Selling part of your business property for development is a good way to raise capital. However, there are lots of things to consider before you go ahead with the sale. If you do not put the right measures in place, you could regret your decision later on.
First of all – what will the new development be used for? And will your future neighbours become a nuisance? You can control these potential issues by imposing restrictions.
This means you can dictate what kind of development is created next to your business premises, and what that development can be used for. For example, you can stipulate how many buildings can be erected on the land. You can also include height restrictions to ensure the natural light to your property is not blocked.
Additionally, you can say what kinds of business operations are permitted. If you are a catering company, you might not want a neighbour who is going to create offensive smells, thereby interfering with food production. Or if you are a quiet office, you might not want a loud factory next door.
On the flip side, you can also impose restrictions so the new neighbours cannot complain about your business operations. This is important, or you may find that your own activity is hindered by the development. This can be avoided with the right forward planning.
The exact nature of the restrictions will be tailored to you and your circumstances. However, you must not fall foul of the law. For instance, you cannot restrict free trading and competition between businesses. That is why we recommend talking to a solicitor about the kinds of restrictions you can impose.
Access and utilities
Once the development is complete, the new commercial tenants will need access to the property. They will also need access to utilities, such as electricity, water and sewage, and broadband. You need to set out each person’s rights in advance. That way, everyone knows what the arrangements are.
If you do not take these measures, a dispute could quickly arise. For example, what if you need to drive your fleet of commercial vehicles across the new development to reach the main road? Unless you obtain permission to do this, your access could be blocked. This could make life very hard.
You may feel safe in the knowledge that you have always used the property in a certain way. But once you sell part of the property for development, your right to use the land is not guaranteed. Similarly, the new neighbours may require permission to access your land or utilities, which you may not want to grant.
By organising these logistics early on, you can rest assured that your own position is protected. You can also help to minimise any future disputes.
Rights and responsibilities
If any part of the commercial property is shared, then what rights and responsibilities does each party have? This is especially pertinent in relation to maintenance and repairs. Who is going to foot the bill? If you want your neighbours to contribute towards all or part of the costs, you must set out this obligation out clearly.
You must also ensure that any obligations pass to future owners or occupiers, should the premises exchange hands. There are ways of doing this, although the laws are complex. It also depends on whether you sell the freehold or leasehold of the property. Generally, you have more control if you sell the leasehold.
Lastly, exactly how are you going to sell to the developer? Will there be a conditional contract, where the property can be purchased subject to certain conditions? Or will there be an outright purchase? And do you want a share of the profits, when the development is eventually sold off?
You want to make the most out of the sale, so these are all things you need to give careful consideration to. There may be a way of maximising your profits, while at the same time protecting your own business venture.
Selling part of your commercial property?
At Breens Solicitors, we have an experienced team of commercial property solicitors. If you are selling part of your commercial property for development, speak to us for advice. We can help you get the best deal possible.