Should I revise my offer on a commercial building in the light of Covid 19?

maccers_85

New Member
Messages
9
Hi,

Just before the virus I had agreed a sale of commercial building. There are 4 tennants occupying the building. As the future the current tenants are uncertain and my own business which is in the building will be affected for a period. Should I make a lower offer under these circumstances?

Also when we agreed the price he mentioned you are buying as is. I later found out that there hasn't been any updated fire cert to which there has been substantial work done to the inside of the building.

I am very inexperienced in this area so I would welcome any advice.

Thanks
 

luckystar

Frequent Poster
Messages
200
Kinda hoping this isn’t a serious post. In case it is.... why would anyone inexperienced agree to purchase a commercial property without proper advice?!
The property itself would need a full structural survey, you will need to examine all leases of the current tenants and you need a lot more info on the fire safety certificate.
After that you need someone familiar to commercial property to assist in valuing same. Then you need to take covid into account.
Simple answer is YES you should probably revise your offer only after making sure all the points above have been covered!
 

PaddyBloggit

Frequent Poster
Messages
3,425
he mentioned you are buying as is.
Is that not a red flag to you? Thankfully, you've only gone sale agreed. Don't sign any contract until you get prope, professional advice.

Not much point in making a lower offer if you have big issues with the building.

The lack of a fire cert should be a big warning to you... substantial works to the building in order to get a fire cert would negate any hope of earning anything out of the building.

Don't sign anything ... more investigation needed ... with professional advice.
 

maccers_85

New Member
Messages
9
Is that not a red flag to you? Thankfully, you've only gone sale agreed. Don't sign any contract until you get prope, professional advice.

Not much point in making a lower offer if you have big issues with the building.

The lack of a fire cert should be a big warning to you... substantial works to the building in order to get a fire cert would negate any hope of earning anything out of the building.

Don't sign anything ... more investigation needed ... with professional advice.
Kinda hoping this isn’t a serious post. In case it is.... why would anyone inexperienced agree to purchase a commercial property without proper advice?!
The property itself would need a full structural survey, you will need to examine all leases of the current tenants and you need a lot more info on the fire safety certificate.
After that you need someone familiar to commercial property to assist in valuing same. Then you need to take covid into account.
Simple answer is YES you should probably revise your offer only after making sure all the points above have been covered!
I have examined all leases and they are running for 2-3 years and the issue with the fire cert is that there is one for a shell. But the shell has been converted into 10 rooms. It hasn't been updated. He bought the property off nama and it didn't come with an updated fire cert. The sale price agreed is below the market value. I have been operating in the building for 3 years and know it well. Just the uncertainty of the updated fire cert and unknown of the future puts it into a little doubt.

I am getting a fire officer and engineer to check the building but I'd they say it will cost 10g to get the fire cert should I revise the offer as he said I am buying as is?

Thanks for the response
 

Brendan Burgess

Founder
Messages
40,245
Hi maccers

A very interesting question.

The fact that something like the fire certificate is a problem does not mean that you should not buy the building. You would have to get expert advice on how much it would cost to remedy it. Though it is odd that they upgraded the building and did not get a fire cert.

What are the rough figures:

Market value before the pandemic:
Sale agreed price:
What do you think it's worth now?

Are you buying for cash or do you need a mortgage?

If you were buying a building as an investment, if they don't reduce the price, you could walk away and buy another building.

But it's probably a great opportunity to buy the building that you occupy.

Are you friendly with the other tenants? What industries are they in? How badly affected are they? You will probably have to do a deal on the rent. Are you happy to do so or will you need the rent to pay a mortgage?

If the tenants go bust, would that matter? Could you get another tenant for the vacated unit easily?

What is the term of your own lease? If you fall out with the landlord because you ask for a lower price and he refuses, does that matter much?

Brendan
 

maccers_85

New Member
Messages
9
Hi Brendan, I am buying it in cash. The price agreed is 187,500. It is the second floor of a commercial unit. The other 2 floors are occupied with a public health services.

My floor is is 3100 sf of rental property which is all occupied at the minute. The annual rent is 22k per year inc my own which is below the average in the area.

The floor itself it's worth approx 200k-225k before virus.

My situation is that I am out of contract this month.

My fear is if the Tennant's pull out but at the same time as you said it's a good opertunity to buy a premisis I work in. Does the value decrease if Tennant's pull out?
 

Brendan Burgess

Founder
Messages
40,245
If it was worth €210k before the virus and if there has been a 20% fall since then, it's now worth €168k.


Does the value decrease if Tennant's pull out?
This depends on how easy it is to relet it at the same rent.

How reliable is the €22k rent? If the tenants pull out and you have to find new tenants prepared to pay only €10k in total, then it's not worth €168k

It's a very difficult one. A lot of tenants these days are asking for rent holidays and a cut in future rent. A few landlords I have spoken to are being very practical. They view a reduced rent as better than no rent.

Brendan
 
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