You’ve found the commercial property you’ve been looking for and you’ve agreed on a price with the seller. So what happens next when you’re considering buying a commercial property?
1. Heads of Terms agreed between parties/agents
The Heads of Terms set out the main points of the transaction, and although usually stated to be “subject to contract” and not legally binding, they are referred to for the legal drafting and should be accurate. If there is a selling agent – the agent will usually prepare the Heads of Terms.
2. Solicitors instructed
Once the Heads of Terms have been agreed between you and the seller, these will be sent to the appointed solicitors.
You will need to formally appoint your solicitor. Your solicitor will usually send you his or her terms of business, ask for your identification documents and any money on account, i.e. for property searches and land registry documents.
3. Contract package
The seller’s solicitor will send to your solicitor the contract package. The contract package for buying a commercial property will usually include a draft sale contract, the title documents, the energy performance certificate and replies to Commercial Property Standard Enquiries (CPSEs). CPSEs are general property enquiries raised on the purchase of a commercial property.
4. Buyer’s due diligence
Once your solicitor has received the contract package, they will carry out a due diligence check on the property in accordance with your requirements and the lender’s requirements (if you are having a mortgage). This will include reviewing the contract, investigating the title and reviewing the seller’s replies to the CPSEs.
Your solicitor will also request the property searches at this stage and these will include a local authority search, an environmental search and a water and drainage search. Your solicitor may also advise that additional searches are carried out depending on the property and its location.
It may also be necessary for you to commission a survey/valuation (with a property surveyor) of the property so that you are fully aware of the structure and condition of the property and if you are lending, your lender will most definitely require this. If so, you should also provide this to your solicitor as they will need to review this.
Once your solicitor has reviewed the contract package, survey/valuation and search results, they will usually raise any necessary enquiries with your seller’s solicitor.
Due diligence can be the longest stage of the transaction, lasting a few weeks as your solicitor will be reliant on third-party search providers and your lender.
5. Review mortgage papers
If you are having a mortgage, your solicitor will review the terms of the mortgage and any other security documentation provided by the lender. Your solicitor will also comply with any of the lender’s requirements.
6. Contract agreed and reporting
Once your solicitor is happy with the information gleaned from the due diligence, the terms of the sale contract and transfer deed will be negotiated and agreed with the seller’s solicitor.
Your solicitor will report to you on the due diligence process and their findings. Your solicitor will discuss your requirements for the property and whether there are any defects which you should be aware of. At this point, you will usually sign the contract, mortgage papers (if applicable), transfer deed and any other necessary documentation. Your solicitor will also request the deposit amount from you (usually 10%).
7. Contracts exchanged
Once you and the seller have signed your respective parts of the sale contracts, contracts will be exchanged and your solicitor will pay the seller’s solicitor the deposit.
Exchange is usually a telephone call between solicitors, who follow up the call by exchanging the contracts formally in the post. On exchange, the purchase is now legally binding and a completion date is set.
If you are lending, your solicitor will at this stage, request funds from your lender. If you are not having lending (or the lending does not cover all sums due), your solicitor will request the balance purchase monies from you.
Just before completion, your solicitor will carry out pre-completion searches at the Land Registry.
On completion, your solicitor will either receive the funding from you or your lender. Your solicitor will then send the balance of the purchase monies to the seller’s solicitor.
At completion, the transfer deed (and mortgage) will be completed and the legal title in the property passes to you. You will be able to collect the keys from the agent.
Your solicitor will now deal with any post-completion matters such as, registering the transfer at the Land Registry and paying the stamp duty.
Buying a Commercial Property?
BHW has a commercial property department who regularly deal with the purchase of commercial property. For further information contact Partner and commercial property solicitor Ian Sanders on 0116 281 6227 or firstname.lastname@example.org.