Broadly, the legal principles involved in acquiring a commercial property are not too different from those in the field of residential property, but it can pay to look for specialist commercial legal advice.
In this blog Commercial Property expert, Matthew Rodgers aims to give an overview of what is involved in a typical commercial property deal.
The key stages of a commercial property transaction are as follows:
- Identify the property you want. There are agents specialising in commercial property in the same way as there are for residential.
- Establish how you are going to fund the project. Talk to specialist lenders, if required.
- Start the negotiation process with the owner by making an offer. Typically, a negotiation will follow until agreement is reached.
- Once you have reached a deal with the owner, “heads of terms” can be prepared. This is a document which is not legally binding, but which records the agreement reached and provides all parties with relevant contact details for solicitors, etc. Anticipated timescales can be included, and it is usual for a buyer to be required to provide proof of funding.
- If you have not done so before, this is the point at which you should instruct your solicitor. Sometimes it can be useful to involve your solicitor before you get to “heads of terms” stage because a solicitor may be able to provide useful input as to what should or should not be included in such a document and this can save time later when the transaction documents are being negotiated.
- Once solicitors are appointed, the “due diligence” phase can commence; this is an inspection by the solicitor of the legal title to the property and should also include a physical inspection of the property by you, and a survey and inspection by your surveyor.
- Solicitors can then prepare and negotiate the following transaction documents:
finance documents (if applicable);
- for a freehold purchase - the sale contract and transfer document;
- for the purchase of an existing lease - the sale contract, the transfer document and any necessary landlord’s consents and any lease security documents (such as a rent deposit deed or an authorised guarantee agreement);
- for the grant of a new lease – the lease, any landlord’s consents and any lease security documents. There may also be a contract known as an agreement for lease, depending upon the circumstances.
- Once all the transaction documents are in an agreed form, your solicitor should report to you on the findings of the due diligence process and the transaction documents.
- Assuming you are happy with the contents of your solicitor’s report, the various transaction documents can be signed, and contracts can be exchanged; this is the point at which the contract becomes legally binding and a deposit is normally paid. A completion date is usually fixed when contracts are exchanged, and you should be clear as to who is responsible for insuring the property between the date of exchange of contracts and the completion date.
- Thereafter, your solicitor can complete the transaction either by:
- signing and dating the transfer of the property interest (where the freehold or an existing lease is being acquired) and paying the balance of the price; or
- signing and dating the lease (where a new lease is being granted) and making any necessary payments under the lease.
- Finally, your solicitor can then attend to the post-completion formalities such as payment of any Stamp Duty Land Tax and registration of the transaction at the Land Registry.
Using a specialist commercial property solicitor will put you in the best position to ensure a smooth process and to get you to where you need to be in the most timely and cost-effective manner. Here at Bell & Buxton we have a dedicated commercial property team with vast experience in handling all kinds of property deals - from the very small to the very large. If you have questions, need advice, or a free 30 minute consultation contact our expert team.