6 Stages of a Commercial Property Purchase

20 August 2020 | Home, Property & Land |

Two property purchases can vary significantly in their degree of complexity. Therefore please take this as a very generic guide as to the stages of a commercial property purchase and the procedures.

1. Initial stages

• You will need to inform the Estate Agents/Surveyors which solicitor you intend to use so that they can send the “Heads of Terms” and “Property Particulars” to all the parties involved.
• You need to instruct a solicitor who will send you a Letter of Engagement or confirmation of Terms of Business. You should sign and return this as soon as possible together with your identification so that they can commence work. Funds will also be requested to cover the cost of searches and other disbursements e.g. Land Registry fees.
• You need to decide how you wish to hold the property. As a company, in a trust, pension fund, as individual(s).  It is prudent to speak to your accountant about this prior to your purchase to establish what is best for you as there may be tax efficiencies available.
• Your solicitor will then write to the seller’s solicitor to confirm that they are instructed and to request the draft contract. This should arrive with a pack that includes information on the title to the property and standard forms and questionnaires completed by the sellers.  In commercial property, we have Standard Commercial Property Enquiries. There are several variations of the Commercial Property Standard Enquiries and these differ depending on what type of property you are purchasing, for example the agricultural enquiries will be different from a high street shop.
• You will also need to let your solicitor know how you intend to fund the purchase.  If you are borrowing money from a bank or other lender, it is likely they will have their own requirements which your solicitor will need to deal with. 

2. Pre-Contract Stage

• Once the draft contract pack has been received, your solicitor will examine the contract, the title deeds and the replies to CPSEs completed by the seller, and if necessary raise any enquiries with the buyer’s solicitor.
• Depending on the complexity of your particular transaction there may be additional documents, for example, an overage deed which could secure additional consideration for the seller post completion.  This will also be reviewed at this stage.
• Your solicitor will also then put in hand the searches which can take 2/3 weeks to receive depending upon the Local Authority and their current workload.  If you are purchasing the property without the help of a lender you may decide that searches are not required. This will depend upon the nature of your purchase and your “risk profile”.  We always strongly recommend searches however if you wish to proceed without them you can let us know at this stage. 
• If you have a lender, your solicitor will receive a copy of the offer and go through the conditions.  Your solicitor will sometimes be able to undertake the legal work on behalf of your lender as well, however it is relatively common in commercial property for lenders to instruct their own set of solicitors. 
• Once all searches have been received and answers to all enquiries have been answered satisfactorily, your solicitor will report to you on the documentation and enquiries.  This can either be in person, telephone or video conferencing, or via post or email.   You will also be asked to transfer your solicitor the deposit monies for exchange of contracts which is usually 10% of the purchase price.

3. Exchange of contracts

• Before exchange of contracts you will need your insurance in place, if you have a lender this is likely to be a condition of their lending criteria.
• All parties involved need to agree on a completion date.
• Once contracts are exchanged between the respective solicitors (usually over the telephone) you are legally bound to buy and the seller bound to sell the property. Should either party pull out, legal action and remedies are available, depending on the terms that have been agreed in your specific circumstances.
• At the point contracts are exchanged, your solicitor will usually send your deposit monies to the seller’s solicitor.

4. Between Exchange and Completion

• If it has not been agreed before, your solicitor will draw up the Transfer Deed so that the property can be registered in your name after completion. Your solicitor will also carry out some final searches at the Land Registry.
• During this period you should receive, if you have not received one already, a final statement from your solicitor showing all expenses and giving you a final figure which you will need to make sure is cleared in their bank account before the day of completion. If you are buying with the assistance of any lending, your solicitor will arrange the funds from the lender in time for completion.

5. Completion

• Completion takes place when the seller’s solicitor confirms that they have received the balance of the money that is due. Once this has happened the keys should be released to you either direct by the seller, or via the Estate Agents.

6. Post Completion

• Your solicitor will then pay any Stamp Duty Land Tax due, and upon receipt of the title deeds and documents and Transfer signed by the seller, register your ownership with the Land Registry.
• Once the registration has been received back from the Land Registry, if you purchased with the assistance of any lending, your solicitor will send a copy of the registered title to your lender as evidence that their charge has been registered, which will remain until such time as you pay off the loan.

To talk about a commercial property transaction please get in touch here.

Find out more about our commercial property services here.