lending. Terms are usually shorter, and the lender will look closely at the trading performance of the business that will service the loan, not just the value of the property. You will need to factor in arrangement and valuation fees, as well as the legal costs for your own solicitor and, in some cases, the lender’s solicitor. It is worth speaking to a commercial finance broker early to understand what is realistically available before agreeing heads of terms.
Tax on the purchase
If the property is in England, the buyer pays Stamp Duty Land Tax (SDLT) at non-residential rates: nothing on the first £150,000, 2% on the portion from £150,001 to £250,000, and 5% on any amount above £250,000. The SDLT return must be filed and the tax paid within 14 days of completion.
If the property is in Wales, Land Transaction Tax (LTT) applies instead and is administered by the Welsh Revenue Authority. The non-residential bands are as follows: nothing on the first £225,000, 1% on the slice up to £250,000, 5% on the slice up to £1 million, and 6% on any amount above that. The filing and payment deadline in Wales is 30 days.
VAT is a separate matter that often catches buyers out. By default, commercial property is exempt from VAT, but a seller may have “opted to tax”. If so, VAT is usually added to the purchase price, and SDLT or LTT is then calculated on the VAT-inclusive figure. In some cases, the buyer can opt to tax and recover the VAT, but the rules are technical. Your solicitor and accountant should consider this together, well before the exchange.
Planning and permitted use
The property’s planning consent must permit the use you intend. In England, Use Class E covers a broad range of commercial, business and service uses, including shops, offices, restaurants, cafés, gyms and most light industrial activity. Changes within Class E generally do not require planning permission. Other categories, such as hot food takeaways, drinking establishments, hotels, or general industrial use, fall outside Class E and may require a change of use. Wales operates its own Use Classes Order, and the position is not identical: if the unit is in Wales, ask your solicitor to confirm the position for your intended use.
Energy efficiency
Since April 2023, it has been unlawful in England and Wales to let non-domestic premises with an Energy Performance Certificate (EPC) rating below E, subject to limited exemptions registered on the PRS Exemptions Register. If you plan to occupy the unit yourself, this restriction does not apply directly, but a poor rating may still affect resale and future letting. The Government has signalled an intention to raise the minimum standard for commercial premises further, with EPC C and ultimately EPC B under discussion, but no firm commercial timeline has yet been confirmed in legislation. Treat further tightening as likely rather than certain, and factor it into your view of any property currently at the lower end of the scale.
Legal due diligence
Once the heads of terms are agreed, your solicitor will carry out legal due diligence. This typically involves reviewing the Land Registry title, raising Commercial Property Standard Enquiries (CPSEs) with the seller, and commissioning a suite of searches: local authority, drainage and water, environmental, and depending on location, chancel repair, mining or coal authority searches. The aim is to identify anything that could affect your use, value or enjoyment of the property: restrictive covenants limiting how the unit can be used, rights of way crossing the site, boundary uncertainties, planning enforcement history, environmental contamination, and any rights or obligations that pass with the title. Issues uncovered at this stage are far easier to resolve or to price into your offer than those found after completion.
Ongoing costs
The headline purchase price is only part of the picture. Business rates can be substantial, although small business rate relief may be available for lower-rateable-value premises. Buildings insurance will be needed from exchange, not just at completion. If the property is leasehold, budget for service charge and any sinking fund contributions on top. Repair and maintenance obligations, particularly under a full repairing and insuring (FRI) lease, can be more onerous than they appear on the surface.
Getting the right advice
A commercial purchase benefits from early professional input. A solicitor, surveyor, accountant and commercial finance broker working together can identify the right structure, surface the risks, and keep the transaction on track. If you are considering buying a commercial unit, get in touch with your solicitor before signing heads of terms or paying a deposit. The earlier they are involved, the more value they can add.
About the author
Brinda Granthrai joined RIAA Barker Gillette (UK)’s real estate team in May 2025. She brings over 15 years of experience advising high-net-worth individuals, private companies and international investors on complex real estate transactions. She works closely with the team to deliver commercially focused, pragmatic solutions across the full property lifecycle.