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5 Things to Consider When Selling Your Commercial Property

Rob Meister
Rob Meister
Joint Manager & Business Owner

When you have decided to divest an investment property 90% of the time you will do so by way of a no-price marketing campaign (Auction, Tender or Private Treaty).

A public campaign will generally be conducted over 4 weeks, which means buyers need to make a fast and informed decision. It has been our experience that when we are able to assist buyer’s with their due diligence investigation by providing detailed information upfront and reducing unknown factor’s to mitigate risk then our Vendor’s have a higher success rate with a greater chance of achieving a premium price.

Five key factors which can affect the success of a sale campaign are:

1. Lease Documentation

It is important to be able to provide potential buyer’s with accurate lease documentation, this might include executed copies of a Deed of Lease, Deed of Renewal, Deed of Rent Review, CPI review notices and any variation’s to the Lease which has been agreed. Buyer’s like to be able to follow a logical timeline for a Tenancy. No lease remains the same, terms change during a tenancy such as rent increases, rights of renewals are exercised etc.

2. Know the Seismic Rating

Following the Christchurch earthquake in 2011, the commercial property market underwent significant legislative changes to the Landlord’s obligations on buildings which have been identified as earthquake-prone. These changes affected the lending requirements of many of the major banks in New Zealand. In most cases when funding is required the banks will request confirmation of a buildings NBS % (National Building Standard) what this means is how at risk is the building is in an earthquake. The NBS rating of your building will be heavily influenced by the date the building was constructed and the type of construction. In most cases we recommend an IEP report (Initial Evaluation Procedure) be completed on the property, this report will provide you with an NBS % for the property.

Further information is available on www.building.govt.nz.

3. Obtain an Asbestos Report

Although many commercial Landlords are not aware, in 2016 the “Health and Safety at Work (Asbestos) regulations were implemented which requires any building built pre-2000 to have an Asbestos Management Plan completed this report will identify any asbestos material which is present within the building.

Further information is available on www.worksafe.govt.nz.

4. Compliance and Unresolved Consent Issues

Tenancies change over the years and work such as tenants fit-out are carried out and things can easily get missed, it is important to obtain and review the LIM to see if there are any outstanding issues such as a Code of Compliance (CCC) not being issued. From my experience, I have found that on many times a building consent has been granted but no CCC has been issued.

5. Complete Outstanding Maintenance

First Impressions are very important, we would always recommend you get on-site and see if there are any works which need to be completed on the property. Things to consider which generally can be completed at a low cost would be, tidying of the gardens, replacing any damaged ceiling tiles, a building wash to remove mould, remove any rubbish from the property, in some cases, it might be feasible to consider painting parts of the building which look run down. If your property looks rundown and shows signs of deferred maintenance buyers will approach with caution or will lower their opinion of value as they will need to spend money to tidy up the property.

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