1. Preliminaries
Prospective buyers should carry out a strategic review to establish what they need from a property. The involvement of an accountant at an early stage is also recommended in order to establish the most efficient method of purchasing, and any tax implications. Buyers may also wish to instruct their lawyer to carry out a cursory title review to flush out any potential deal breakers, such as restrictive covenants preventing a particular use, or other matters that affect a property adversely.
2. Heads of Terms
Heads of terms are normally negotiated and prepared by surveyors. The involvement of a surveyor can obviously assist with formulating a deal. Heads of terms provide a framework of the headline purchase terms enabling the lawyers to “put pen paper” and may include:
- Description of the property (important where part is being acquired).
- Price and whether or not it includes VAT.
- Any conditions the sale will be subject to (for example, a purchase may be conditional on certain works being carried out, or on planning permission being obtained).
- Any rights that need to be reserved or granted.
- Any covenants that need to be created.
- Energy Performance Certificate rating (any EPC rating below E may render a property sub-standard).
- Details of each parties’ professional advisors.
3. The Draft Contract
The seller’s lawyer typically prepares the draft contract for sale. The primary aim of the contract is to define the extent of the property to be sold and the terms upon which the seller is prepared to sell.
Along with the contract, buyers should expect to receive evidence of the seller’s ownership of the sale property via documentary evidence of title. This evidence will differ depending on whether the property is registered or unregistered. Ownership evidence should ideally be supported by seller’s replies to commercial property standard enquiries, which are an industry standard set of questions designed to provide a comprehensive picture about the property. The enquiries cover matters such as planning, boundaries, utilities, disputes, planning and much more!
4. Investigation of Title
Armed with the draft contract and supporting information, a buyer’s lawyer’s role is to ensure that the seller is able to sell the property in question and that there are no defects in the title which could prejudice the interests of the buyer, or any lending institution providing finance for the purchase.
The existence of title defects or other adverse matters can be discovered by conducting a full review of the seller’s title, raising pre-contract enquiries and carrying out property searches.
Core searches tend to include:
- Local Authority Search: elicits various information held by the local authority including planning history, any enforcement action, tree preservation orders whether the highways serving the property are maintained at a public expense, whether there are any new roads and railways proposed within the vicinity of the property, whether the property is listed, within a Conservation Area, registered as Common Land or if there are any footpaths affecting the property.
- Drainage and Water Search: these reports include information concerning connection (or otherwise) to mains water, whether foul and surface water at the property drain to a public sewer and whether any water main or public sewer is within the boundaries of the property.
- Environmental Report: should establish if the property is near a landfill site or if there are premises discharging hazardous substances in the vicinity. The prospect of a property being contaminated is fundamental to any property purchase and must be considered.
- Flooding Report: the risk of flooding should also be properly considered via an appropriate search. Flooding can arise from less obvious sources so it is important that the correct checks are carried out.
5. Reporting
The culmination of your lawyer’s efforts! The results of enquiries and searches provide key information about the property, and will inform a buyer’s decision as to whether or not to proceed. The information should be assimilated into an executive summary, which the buyer should discuss fully with their lawyer.
6. Registration
Following completion of a purchase, the buyer’s lawyer will deal with post completion matters, which include preparation of a Stamp Duty Land Tax Return (where one is required) and filing an application at the Land Registry to register the property in the buyer’s name.
Ward Gethin Archer’s dedicated team of commercial property specialists have extensive experience in handling all manner of sales both locally and nationally. If you are thinking about selling your commercial property, any member of the team would be pleased to have a free initial chat to guide you through the legal process.
This article aims to supply general information, but it is not intended to constitute advice. Every effort is made to ensure that the law referred to is correct at the date of publication and to avoid any statement which may mislead. However, no duty of care is assumed to any person and no liability is accepted for any omission or inaccuracy. Always seek our specific advice.
