Selling Commercial Property

The overall process for selling commercial property is not too dissimilar to selling a residential house. However, with a commercial property transaction, there are a few extra documents and more detailed requirements necessary. If an agent is involved in the sale, they will be able to assist with the initial negotiations. After the terms are agreed, the main steps in the process are:-

This is a relatively simple document that sets out the overall terms agreed between buyer and seller. The agents will circulate this to both parties and will often ask for confirmation as to the legal advisers instructed so that this can be included in the Heads of Terms. Where the legal advisers have been instructed before or during the circulation of the Heads of Terms, the process can move to the next stage much faster.

Heads of Terms are not legally binding and do not tie you into a transaction. However, they are used as a base for drafting documents and so should be as accurate as possible.

You will need to formally instruct your legal adviser to act on your behalf, which often includes signing and returning retainer letters and providing identity documents. The Heads of Terms are sent to your legal adviser for review.

You will be provided with Commercial Standard Property Enquiries (CPSEs) to complete. These are general enquiries about the commercial property you are selling and are intended to give the buyer as much information as possible. Your legal adviser will be able to assist with these enquiries.

Your legal adviser will prepare the pack of paperwork to be sent to the buyer’s solicitors. This will include a draft Contract, title paperwork (if your property is registered at HM Land Registry), the replies you have given to the CPSEs, and any other relevant documents. You must provide an Energy Performance Certificate (EPC) for your property unless the property is exempt. You are also required to provide other statutory reports for commercial properties, such as Asbestos Reports, Fire Risk Assessments, and Building Regulation Certificates.

If you have a loan registered against the property, this will need to be redeemed as part of the sale process. You will be asked for details by your legal adviser so they can obtain a redemption statement. Your legal adviser will contact your lender to get confirmation of the outstanding balance. They will obtain an estimate of the redemption amount initially so that they can check if the purchase price will exceed the amount owed.

Once the buyer’s solicitor receives the contract pack, they will work through the information and documents given – the due diligence process, which can take a few weeks. This process may include obtaining searches (Environmental, Water and Drainage, Local Authority etc). They will raise any further enquiries with your legal adviser if necessary. All enquiries must be answered as accurately as possible, as the buyer will be entitled to rely upon all information you give to them.

Once the buyer’s solicitor is happy that all their queries have been answered, and both parties have agreed the contents of the Sale Contract, it will be confirmed that the transaction documents are agreed. You will be sent the Sale Contract to sign and return to your legal adviser in readiness for the next steps. Both parties will also discuss agreeable dates for exchange and completion. Your legal adviser is also likely to send you the Transfer Deed for the property ahead of the exchange of contracts so that all paperwork is signed at the same time and is ready to proceed.

Once both parties have returned their signed paperwork, the buyer has paid the deposit (usually 10% of the purchase price) to their solicitor, and a date for completion has been agreed, contracts can be exchanged. This is done by a simple telephone call between the solicitors, where the contract is completed. Your legal adviser will then send out your signed and completed contract to the buyer’s legal adviser, and vice versa. Once contracts have been exchanged, the sale is legally binding and the date agreed for completion is fixed. From this point, neither party can withdraw from the transaction without penalty.

At this stage, your legal adviser will obtain another redemption statement calculated up to the completion date. This will confirm the exact balance that will be due on the day of completion.

On the day of completion, the buyer’s solicitor will send the completion funds to your solicitor’s client account. When the funds have been received, the legal advisers will have a brief telephone call to confirm that they are dating their client’s signed transfer deed and that the transaction is complete. Out of the sale proceeds held by your solicitor, they will send funds to your lender to redeem the loan registered against your property.

Your legal advisor will prepare a completion statement for you, detailing the monies received and payments out (including legal costs and any disbursements). This will confirm the figure to be paid out to you as the remainder of the sale proceeds. You will then be required to pass on all keys, deeds, and documents relating to the property to the buyer and the process of selling your commercial property will be complete.

If you are selling a leasehold commercial property, there are some additional stages involved in the sale. Your legal adviser will be able to explain this to you.

Tel:          01245 893400
Email:     info@backhouse-solicitors.co.uk
Visit:       17 Duke Street, Chelmsford, CM1 1JU
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