Browse our Buying & Selling Commercial Property Services
Whether you are an experienced property developer or a first-time property investor, our experienced commercial property solicitors are here to help.
Buying a Commercial Property
There are many things that need to be considered when buying a commercial property. The process of buying a commercial property usually begins when ‘heads of terms’ are negotiated with the agent who is selling the property on behalf of the seller. These negotiations can also include agreeing other key documents relating to the property purchase such as exclusivity agreements for the buyer or confidentiality agreements.
VAT on Commercial Property Purchases
As your commercial property solicitor, we will investigate whether you are obliged to pay VAT on the purchase price and if so, that you are able to recover that VAT. If the property is subject to a lease or leases, then a transfer of a ‘going concern’ will often arise which can mean that no VAT is payable - provided you opt to tax the property for VAT purposes. We can advise you and your accountants in connection with that option to tax with a view to minimizing any VAT payment.
Financing the purchase of a commercial property
How you finance the purchase of a commercial property will affect what legal work needs to be undertaken. For example, if you need to borrow money from a bank, it will usually require a first legal charge over the property as security for the loan. We will ensure that you have an appropriate title to the property so that you can borrow money against the security of the property and eventually sell the property for a full value.
Reviewing the property title and undertaking property searches
The initial part of the process will involve reviewing title documents produced by the seller, as well as replies to enquiries before contract and negotiation and agreement of a draft contract. We also submit searches to bodies such as the relevant Local Authority, Highway Authority, Coal Authority and Water and Drainage Company. We frequently recommend having an Environmental Report prepared which identifies possible environmental liabilities that may adversely impact the future value of the property.
The title to the property, which establishes the seller’s ownership, is likely to be registered at the Land Registry; we will review that registered title and provide you with a copy of the title plan that identifies the extent of the property that you are to acquire.
There might be restrictive covenants or other third party rights, such as rights of way, which would restrict your proposed use of the property or the value of the property as an investment. We will ensure that you are fully aware of these before proceeding with the purchase. As part of the process, we will also ensure that any existing legal charges over the property are removed so that you obtain a property free of any legal charges in favour of third party banks.
Exchange of contract and property purchase
Once we have completed the review process and agreed the documentation, we can proceed to exchange contracts for the purchase of the property. At this stage, you are usually required to pay to the seller a deposit of up to 10% of the purchase price. Once you have exchanged contracts, you are legally bound to purchase the property on the agreed completion date.
After the purchase has been completed, we will legally register your ownership of the property with the Land Registry and pay any Stamp Duty Land Tax (SDLT) due to HMRC.
Selling a Commercial Property
In most commercial property sales, sellers instruct agents to market the property. ‘Heads of terms’ for the sale of the property, which include the sale price together with details of the parties and any additional terms, are then agreed.
Certain properties may be affected by residential tenants’ rights of first refusal under the Landlord and Tenant Act 1987. We will advise you as to whether you need to take account of any such rights of first refusal (which may apply where the property is subject to mixed commercial and residential uses.)
VAT on Commercial Property Sales
As part of the sale process we check the position in relation to VAT on the property and the buyer’s VAT position. If the property is subject to tenancies, the buyer is registered for VAT and satisfies various statutory procedures, they may be able to buy the property from you without paying any additional VAT. However, we need to check that the buyer had satisfied all such requirements as a failure of the buyer to satisfy those requirements could leave you with a substantial VAT bill.
Reviewing the property title and undertaking property searches
The initial part of the legal sale procedure involves reviewing your title to the property and obtaining copies of your title from the Land Registry in order to prepare a title pack to show to the buyer’s solicitor. If the property is subject to a lease or leases, then we include copies of those leases in the title pack for the buyer.
This initial investigation procedure also involves preparation of ‘replies to enquiries before contract’ relating to both the property and any leases affecting the property. We normally obtain documentation from you, such as, insurance policies for the property, service charge accounts, fire safety documentation, energy performance certificates and asbestos surveys. It’s often useful to gather these documents together as soon as you know you want to sell the property.
Sale contract and documents
Once we have all the documentation, we can prepare a draft sale contract to send to the buyer’s solicitor, together with all of the title documents, replies to enquiries before contract and other documents.
There may be other documents required, such as assignments of building warranties or assignment of rent deposit deeds.
When contracts are exchanged on the sale of the property you’ll receive a deposit of up to 10% of the sale price which we will hold in our client account until completion of the sale. It’s worth knowing that once contracts have been exchanged, there is a legally binding contract for the buyer to purchase the property and for you to sell the property to them.
Legal charge over a property
If you have a legal charge registered over the property then we will deal with the discharge of that legal charge directly with your bank. The buyer will insist that they have binding assurances that the legal charge will be removed before completing the property purchase.
After completion we will deliver any agreed documentation to the buyer’s solicitor as well as distributing monies to the seller and its bank, if appropriate.
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