It’s not quite as well-known as residential conveyancing, but commercial property conveyancing is an important legal process. It is the transfer of ownership or leasehold of a property that is used for business from one owner to another. There are some similarities between residential and commercial conveyancing, but there are key differences to be aware of too. In this guide, we’ll be exploring everything you need to know about the commercial conveyancing process. So you’re fully prepared for your business transaction.
Freehold vs leasehold transactions
It’s important to note that commercial properties can be sold either as freehold or leasehold. Freehold means the new owner of the property owns all aspects of it including the land it is situated on. Leasehold is when you don’t fully own the property outright, you are essentially leasing it from the seller for a fixed period of time. This can restrict the changes you can make to the property and the land around it whilst you’re using it. Leases normally last anywhere between 99 and 125 years but can be extended as high as 999 years.
If there is a commercial lease in place, i.e., the property is occupied tenants, this must be taken into consideration during the sale. The leaseholder will have rights that should be accounted for by the buyer and seller, meaning they can occupy the property until the agreed time as stated in their lease.
Commercial conveyancing for the buyer
If you’re the buyer during a commercial property transaction, your conveyancing journey will follow the below stages.
When you start the conveyancing process to purchase a commercial building, your solicitor should start by investigating the property title. As well as instigate any relevant pre-contract searches. Following this, the seller’s solicitor will supply a draft contract for your solicitor to approve and potentially raise any further queries.
These queries can be based on the search results and answers to the standard commercial property enquiry forms, called the CPSE Enquiries. For more information of commercial property enquiries see our other guide here. In addition, other related factors such as financing the purchase and Stamp Duty Land Tax will be dealt with at this point in the process.
At this stage, if the buyer is happy with the replies to the enquiries and search results and both sides have agreed to the draft, contracts will be exchanged, and the buyer will pay any deposit that has been agreed upon during initial discussions. Like with residential conveyancing, the exchanging of contracts marks the point in which the transaction becomes legally binding.
After the contract exchange, your solicitor will carry out any required pre-completion searches and draw up the Transfer Deed to send to the seller’s solicitor for approval. As the buyer, it will be requested at this point that you get the remaining balance of the purchase ready for completion.
Completion is one of the final steps in the property conveyancing process. You will now forward the purchase price (minus any deposit) to the seller and the solicitors for both parties will finalise the transaction.
Your solicitor will pay any required SDLT and register the transaction with the Land Registry if needed.
Commercial conveyancing for the seller
If you’re selling the commercial property in the transaction, your conveyancing journey will follow the below steps.
There is a significant amount of responsibility on your solicitor as the seller in these early stages. So, it’s important to make sure you use professional and experienced commercial property solicitors like the team at Toomey Legal. After the legal title to the property has been investigated on the buyer’s side, your solicitor should prepare the Contract for Sale.
Also, you will be asked to complete one or more CPSE forms, how many forms are needed will depend on the type of transaction and property. You might need to provide details of fixtures and fittings within the building as well at this stage.
This stage is the same for the seller at it is for the buyer. When they have approved the replies to search results and enquiries, contracts will be exchanged. You will receive the agreed deposit from the buyer and the sale will be legally binding.
Your solicitor will approve the Transfer Deed that has been sent from the buyer’s solicitor and provide any required undertakings to discharge a mortgage to the property (if the buyer is using a mortgage to purchase) you’re ready for completion.
You will receive the full balance of the purchase price from the buyer and the solicitors from both parties will finish the transaction.
The final stage is to tie up any loose ends including settling any charges on the property and awaiting the transfer of any remaining funds.
Hopefully this guide has given you a greater insight into commercial property conveyancing for buyers and sellers. If you need expert local commercial conveyancing solicitors in Whitley Bay, the Toomey team can help. Get a quote online or contact us today if you have any questions or queries about our commercial services.