Administration of trusts—trustee investment in commercial property
Administration of trusts—trustee investment in commercial property

The following Private Client guidance note provides comprehensive and up to date legal information covering:

  • Administration of trusts—trustee investment in commercial property
  • Commercial property
  • The decision to invest in commercial property
  • Indirect investment
  • Direct investment

Commercial property

Commercial property is that which is intended to produce a financial return for its owner by being used or occupied by businesses. That return can arrive in the form of rent paid to the owner by a tenant or from a change in the capital value of the property, realised when the property is bought or sold.

There are a number of differences between investing in residential property and commercial property, eg:

  1. Costs—the cost of large, high-quality commercial property tends to be much greater than residential property

  2. Valuation—the uniqueness of many commercial properties makes it difficult to get an accurate valuation without access to professional advice, whereas it is fairly easy to compare house prices

  3. Commercial leases—these tend to last much longer than residential leases, traditionally contain clauses that are upward only (ie the rent cannot be less after a review than it was before one) and place responsibility on tenants for repairs and maintenance

The decision to invest in commercial property

Trustees may invest in commercial property indirectly or directly. Indirect property investment involves putting money into a product that invests in property. Essentially this means investing in the skills and expertise of other people, such as property or fund managers. Direct investment in property refers to buying the whole or part of a physical property.