Guide to Buying Commercial Property 

Buying commercial property is one of the most effective ways to generate long-term income, diversify investment portfolios, or secure a stable location for business operations. With longer lease terms, stronger yields, and tenants often responsible for repairs and insurance, commercial property can offer greater control and profitability than residential alternatives. However, the process is more complex, involving different tax rules, legal obligations, and valuation methods. Success depends on a clear understanding of your objectives, the property’s income potential, and the legal and financial structures involved.

Whether you’re purchasing a retail unit, office space, warehouse, or mixed-use development, this guide walks you through each stage of the process from setting a budget and sourcing finance to conducting due diligence and evaluating returns. You’ll learn how to avoid common pitfalls, work with the right professionals, and assess whether a property is a good investment. With market demand rising in sectors like logistics and flexible workspaces, buying commercial property requires careful planning, but offers strong opportunities for those prepared to invest strategically.

What Is Considered Commercial Property?

Commercial property includes any real estate used primarily for business activities. These properties generate income through operations or leasing and are not used as residential accommodations. Scottish planning regulations define commercial properties through Use Class Orders under the Town and Country Planning (Use Classes) (Scotland) Order 1997, which determine legally permitted activities.

These classifications are critical for buyers, as they impact the property’s permitted function and future flexibility. From high street shops to industrial estates, each type carries distinct risks, yields, and lease structures under Scots law.

Types of Commercial Property:

Examples of Commercial Activities:

• Selling goods (retail)
• Manufacturing or storage (industrial)
• Providing services (offices, salons, medical clinics)
• Hospitality or entertainment (restaurants, cinemas)

Why Buy Commercial Property Instead of Residential?

Commercial real estate can be a high-yielding alternative to traditional residential investments. It offers more control over lease terms, lower day-to-day management, and a better match for long-term financial goals.

Compared to residential properties, commercial units often generate a stronger and more predictable income stream due to longer leases and better tenant responsibility. Scotland is home to the highest commercial yield at 20.4%, along with the South West (13.7%), while Scotland is also where investors can find the highest residential yields.

Benefits of Buying Commercial Property:

• Higher Returns: Net yields typically range from 6% to 12%, while residential averages 3%–5%.
• Long-Term Leases: Leases usually span 5–15 years.
• Tenant Maintenance: Tenants cover repair and insurance costs via FRI leases.
• Lower Turnover: Less frequent tenant changes = fewer voids.
• Inflation Hedge: Leases may include rent reviews tied to RPI/CPI.

How to Buy a Commercial Property: Step-by-Step Process

Buying a commercial property in Scotland involves distinct regulations, higher costs, and a specialised team compared to residential property. Following a clear step-by-step process, you will reduce risk and ensure compliance with Scottish law.

10-Step Commercial Property Purchase Process

1. Set Objectives and Budget:
   Begin by defining your commercial property goals, whether it’s long-term rental income, capital growth, or acquiring premises for your own business. Consider how much capital you can invest, your preferred level of risk, and your expected return. Early budgeting also means assessing borrowing capacity, identifying your maximum purchase price, and factoring in associated costs like LBTT, legal fees, surveys, and VAT. Establishing financial and investment criteria upfront will help you quickly eliminate unsuitable opportunities and focus only on properties that align with your financial strategy.
   
2. Search Properties:
   Use digital platforms to browse active listings. These can allow you to filter by location, size, type, and price. However, many attractive opportunities in Scotland are sold off-market, so connecting with local commercial surveyors and estate agents is essential. They often have early access to listings or exclusive instructions. When shortlisting properties, assess proximity to key transport links, demand in the area, and any local development projects or infrastructure plans that could affect value.
   
3. Assess the Property:
   Once a property is shortlisted, carry out a detailed appraisal to determine if it meets your financial and operational needs. Consider the condition of the building, the flexibility of internal layouts, any potential for redevelopment or change of use, and whether it’s vacant or tenanted. Review the surrounding market. Is the area in decline or growth? Check planning restrictions with the local authority, as Scottish planning policies may affect future use or renovation potential. Engage a surveyor early if you’re uncertain about the condition or value.
   
4. Secure Financing:
   Apply for a commercial mortgage or loan agreement in principle to support your offer. Lenders in Scotland evaluate borrowing applications based on both the asset and the borrower’s creditworthiness. They will require detailed cash flow forecasts, especially for leased properties, and may ask for a business plan if the property will be owner-occupied. Consider engaging a commercial finance broker to access a broader panel of lenders, negotiate terms, and structure the loan appropriately. Also, confirm if the lender requires a building survey or environmental report before approval.
   
5. Make an Offer:
   Offers in Scotland are submitted in writing by your solicitor, typically including any conditions (subject to survey, subject to funding, etc.). This marks the beginning of the missives — a Scottish legal process involving a series of formal letters between solicitors. Once an offer is accepted and missives are concluded, it becomes a legally binding contract. You should only submit an offer when you are confident that all financial, legal, and technical factors have been accounted for. Include contingencies if required, but be aware that overly conditional offers may weaken your negotiation position.
   
6. Instruct Legal and Survey Team:
   Appoint a Scottish commercial property solicitor who is experienced in handling transactions governed by Scots law. Their responsibilities include reviewing the title, managing correspondence, overseeing due diligence, and registering ownership upon completion. A RICS-accredited surveyor should be commissioned to conduct a valuation and a comprehensive building survey. If the property is leasehold or tenanted, a Schedule of Condition is also recommended to clarify repair liabilities. A solicitor will also check for title burdens, servitudes (rights of access), or other legal constraints specific to Scottish commercial property.
   
7. Conduct Legal Due Diligence:
   Your solicitor will perform detailed checks using either the Land Register of Scotland or the Sasine Register (for older titles). Key aspects include verifying legal ownership, checking the title for burdens, shared access rights, or development restrictions, and reviewing lease terms if tenants are in place. Planning consents and building warrants must be verified, along with energy performance certificates (EPCs). Environmental issues are a high priority, especially on industrial or brownfield sites, and your solicitor may order reports governed by SEPA (Scottish Environment Protection Agency) to confirm there is no contamination risk.
   
8. Conclude Missives:
   Once all terms are agreed and both solicitors confirm satisfaction with contract terms and conditions, missives are concluded. This step creates a legally binding contract under Scots law. At this point, a deposit typically of 10% of the purchase price is paid by the buyer. It’s important to note that backing out after the conclusion of missives can lead to serious legal and financial consequences, including losing the deposit or legal claims for damages. Buyers should proceed only once every risk has been addressed and all conditions are acceptable.
   
9. Completion:
   On the date of completion, the balance of the purchase price is transferred to the seller’s solicitor. Your solicitor simultaneously submits the required registration application to the Land Register of Scotland, which formally transfers ownership to you. Once completed, you receive legal title and physical possession of the property, including access, keys, and control of the premises. If there are any leases in place, the management of rent collection, service charges, and tenant communication also transfers to you or your appointed agent.
   
10. Post-Completion:
    Your solicitor must submit an LBTT return to Revenue Scotland, which is mandatory for all purchases, even if no tax is due. You will also need to register with the local council for non-domestic rates, Scotland’s equivalent of business rates. If you’ve purchased a property with existing tenants, you must notify them of the change in ownership and update payment instructions. Arrange insurance immediately and set up utilities if vacant. This is also the time to initiate any refurbishment, fit-out, or letting activity to optimise your investment.

Professionals You’ll Need:

• Scottish Commercial Solicitor: Manages legal checks, missives, and compliance with Scots law.
• RICS Surveyor: Assesses structural integrity and provides a valuation, adhering to UK-wide RICS standards.
• Finance Broker: Arranges funding tailored to Scottish commercial properties and lender requirements.
• Commercial Agent: Identifies suitable properties and negotiates terms, leveraging knowledge of the Scottish market.

What Are the Costs of Buying Commercial Property?

The total cost of buying a commercial property in Scotland extends beyond the purchase price. From tax liabilities to professional fees, a comprehensive cost forecast is essential for accurate budgeting.

Typical Costs Involved in Buying Commercial Property in Scotland:

LBTT Example for a £600,000 Purchase:

• 0% on first £150,000 = £0
• 1% on next £100,000 (£150,001 to £250,000) = £1,000
• 5% on remaining £350,000 (£250,001 to £600,000) = £17,500
  Total LBTT = £18,500

Additional Costs:

• Professional indemnity insurance (for solicitors or surveyors).
• Service charges and ground rent (for multi-unit buildings).
• Utility connections and set-up costs.
• Early repayment fees (if refinancing existing loans).

How to Finance a Commercial Property Purchase?

Most commercial buyers finance their purchase through a commercial mortgage, structured around the property’s income or business potential. These loans are less standardised than residential mortgages and vary significantly across lenders, with some requiring familiarity with Scottish conveyancing practices.

Key Features of Commercial Finance:

• Loan-to-Value (LTV): 60%–75%, depending on property type and risk.
• Deposit: 25%–40% of the purchase price.
• Interest Rates: 6% to 14%, influenced by market conditions and lender policies.
• Repayment Terms: 5–25 years, tailored to the borrower’s financial profile.
• Security: Typically secured against the property, with some lenders requiring additional guarantees under Scots law.

Popular Lenders:

• High Street Banks: Royal Bank of Scotland (RBS), Bank of Scotland (part of Lloyds), HSBC UK.
• Challenger Banks: Shawbrook Bank, Aldermore, Paragon Bank.
• Alternative Finance: Together, LendInvest, Scottish Investment Bank (for eligible businesses).

Other Financing Options:

• Bridging Loans: Short-term financing for quick purchases or refurbishments, ideal for time-sensitive deals in Scotland’s competitive market.
• Auction Finance: Fast-track loans with rapid approval, suited for properties bought at Scottish commercial auctions.
• SIPP/SSAS Purchase: Use a Self-Invested Personal Pension (SIPP) or Small Self-Administered Scheme (SSAS) to buy property tax-efficiently, subject to UK pension regulations and Scottish title registration.

What Legal Checks Are Needed Before Buying a Commercial Property?

Legal due diligence in Scotland ensures the commercial property is free from liabilities, has a clear title with legal protection, and is legally fit for its intended use. Skipping these checks can lead to significant financial or regulatory issues later under Scots law.

Must-Have Legal Checks:

• Title Check: Confirm the legal owner through the Land Register of Scotland or Sasine Register of Scotland and check for absence of burdens or obstacles (e.g., servitudes or securities).
• Lease Review: Analyse terms, rent review clauses, break rights, and ongoing maintenance obligations, ensuring compliance with Scottish commercial lease laws (no automatic renewal rights).
• Planning Use: Verify the property’s current and future legal use under Scottish planning laws, checking with local planning authorities.
• Environmental Search: Assess risks like flood zones, contamination, or protected areas, regulated by the Scottish Environment Protection Agency (SEPA).
• Asbestos & Fire Compliance: Ensure compliance with Scottish safety regulations, including the Fire (Scotland) Act 2005 and asbestos management laws.
• EPC Rating: Confirm the Energy Performance Certificate (EPC) meets the minimum ‘E’ rating for lettable commercial properties under UK-wide energy laws.

Documents Your Scottish Solicitor Will Review:

• Land Register of Scotland Title Sheet and Plan (or Sasine Register documents for older titles).
• Commercial Property Standard Enquiries (CPSE), adapted for Scottish conveyancing practices.
• Existing Lease Agreements, checked against Scottish lease law requirements.
• Planning and Building Warrant Certificates, issued by Scottish local authorities.
• Energy Performance Certificate (EPC), verifying compliance with minimum standards.

These checks often uncover issues like boundary disputes, overage clauses, or shared access arrangements (e.g., common rights of way), which must be resolved before concluding legal paperwork.

Conclusion

Buying commercial property is a significant step that requires careful planning, financial clarity, and legal precision. From understanding yield potential and tenant obligations to navigating legal checks and tax implications, each stage of the process influences your long-term return. Whether you’re a first-time buyer or expanding a portfolio, success depends on making informed, strategic decisions backed by professional advice.

At Westport Property, we specialise in guiding investors, business owners, and developers through every aspect of commercial property acquisition. With in-depth market knowledge, access to exclusive opportunities, and expert support, we help you buy with confidence and invest with purpose.