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A Guide To Buying Commercial Property in The UK

For any corporate entity, buying a commercial property in the UK is a strategically important transaction; one that can facilitate the realisation of business plans while enabling future growth and expansion. Likewise, for commercial landlords, making sound decisions throughout the purchasing process can make the difference between a highly successful portfolio and one that underperforms. Given recent events, especially the COVID-19 pandemic, it has become increasingly important to understand how the commercial property market is evolving and how businesses are adapting their needs based on changing dynamics such as consumer and worker behaviour, in addition to many other factors. As a purchaser, it is also extremely important to know how to buy commercial property and the pitfalls that can occur. Here we provide a commercial property buying guide to the legal process of purchasing single whole freehold commercial property in the UK.

25 April 2022
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1. Heads of terms

Once you have found the ideal commercial property for your needs and have negotiated a price with the owner, the most important step you now need to take is to engage a specialist commercial property Solicitor who can manage the purchase aspects of the transaction. At this stage, you will also need to confirm your Solicitor’s fees for buying commercial property. 

Before a contract can be drawn up, your commercial property Solicitor will guide you through a number of important steps, including discussing and identifying:

  • Heads of terms.
  • Matters of confidentiality.
  • Requirements for an exclusivity agreement.

The heads of terms ensure that both parties to the commercial property transaction agree on key aspects of the purchase, including the price, the extent of the property, and any other important matters such as the grant of rights over retained land and any conditions attached to the purchase. Importantly, the heads of terms are deliberately not legally binding, hence your Solicitor will ensure it cannot be treated as a contract (e.g. by using the term “subject to contract”). Once these documents are drafted and agreed upon, they are sent to the Solicitors representing each party.

Your Solicitor will also carry out a number of financial checks in the pre-contract stage, including checking:

  • The purchase price. 
  • If VAT is payable and if this can be recovered.
  • The arrangement for paying a deposit.
  • The chattels and other items to be included in the sale.
  • How the purchase price is to be split between the property and the chattels.
  • How much stamp duty and land tax is payable.
  • Arrangements for a mortgage if required (in which case the lender will require the first legal charge over the property as security for the loan).
  • Fees for Land Registry fees and searches.
  • Any other fees and disbursements.
  • Whether there are any capital allowances available.

2. Title pack and draft contract received 

Once the main terms of the sale/purchase are agreed upon, the seller’s Solicitor will draft the contract and send this to the purchaser’s Solicitor along with the title documents. 

3. Due diligence

The due diligence phase of any property purchase is key in ensuring that important matters can be brought to the attention of the buyer and any key decisions made. The purchaser’s Solicitor will now:

  • Review the draft legal contract.
  • Examine the official copies of the title register, the title plan, and any documents referred to on the register.
  • Confirm the seller has the capacity to sell.
  • Raise any queries with the seller’s Solicitor.
  • Review any responses from the seller’s Solicitor to queries raised.
  • Raise any further queries where needed.
  • Submit searches (e.g. local authority and environmental searches).

The purchaser and/or lender may also wish to have checks carried on the physical property, perhaps by a surveyor, environmental auditor, or valuer. 

4. Report on title

On completion of the due diligence process, the buyer’s Solicitor will draft and send a “report on title” to the purchaser outlining all of the key facts of the transaction, including:

  • Any major issues which need to be brought to their attention.
  • Details of the purchase price.
  • Details of the property, including whether it is freehold, its boundaries, the title reference and location, and the registered owner.
  • Matters which may burden the property.
  • Search results.
  • Enquiry responses.
  • Planning and building regulations.
  • Insurance.
  • Stamp or land duty tax.

5. Exchange of contracts

Assuming the contents of the report on title are all in order, the exchange can then proceed. As the purchaser, you will be informed once this stage is completed. At this point, you are legally committed to the purchase of the commercial property. You will also need to ensure you have the necessary commercial building insurance in place once. 

6. Completion

Completion represents the final stage in the process of buying commercial property. The purchaser’s Solicitor will complete a number of pre-completion tasks, including:

  • Carrying out an official search at the Land Registry to obtain priority for the transfer and/or charge.
  • Check the completion statement sent by the seller’s Solicitor.
  • Request funds from the lender (if there is one).
  • Fulfil any completion requirements.
  • Arrange the execution of the legal charge by the purchaser in readiness for completion (where needed).
  • Final pre-completion undertakings.

On completion, monies are sent by the purchaser’s Solicitor to the seller’s Solicitor. The purchaser is then informed of the transfer and that the keys to the property should now be available. 

7. Post-completion

After completion, the purchaser’s Solicitor will complete the transaction by paying any stamp or land duty tax owing and registering the transfer with the Land Registry.

Final words

This commercial property buying guide only summarises the process followed by a purchaser’s Solicitor when handling a commercial property transaction. While the purchaser normally wants to proceed as quickly as possible with the transaction, it is the responsibility of the conveyancing Solicitor to ensure it is completed properly and in a manner that fully protects the interests of the buyer. 
Guillaumes LLP Solicitors is a full-service law firm based in Weybridge, Surrey. We have a highly experienced team of Solicitors who can assist you with any legal matter, including buying commercial property in the UK and everything you need to know about conveyancing. To make an appointment, please call us on 01932 840 111.