Using a solicitor for your commercial property lease or sale/purchase isn’t a legal requirement but it’s highly advisable. Commercial property law is complex and the financial stakes can be high, putting your business at risk or potentially tying you into an inflexible lease.
Here we’re covering:
- Legal advice when buying or leasing a commercial property
- Do you need to have your commercial lease checked?
- Which legal documents and processes will you need for a commercial property transaction?
- Which regulations (and/or legislation) apply to commercial property transactions in the UK?
- Can Harper James advise on access to finances for commercial property?
- Negotiating the price of commercial property
Legal advice when buying or leasing a commercial property
It’s not essential to get legal advice when buying or leasing a commercial property but it is highly recommended, especially given the high financial value and long periods of commitment that are involved with commercial property transactions.
When buying or leasing the right commercial property, you need to be sure you’ve run all the necessary checks and surveys and investigated title to the property as well as checking the physical condition of the property and its surrounding land.
You’ll also need to decide what’s best for you in terms of buying the freehold, or only obtaining a lease. A solicitor together with your accountant/tax adviser can help you analyse your business plans and determine which is more suited to your long-term needs.
Do you need to have your commercial lease checked?
No – there’s no legal requirement to have your lease checked by another person such as a solicitor. However, we’d strongly advise getting legal advice on a commercial lease.
There are a number of different matters and conditions covered in a lease. A solicitor’s advice can help ensure you understand these conditions, as well as their implications in practice.
By having a solicitor review your lease, you’ll be able to flag any issues early on and can resolve these before commencing the lease. For example, the lease may not clarify the service charge payable by you. Or it may require an unfair contribution towards the service charge, in light of the fact that there may be other tenants in the building who also have a commercial lease with the landlord.
Which legal documents and processes will you need for a commercial property transaction?
There are at least three key documents you need to be aware of when involved in a commercial property transaction: the heads of terms, the contract and the Transfer.
The first document you’ll likely have when purchasing or taking a lease for a commercial property is the heads of terms. This will set out the basic terms of the transaction, namely the nature of the transaction (purchase of freehold or leasehold), the price, and the parties. Find out more about heads of terms in our advice article, Using Heads of Terms in Commercial Leases and Commercial Property Transactions.
The second document is the contract. The contract will incorporate the standard commercial property conditions. Once the contract has been exchanged, the parties are bound to complete the property transaction.
The next document needed is the Transfer. If you are purchasing or taking (or assigning) the whole of a commercial property, you’ll need a TR1. This deed allows you to effect the transfer of the property. If the transaction only concerns a part of the property, a TP1 is used.
If you’re buying a freehold commercial property, you’ll also need to send the seller a Form TA13. This document contains pre-completion queries such as the bank account details which the money should be sent to and where keys can be collected.
Prior to completion an OS1 search should be undertaken. This is an official search made to identify any interests of third parties that may have been registered since the start of the transaction.
Other documents may also be needed. For example, after completion, send a Form MR01 and a certified copy of the mortgage, to register your new mortgage at Companies House within 21 days after the creation of the charge. Companies House will send a certificate of registration.
You must send your SDLT1 return to HMRC with you SDLT payment, within 30 days of completion. HMRC will then send you a SDLT5 as receipt of your payment.
You can then send you certificate of registration, mortgage deed, SDLT5, certified copies of the transfer (TR1 or TP1), DS1 (discharge of the seller’s legal charge), and your Form AP1 to the Land Registry to register your transaction. This should be done within 30 working days from the search results of your OS1.
Which regulations (and/or legislation) apply to commercial property transactions in the UK?
There’s a wide range of legislation which applies to commercial property transactions. This includes (but is not limited to):
- The Landlord and Tenant Act 1954 – security of tenure
- The Law of Property Act 1925 – requires conveyance to be done by using a deed
- Land Registration Act 2002 – regulates the registration of proprietary interest
- Land Charges Act 1972 – regulates the registration of charges on unregistered land
Can Harper James advise on access to finances for commercial property?
Yes – Harper James Solicitors is a full-service commercial law firm that can provide advice on raising finance for your business. If this is something you would like to consider further, contact our specialist team by calling us on 0800 689 1700 or filling in the enquiry form at the bottom of the page.
Negotiating the price of commercial property
When you’re negotiating the price of a commercial property, it’s important to take a holistic approach when valuing the property. This will require taking consideration of all the results from property searches such as the physical inspections, the results of your survey, the commercial property seller’s enquiries, and other searches conducted, such as a highway search and desktop environmental search. Any issues or concerns raised from these searches can be used to bring down the purchase price because they usually reduce the value of the property. Having a solicitor who is well experienced in commercial property transactions, and capable of considering all the relevant factors is extremely helpful and may help you (in conjunction with your surveyor) negotiate a better price than you’d otherwise negotiate.