One of the first questions a seller of commercial property often asks, is how long will the sale take to go through? For many reasons, speed is often essential. To ensure that a sale progresses smoothly and quickly, it is a strongly recommended to have the documents and paperwork in order before getting started. If you are considering selling in the near future, here are just a few of the things which if thought about in advance, can help the transaction move along at a swifter pace:
- Commercial Property Standard Enquiries – These are a standard set of enquiries that are raised in every commercial property transaction. Providing accurate and comprehensive answers to these enquiries from the start could save a lot of unnecessary enquiries being raised or chased by the buyer later.
- Surveys – There are certain surveys that a buyer will look for, namely a Fire Regulation Assessment and an Asbestos Survey. These should be carried out by the responsible person which might be the freehold owner or the occupier. For any properties built before 1999, an asbestos report is required. If you do not have up to date surveys (or any at all) then commissioning them in advance could be advantageous. These are also often a requirement of any lender.
- Energy Performance Certificate (EPC) – It is a legal requirement to have a valid EPC in place when selling a property. This is whether selling a freehold or a lease. If you do not have one, or the EPC is no longer in date, it is recommended that a new certificate is commissioned before the property is marketed. Depending on the energy rating received, improvement works may be needed to bring the rating up to the minimum standard required. Carrying out the EPC early gives time for these to be carried out or costed.
- Planning and Building Regulation Certificates – A prudent buyer will carry out a local search. This will reveal any planning permissions and building regulation certificates that are registered for the property being sold. If you have applied for any planning permissions during your ownership or have recently carried out any works to the property, it is a good idea to collate these documents (including any warranty documents or guarantees) in advance. These can then be given to the buyer at the outset (in order to minimise additional enquiries).
- Capital Allowances – If you have claimed Capital Allowances during your occupation of the property this will need to be disclosed to the buyer. Discussing any Capital Allowance requirements with your tax advisor and passing this on to your solicitor before the sale gets underway will allow the necessary information to be inserted in to the draft contract and replies to CPSEs at the start, rather than being inserted at a later point, potentially delaying approval of documents and prompting late enquiries.
- VAT – If you have elected the property for VAT this should be made known to the agent before the property is marketed. The buyer can then ensure that it has the necessary funds to complete at the start rather than delaying matters whilst any additional funds are sought part way through. It may also allow for specific tax planning to be carried out. Relevant VAT paperwork relating to the option to tax should also be made available.
- Consent to the Sale of a Lease – If the property is leasehold, and you require the landlord’s consent to the sale of the lease, starting discussions with the landlord early on can be helpful. Ask your solicitor what conditions the landlord may impose on an assignment in accordance with the lease provisions. Make those conditions clear to a potential buyer. A buyer may be deterred further down the line, for example, if it discovers that the landlord requires a 6 month rent deposit.
- Service Charge – If the property is subject to a service charge, you should gather any information you have regarding those charges such as the last three years accounts, current budget, and contact details of any managing agents or management company. Are there any fees for the managing agents to provide an information pack? Consider who will cover those costs.
- Management Company – If there is a management company you may hold a share in that company. Do you have an original share certificate that needs to be handed over? If so, locating that now would be helpful. If it has been lost, then we need to consider how to replace it. Consider finding out the management company’s requirements for an incoming owner and shareholder. These kind of formalities can often delay a sale if left to the last minute.
Although it is impossible to pre-empt all the enquiries and documents a buyer and its lender may request, having the above information readily available in advance of putting your property (or business) on the market could really help expedite matters.
For any further information about selling your property, or any other commercial property transaction, please do get in touch with the Commercial Property team at Morrisons Solicitors. Or contact Ben Brewer directly on 0208 971 1605 or by email at [email protected]
Other articles from September's newsletter
Although correct at the time of publication, the contents of this newsletter/blog are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Please contact us for the latest legal position.