Here’s an overview of the purchase and sale process from a property lawyer’s perspective, to demonstrate how we can help you.

The process

Stage 1: Heads of Terms and Instruction Gathering

This is often the stage where both the seller and the buyer may have been corresponding for a while, whether that be directly or through commercial property agents, negotiating on the key elements of the transaction and what will or will not be, included in the sale and the price to be paid.

Once the Heads of Terms have been agreed, each party moves to appointing solicitors and, where deemed necessary by the buyers for their own purposes or lending needs, valuations are typically instructed.

Upon receipt of the Heads of Terms, the solicitors consider the details laid out, discuss with clients the possible complexities of the case – including known or unknown factors that could affect it – and eventually, put a scope of work together to summarise for the client what the solicitors intend to do as the matter progresses, and provide an estimate of costs they believe will apply to the same.

Stage 2: Due Diligence

Once solicitors are formally instructed to represent the clients, the seller’s solicitors will prepare replies to standard form enquiries (often via the Commercial Property Standard Enquiries) with the assistance of the seller, providing details on various elements to the property such as taxation matters, planning permissions, disputes, and property rights supported by appropriate guarantees, warranties, and Energy Performance Certificate.

The seller’s solicitors will also gather and supply appropriate copies of HM Land Registry documentation showing details logged against the property by the Land Registry and an appropriate plan marking out the location of the property too.

The buyer’s solicitors, on the other hand, will raise enquiries over what has been supplied (if appropriate to the transaction), carry out searches, and check any legal matters set out in surveys by surveyors.

Once all information has been gathered and checked, the buyer’s solicitors will then put a report together to draw to the attention of the buyer the key elements of their intended purchase, including analyses of search results and findings off the back of studying the legal deeds and documents.

The solicitors for the buyer will also report to any lender involved and send appropriate lending documentation to the buyer for perusal and signing as part of the legal reporting process.

To speed matters up, occasionally, a buyer may wish to ask their solicitors to bypass a stage in the process. This may seem sensible where there is a close connection between buyer and seller, but solicitors will remind their clients in such a situation that the principle of caveat emptor will apply. In other words, buyer beware.

Essentially, this relies on the understanding that where a buyer could find out more on the state and condition of a property but chooses not to (by not carrying out searches or surveys for example), the buyer purchases at their risk.

Ultimately, they will be legally responsible for their own inspections, searches, and due diligence over the property or lack of it – so if not done, and something crops up, they will be stuck with the issue rather than expecting the sellers to sort.

This is quite a crucial point as sometimes buyers assume that they have nothing to be concerned about as a reasonable seller will always share the full pros and cons of buying their property. However, though a seller must be careful to provide true and accurate answers, often the risk falls onto the buyer under this legal rule.

Stage 3: Contract and Transfer Documentation

Though documentation can vary from deal to deal, you will almost always need a contract for sale and a transfer deed to facilitate the legals to the transaction.

The contract will manage liability and allocate risk, whilst the transfer deed will stipulate what obligations / rights / covenants will be borne by the buyer and the seller in relation to the property, however both will specify the agreed price to be paid between parties to facilitate the sale of the property to the buyer.

Depending on what issues creep up during the due diligence stage, both documents may need to be heavily negotiated between solicitors, but so far as drafting them goes, generally, the contract will be prepared in draft form by the seller’s solicitors whilst the transfer will be produced by the buyer’s solicitors, albeit this can vary from case to case.

Stage 4: Exchange of Contracts and Completion

The more complex or high value the deal is, the more time will be spent on stages 2 and 3. However, once documents are agreed, the parties can proceed to signing.

There are then two key stages before the transaction is taken over the line:

• Exchange of Contracts: This is where the seller’s solicitors and the buyer’s solicitors each hold their client’s signed contracts and go through the details of the same including names of parties and prices agreed for the property and any fixtures or fittings, etc. So long as the terms are in order, the solicitors will formally “exchange” the contracts over the phone and tie in the parties

Depending on the time between exchange taking place and completion itself, a deposit will also be paid from the buyer to the seller via the solicitors which is usually expected to be 10% of the sale price but can be changed depending on what has been agreed between parties.

• Completion: This is the day parties hand over keys and the buyer moves into the property, and where the purchase monies are paid from buyer to seller by the solicitors (if a deposit has already been paid, then the price will be less this deposit amount)

As this is when the main sums of monies pass hands, where there is a mortgage, the buyer’s solicitors will need to ensure all mortgage conditions have been satisfied, documents signed, and the mortgage monies released to them in readiness to send out to the seller’s solicitors.

As far as timescales are concerned, completion can be on the same day as exchange, or any length of time away from the day of exchange, so long as both buyer and seller are in agreement of the date.

The date becomes legally binding on exchange and if one party cannot complete on the day agreed under the exchange step, they will normally be subject to penalties under the exchanged contract.

Stage 5: Post-Completion

This predominantly relates to record-keeping and legal enforcement of particular matters affecting the property which must or should appear on the register of titles.

One example is the registration of an easement to use and access a waste tank on an industrial park in favour of the buyer as against a grantor’s title.

This stage is imperative to maintain a functional Land Registry, and directly feeds back into stage 2 (due diligence) for future and all property transactions undertaken.

This is also the point where any Stamp Duty Land Tax calculated and reported to the buyer, needs to be paid to the Inland Revenue – there is a strict time limit by which such payment must be made which currently stands at being within 14 days from completion.

Conclusion

We hope you find our brief summary of the commercial property purchase and sale process of use in understanding how it works and what the key elements are that solicitors deal with so you don’t have to.

The process can be a minefield at times, but with the correct solicitors in place to guide you, the prospect does not have to be daunting.

DISCLAIMER: The information and opinions expressed in this article does not address individual requirements and is for informational purposes only. It does not constitute any form of legal advice and should not be relied on or treated as a substitute for specific advice relevant to your particular circumstances.