Commercial leasehold/freehold

[neilwallace]

I'm sure this must have been covered before, but I can't find a search option!

Anyway, I'm looking to buy (via my pension) a commercial unit that has 974 years remaining on a 999 year lease. I've never bought commercial property, so forgive my ignorance, but would I be buying the bricks & mortar, or merely 'buying' the right to use the property as my own for 974 years? Would I be allowed to modify the building internally (non structurally), or would I need to seek the landlords permission? Is it possible, like residential property, to force the landlord to sell the freehold so that everything would become mine to do with as I please?

Once again, excuse the ignorance, I'm new to this.

TIA, Neil.

 

[billmccallum1957]

You need to speak to a financial advisor and/or specialist property solicitor, what might work for you may or may to be possible with the building you have in mind, depending on what use you have for the building (self use or letting).

Personally (depending on your budget) I would go for outright freehold on a new build.

 

[neilwallace]

It's initially for self use and then longer term investment after I retire.

New build freehold would be the ideal option, but I need a unit close to home, and they stopped making land around here a long time ago!!!

I viewed the unit today, and physically it's perfect. Obviously I need to get my solicitor to pick through the lease to see if there's anything onerous, but it's promising so far. The only thing that concerns me is that the agent appears to have valued it way too cheap. They are asking 12K per year to rent or possibly purchase for 120K. Given that commercial yields seem to be somewhere around the 5-6% mark I would have thought it to be worth twice that amount, assuming rent at 12k is realistic. The problem with valuing it is that it's a small (1300sqft) unit in a very good location in a big city and these units just don't come up for sale, so there's nothing to compare it to.

 

[billmccallum1957]

useful info here (add a dot in the space after thomson) atkinsthomson com/information-guides/Atkins%20Buying%20Property%20in%20Pension%20Fund.indd.pdf

 

[neilwallace]

Many thanks Bill. I'll read this a few times to let it sink in.

 

[LondonSW]

Hi Neil, I have bought myself a 999y A1 Shop with my SIPP, and in process of buying a B1 office with SIPP as well.
You have NO right to enforce freehold purchase on mix residential/commercial, still you have right of first refusal if Landlord decide to sell the Freehold.
The SIPP can only buy "pure" commercial entity, hence the 974y, but cannot buy the freehold that has most probably residential element, I presume flat sold off on long lease.
On commercial the yield is 8/9%, hence it seems priced correctly.
It is true, commercial come up on the market rarely.
I love it as investment, it is high yield, you would rent out at later stage as full insurance and repairing term to your tenant.
If you decide not to proceed, but rent only, I may be interested to have a look at it as investment.
I have AJ Bell as SIPP provider, they are very professional and supportive.
Keep us posted.

 

[Swisaw]

To see the end of 999 years lease, you need to go on my reach120years diet. . It should propel you to live as long as 999 years. google for it.