Commercial property law advice in Wimbledon, South West London, Epsom and Surrey
What is commercial property?
Commercial property is any property used for business purposes: offices, retail, hospitality, industrial, logistics, healthcare, and education.
Investing in commercial property can be an attractive proposition: tenants are more likely to lease your property for 5-15 years at a healthy rent, usually with five-yearly uplifts; you may also benefit from the increase in capital value over time. As an owner-occupier, you can grow equity in the property rather than paying rent to a landlord.
Purchasing commercial property can be a complex process but our commercial property team can help you avoid the pitfalls and maximise your investment.
When the time comes to sell your property, you’ll want the process to be as smooth as possible. Our solicitors will work with you to collate the legal sales pack and seek to minimise your potential exposure after completion.
What is the role of a commercial property solicitor?
A commercial property solicitor’s role involves dealing with three elements of a transaction: due diligence; preparation or review and negotiation of contractual documentation; and handling the transaction and monies. It is essential to engage a solicitor to act for you on a commercial property transaction to manage your risk and protect your interests.
A seller’s solicitor will help you assemble a pack comprising title documents, any lease documents, replies to Commercial Property Standard Enquiries (CPSEs) and supporting documents such as an asbestos survey, Energy Performance Certificate, gas and electrical certificates, insurance and service charge information. The pack will be sent to the buyer’s solicitor and further enquiries may be raised to which the seller’s solicitor will respond with your input.
A buyer’s solicitor will review the pack of documents, carry out searches on the property, raise additional enquiries, and prepare a ‘report on title’ with their findings. They will advise you of any risks arising from their due diligence and if there are ways to reduce these risks.
The solicitors for buyer and seller will negotiate the form of any documents needed to give effect to the sale and purchase – usually a contract for sale and transfer deed, or a lease (sometimes with an agreement for lease). Each solicitor will endeavour to ensure that their client does not agree to unduly onerous obligations or unusual liabilities. These can be complex legal documents and your solicitor can advise you on the terms.
A seller’s solicitor will exchange contracts on the seller’s behalf and hold the deposit (usually 10%) until completion. They will also handle completion: the dating of the documents, receipt of the sale proceeds, and redeeming any mortgage.
The buyer’s solicitor will exchange contracts and pay the deposit on the buyer’s behalf, satisfy any lender requirements and call for drawdown of mortgage monies, and effect completion. After completion, they will prepare and file a stamp duty land tax return and register the purchase at the Land Registry.
How can Peacock & Co help?
Our commercial property team have extensive experience in dealing with acquisitions and disposals throughout Central and South West London, Surrey and further afield. We handle freehold and leasehold property transactions – everything from empty units to multi-let buildings and portfolios. Our size of transaction ranges from small acquisitions to multi-million-pound deals.
We endeavour to provide high levels of communication to clients and agents alike. We enjoy close relationships with many commercial property agents in South West London and Surrey, promoting cooperation in transactions on which we are both instructed. We can add value by introducing surveyors, business rates specialists, mortgage brokers, tax advisors and other professionals so you receive holistic advice where required.
Here are some commonly asked questions we receive about buying and selling commercial property:
Once you have considered your budget and funding options, researched the market, and identified a property to buy, you will typically make an offer to the seller’s agent. If your offer is accepted, the agent will prepare a memorandum of sale or heads of terms. This will set out who the parties and their legal representatives are, the price and timescales, and any other terms, for example if the contract is conditional on the grant of planning permission or the seller obtaining vacant possession from a tenant. It is advisable to have your solicitor check the heads of terms before they are finally agreed as the commercial terms can be tricky to renegotiate these terms later.
Once the heads of terms are passed to the parties’ solicitors, they start work on the legal process as set out above. If you are obtaining a mortgage to finance the purchase, your solicitor may also act for the lender in satisfying their requirements. You will need to make any mortgage application so that instructions are issued to your solicitor to do so.
A seller is not obliged to disclose physical defects and issues. It is therefore always recommended to carry out a survey, which will reveal physical defects and potential issues such as Japanese Knotweed or pests, and identify any works carried out to the property which may have required planning permission and/or building regulations compliance. Your solicitor will need to obtain the applicable paperwork for recent works.
If title to a property is freehold, the proprietor owns it absolutely and in perpetuity. They will have control of the property and own the land, buildings, subsoil and airspace. The owner may grant leases out of its freehold title.
If title to a property is leasehold, the proprietor holds a lease of that property for a limited period (usually a maximum of 999 years). The lease should set out the rights and responsibilities of the landlord and tenant regarding the property and the building in which it is situated. The tenant will not have absolute control of the property: it may need permission to make alterations or sell the lease and may have to pay a rent and service charge.
The land under either class of title may have the benefit of rights over other land or be subject to rights of benefitting other land (which are known as ‘easements’) or restrictive covenants which may limit the use of or activities on the property.
Your solicitor will advise on the various searches that should be carried out. Generally, this will include a local land charges search and local authority enquiries, a drainage and water search, a desktop environmental and flooding search, a chancel repairs search and a highways search.
Depending on where the property is located or what you intend to do with it, e.g. redevelopment, additional searches such as coal mining or utilities may be recommended.
The Environmental Protection Act 1990 sets out the framework for the remediation of contaminated land. Land is ‘contaminated’ if significant harm or pollution is being caused or there is a significant possibility of it being caused.
If land is identified as contaminated, notice may be served by the Environment Agency to remediate the land. If the person who caused or knowingly permitted the contamination can be identified, they will be liable for that remediation. If they cannot be identified, notice may be served on the owner or occupier of the land.
It is therefore important to establish the risk of a property you are buying being qualified as ‘contaminated’. A desktop environmental search is the starting point: this will either give a ‘Passed’ result, meaning that the level of risk is not such as to indicate that the land might be deemed “contaminated”, or recommend ‘Further Action’. In the latter case, a buyer should consider a risk assessment by an environmental consultant.
The contract for sale of the property may contain provisions for the apportionment of environmental liability, particularly if the land is being sold for development. A seller will want to pass all risk of any future remediation to the buyer.
This is when the contract becomes legally binding and the parties are obliged to complete the sale and purchase of the property. The price, completion date and other terms are formally agreed and if one party breaches those terms, particularly if they fail to complete the transaction, the other party will have rights and remedies against them.
This will depend on the terms of the contract. Risk usually passes to a buyer on exchange of contracts and they will still have to buy the property if it is damaged or destroyed. If the seller is obliged to maintain insurance until completion, the contract should contain provisions for making a claim and transferring the insurance monies to the buyer. If the buyer insures the property from exchange of contracts, then they can hopefully claim under their own policy.
The buyer will pay the seller the price or lease premium for the property and the transfer or lease will be dated. This will transfer the title to the property or, if the transaction is for a leasehold, the title will be created.
Completion will be the trigger for the Stamp Duty Land Tax return to be filed and payment to be made (within 14 days) and for registration of the transaction at the Land Registry (where applicable).