Guide to Buying Commercial Property

This guide is a snap shot overview to buying a commercial property after terms of the purchase have been agreed between the parties.

Heads of Terms

The Seller’s Agent will produce a set of Heads of Terms (also known as letters of intent, memoranda of understanding, heads of agreement, letters of potential interest, term sheets or protocols) which set out the terms of the commercial transaction which have been agreed in principle between the parties in the course of negotiations.

Secure Lending

If your proposed purchase of the commercial property is dependant on third party lending you may be minded to seek and obtain independent financial advise on how you are to finance the purchase, including the purchase price, stocks (if any), legal costs, valuation fees and disbursements including Stamp Duty Land Tax

Typically, commercial lending requires a deposit which your broker will be best placed to advise you on and any offer of loan from your preferred lender.  You should note that any loan conditions  will need to be satisfied before the net loan proceeds  can be released to your solicitor.

Appoint Solicitors to Act for you in the Purchase

Once Heads of Terms have been agreed, the next step will be to appoint a solicitor with the relevant expertise to act for you (and any lender) in the purchase of the commercial property. 

Our Commercial Property Team can deal with all your legal requirements for commercial property.

We have a depth of commercial experience and will navigate you through your transaction, keeping you informed and at all times endeavouring to achieve your goals. We have a team who between them have many years of commercial property experience.  They do not do any work other than commercial property work and it is this specialist experience that makes us different, and allows us to give you the targeted and cost effective advice that you require.

Your solicitor can advise you on the detail of the contract, the assignment of any goodwill, undertake the necessary pre-contract searches and raise any enquiries before arranging exchange of contracts (once any lender has confirmed that the property is safe to lend) deal with completion and the post completion formalities in registering the purchase (and any secured lending) with the Land Registry and where necessary with Companies House. 

If the commercial property is leasehold then your solicitor can advise also on the terms of the lease and arrange for any licence to be granted by the freeholder for the lease to be assigned (where permitted)  to you. It is usual for the Freeholder’s costs to be paid for by the Seller with the Seller agreeing to enter into an authorised guarantee agreement with the Freeholder. 

An authorised guarantee agreement is often used when a  lease is assigned from the original tenant to a new tenant.  The outgoing tenant guarantees to the landlord the obligations and liabilities under the lease  in the event of a default by the new tenant (e.g. to pay rent, carry out repairs etc).  

In most cases the outgoing tenant is released from future liability when the incoming tenant lawfully assigns on the lease or when the lease is determined.

The commercial property may be subject to a Premises Licence authorised by the local Licensing Authority. A Premises Licence authorises the property to provide licensable activities including:- selling of alcohol, serving of hot food and drinks between the hours of 11pm and 5am, and the provision of regulated entertainment.  Your solicitor will advise you on the terms of the Premises Licence (including any conditions) and arrange on completion for the Premises Licence to be transferred into your name as well as amending (where the necessary) the name of any Designated Premises Supervisor.

Where the commercial property is used in the provision of a business, it is likely that there will be employees of that business. The employees’ in those circumstances are afforded the protection of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (known as “TUPE”) and this will place obligations on both the buyer and seller in respect of those employees. It is important that with any acquisition of commercial property, you take advice as to any employees that are currently working on the premises and how TUPE will apply to your purchase. Our Employment Team will support your commercial property transaction by raising enquiries to establish the employment liabilities and will report to you on the liabilities and implications. They will also assist you to comply with your consultation obligations.

You may be minded also to appoint or involve (at early stage of the purchase) an Accountant who can advise you on any unclaimed capital allowances, review any trading accounts and recommend any apportionments of the purchase price between the property, goodwill and fixtures and fittings.

If you would like further advice on buying a commercial property please contact christian.robertson@kitsons-solicitors.co.uk

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    About the author

    Christian RobertsonPartner

    Christian is a Partner in our Commercial Property team

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