Why Is Property Important?
Commercial property considerations are of great importance to a business as it is likely to be the (or one of the) greatest expenses or liabilities (capital payments or rental payments) payable by the business.
Each business will have its own property specific requirements in terms of type, size and location of their business premises. Location can be of great importance, for example, do you need to be close to specific target clients, in a specific geographical area, close to transport links, etc?
You may be looking for retail space, warehousing, leisure or office space. Depending on your requirements this may increase or reduce your search area.
You may need a property that your business can grow into or indeed contract in a flexible way. You will need to consider if you are best buying property or taking a commercial lease.
Factors To Be Considered
If a property is being purchased or already owned you should consider in whose ownership the property is to be registered at the Land Registry. The legal title could be owned by the individual(s) business owner(s), registered in the company name, held by a partnership or transferred to a pension fund (normally a SIPP or a SASS). This may form part of a wider financial planning exercise that should be undertaken in conjunction with your accountant.
If you are buying a commercial property you may need advice on and to understand the following:
- The legal title being purchased. Is the property freehold or leasehold? Your solicitor will be able to investigate and report on this to ensure that there are no defects in title that could result in extra expense to your business. Your solicitor will also advise if there are any existing covenants that could adversely affect your business.
- Have a solicitor carry out all required searches and enquiries. This will help ensure that there are no adverse search results which could reduce the market value of the property. The typical searches are local authority search, environmental search, water and drainage search, coal mining search and chancel repair search. There may also be some other location specific searches that should be carried out.
- You may also need introductions to surveyors or funders. Your solicitor (if well connected) will be able to assist with these introductions.
- VAT implications – has the property been (or should it be) elected to charge VAT? It is important to know whether or not you are to pay VAT in addition to the purchase price as this will have a cash flow implication and it could also increase the amount of Stamp Duty Land Tax (SDLT) payable. You may also have to register for VAT in order to claim back any input tax.
- SDLT implications – your solicitor will be able to calculate the SDLT payable and will be able to assist with completing and submitting the SDLT tax return. This must be done and the tax paid within 30 days of completion.
- Advice on funding documents. Your solicitor will be able to advise on the terms of facility letters, guarantees, legal charges and debentures and the ancillary documents or security that your funder may require.
If you are entering into a commercial lease you must take legal advice as there are large potential liabilities in addition to rent, such as service charges, insurance contributions, SDLT and potential dilapidation liabilities when you come to vacate the premises. Some of the main considerations with leases are as follows:
- You may need advice early from a solicitor when the heads of terms are being negotiated. Although it is unlikely that the heads will be legally binding it is much more difficult to agree amendments to the lease if preliminary points appear to have been agreed in the heads of terms.
- A solicitor will be able to prepare, amend or negotiate the contractual terms in an agreement for lease or a lease.
- You need to make sure that you are aware of all potential liabilities in a lease, particularly if you are a tenant.
- You need to be sure that you are aware of potential dilapidations liabilities at the end of the term as these can often be an unexpected exit cost faced by tenants.
If you are renting out a commercial property a commercial property solicitor can ensure that your lease is tightly drafted to protect you as far as possible in relation to future tenant disputes. Important issues such as rights granted or reserved, signage, rent reviews and break clauses can be carefully drafted to minimise the potential for future disputes.
Other Ways We Can Help
If you are re-mortgaging or re-financing a property we can advise you on the likely security requirements of a lender and assist in completing the legal documentation.
We can help with landlord and tenant disputes as we have a property litigation department as part of our property team offering. Common examples would be non-payment of rent, termination of leases and serving break notices.
There might be rights of way issues or disputes with adjoining owners or occupiers. We can review the legal title to advise you of the legal position and negotiate with the third party on your behalf.
You may require assistance with lease renewals or re-negotiations (from the perspective of the landlord or tenant) or for terms of an existing lease to be varied.
As you can see there are many considerations that have to be actioned in relation to commercial property. Instructing a solicitor early in any of your property transactions will limit your risks and hopefully minimise your stress levels!!
The property team at Davis Blank Furniss has many years’ experience of the North West and national property markets and in dealing with a wide variety of property transactions, which will assist in achieving all of your needs with a professional but personal approach with an efficient service at competitive rates.