The property game: Purchasing guidelines for those investing in commercial property
Buying property is a big investment decision and should be approached in the correct manner. Here are a few tips on how to succeed at it:
1. Inspection of the Title Deeds
It is advisable to request a copy of the Title Deeds in order to ascertain if there are any specific/onerous conditions contained therein, that could adversely affect the property you intend purchasing.
For example, if the property was previously in an area zoned for residential purposes and although subsequently successfully rezoned, there are sometimes still restrictions in the Title Deed limiting the use of the property, that will ultimately need to be removed, which will involve additional costs.
Ensure that there are no servitudes or endorsements registered against the Title Deed. In some instances, there may be a right-of-way in favour of the adjoining property, which is registered over the property you intending purchasing, which may not have disclosed by the seller.
A survey diagram from the Surveyor General’s office, showing the correct boundaries of the property, is also a useful document that should be obtained in order to confirm the above.
2. Municipal information
Obtain a copy of the Town Planning Regulations pertaining to the property that you intend purchasing, from the Local Authority. This ‘Town Planning Enquiry’ report will reflect the current zoning of the property, the permitted coverage, height restrictions, parking requirements, street, side and rear building lines.
The property will also have an allocated Floor Area Ratio, which when applied to the extent of the Erf, in conjunction with the various restrictions listed above, ultimately determines the permitted Gross Building Area that can be erected on the property.
3. Condition of the property
A thorough inspection of the property should be undertaken with specific attention being paid to the roof structure and the condition thereof. Find out from the current occupant as to whether there have been any roof leaks in recent months.
4. Lease agreements
Where the property, is currently leased to an existing tenant, it would be prudent to request a copy of the lease agreement. The extent of the premises being let should be stipulated in the lease agreement and, ideally, verified against the actual extent of the buildings, as often, these differ. The generally accepted method for the determination of lettable area, is the South African Property Owners Association (SAPOA) method, which clearly defines rentable, usable and supplementary areas.
The terms and conditions of the lease need to be examined. Any ‘options to renew’ need to be perused, as often, the wording in such clauses, can materially affect the application and amount of any future increases. Such options, could materially influence the buying decision of a prospective investor/end user.
These are merely a few pointers that should ideally be considered when purchasing a commercial property! When in doubt, do not hesitate to consult a professional!
Photo caption: Dave Summerton, Member, Summerton Edelson cc / Professional Valuer, Appraiser, Auctioneer and Estate Agent.
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