Introduction
Making an offer on a commercial property is a structured process and differs significantly from residential transactions. Offers are typically subject to contract and form the basis for negotiation rather than a binding commitment.
Understanding how offers are presented and assessed helps buyers negotiate effectively and avoid unnecessary delays.
How Commercial Offers Are Made
Commercial property offers are usually made:
- Via the selling agent
- In writing
- On a subject to contract basis
An offer may be accepted, rejected or used as a basis for further negotiation.
Unlike residential property, price is only one part of the decision.
1. What a Commercial Offer Should Include
A well-prepared offer should clearly set out:
- Purchase price or proposed consideration
- Conditions (subject to contract, survey, finance, planning)
- Proposed timescale for exchange and completion
- Funding position (cash buyer, mortgage agreed in principle)
- Any special requirements
Clarity at this stage reduces friction later in the process
3. Subject to Contract
Most commercial offers are made subject to contract, meaning:
- The offer is not legally binding
- Either party can withdraw prior to exchange
- Terms remain open to negotiation
This allows due diligence to be carried out before legal commitment
4. Negotiating Terms
Negotiation may involve:
- Price adjustments
- Conditions linked to surveys or reports
- Timetable changes
- Lease-related matters (for investment property)
Commercial negotiations are often iterative and may continue alongside legal work
5. Offers on Investment Property
Where the property is let, offers are typically assessed against:
- Rental income
- Lease length and break clauses
- Tenant covenant strength
- Yield
Buyers may submit offers on a net initial yield basis rather than headline price.
6. Offers on Owner-Occupied Property
For owner-occupiers, sellers may place greater emphasis on:
- Certainty of funding
- Speed of completion
- Strength of the buyer’s business
Demonstrating readiness and credibility can be as important as price.
7. Competing Offers
Where multiple offers exist, sellers may:
- Request best and final offers
- Set a deadline
- Seek proof of funds or finance
Buyers should be prepared to support their offer with evidence
Summary
Heads of Terms
Once an offer is accepted in principle, the agreed commercial terms are usually recorded in Heads of Terms.
This is covered in the next section:
Buying a Commercial Property – Drafting Heads of Terms (HOTS).
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