What happens during a Sale of a Commercial Property
It’s important when selling a commercial property, that you are aware of the process and documents required to complete the transaction and to satisfy the buyer.
We have provided a brief summary of the steps taken by us as your solicitor when dealing with the sale of a commercial property:
Step 1
After we have been instructed and the heads of terms have been agreed, we will prepare a draft contract which we will send to the buyer’s solicitor for approval. We will also provide up-to-date Land Registry title documents and a number of sale documents referred to as ‘Documents to be provided to my solicitor’ below.
Step 2
Where there is a registered charge against the property, we will contact your lender to obtain a redemption statement. This is to ensure that the purchase price will provide enough capital to redeem the mortgage on or after completion. If your lender approves, we will also prepare the Land Registry application to remove the charge from the title register once the mortgage has been redeemed.
Step 3
The buyer will then inspect the title, contract and additional documents. The buyer will also take steps to inspect the property by carrying out a survey and will apply for a full set of commercial searches against the property. It is at this point that the buyer’s solicitors will usually raise further enquiries.
Step 4
We will deal with buyer’s solicitor’s enquiries and forward the same to you for your approval. Following your instructions and provided the buyer and the buyer’s lender are satisfied we can agree to exchange contracts.
Step 5
On the day of exchange, the buyer will provide payment for any deposit and agree the completion date.
Step 6
The completion date will involve the buyer paying the balance of the purchase price and any apportionment of rent, service charge or insurance. We will use the completion monies to pay the redemption monies to your lender, all costs and disbursements and any agent’s fees. The completion monies will then be sent to you.
Step 7
Following completion it is the buyer’s solicitor’s responsibility to submit an application to the Land Registry to ensure the buyer is registered as the new owner of the property.
Documents to be provided to my Solicitor
You will need to provide the following documents to us, which will be required from the buyer at Step 1 of the transaction:
1. Replies to Commercial Property Standard Enquiries – (CPSEs)
These are a set of standard questions relating to the commercial property and, sellers are required to answer each question for the benefit of the buyer. The replies given in the CPSEs must be as accurate as possible. If any documents are provided in support of the replies it is important that these are as up-to-date as possible. The importance of this is that the buyer will be relying on the replies given and if any information is inaccurate you may be sued for misrepresentation.
2. Planning Permission and Building Regulations Documentation
Any planning permissions or certificates of lawful use relating to the property should be provided to the buyer. Where you have recently carried out structural works at the Property you should have received building regulations certificates which will also need to be given to the buyer.
3. Energy Performance Certificate (EPC)
You will not be able to sell your property without an up-to-date EPC. The EPC must certify the relevant property. For example, if you are selling one unit out of five on an estate, the EPC must relate to that unit being sold. It is important that the EPC contains the correct property address. Additionally, since 1 April 2018 under the EPC regulations, there is now a legal requirement for all residential and commercial properties to be sold with an EPC rating of E or above. If your property’s EPC rating is lower than the requirement you will need to arrange for the necessary works to be carried out to improve the EPC rating.
4. Asbestos Survey
If the property is built before 2000 and you are the owner of the property (or unless otherwise agreed under any occupational or property management documents) there is a legal obligation on you to check whether asbestos is present at the Property. This can be done by employing a competent surveyor to conduct an asbestos report. If asbestos is found at your property you will need to arrange for asbestos to be removed from the Property or obtain evidence of how asbestos has or will be managed at the property. It is a criminal offence to sell a Property which contains asbestos and penalties will apply.
5. Fire Risk Assessment
Where you have control over a commercial property you will need to carry out a fire risk assessment of the property and ensure that is regularly reviewed. Evidence of any assessments or reviews will need to be provided to the buyer. A short guide on how to make you property safe from fire is available here.
Additional Documents (examples):
- Air conditioning maintenance records
- Health and Safety files
- Fire system service contracts
- Electrical and/ or gas test certificates
- Any business rates and any other costs the buyer would be liable for as owner of the property
- VAT documentation
The above documentation is not an exhaustive list and there may additional documents required, depending on the elements of the sale. If you are unable to obtain any of the documents listed above or need additional time to carry out further assessments or works, it is best that this is done as soon as possible to avoid causing delays to the transaction.
If you would like any more information in relation to this article then please feel free to contact me via email: huseyin.youssouf@bowlinglaw.co.uk or visit my profile.
Website content note: This is not legal advice; it is intended to provide information of legal interest about current legal issues.
