Commercial acquisitions and disposals
Commercial property purchase
Legal work to buy a shop, office, industrial unit or let investment, covering title, enquiries, VAT, tenancies, planning and environmental risk.
Every cost on its own line: the law firm's legal fee, VAT, the searches and other third-party costs, and any property tax. Your quote opens as soon as you send the form.
If VAT might be charged, ask at heads of terms stage whether the seller has opted to tax and whether the sale is meant to be a transfer of a going concern. The answer can change how much cash you need, the SDLT you pay and the timetable.
Buying a shop, office, warehouse or let building carries more risk than buying a home. The seller usually gives only limited promises, and the law expects a business buyer to find problems before committing. The legal work is how you find out what you are really buying.
It suits owner-occupiers buying business premises, investors buying let property, and companies, partnerships, trusts and pension schemes. Your solicitor checks the title, planning, environmental risk, VAT and any tenancies, and negotiates a contract that matches the heads of terms (the outline of the deal agreed through the agents).
Keyfolio gives you an instant itemised quote online. You tell us the property's use, whether VAT is charged on the price or the deal is a transfer of a going concern (a let building sold as a running business, without VAT), how many tenancies come with it and who is buying. The quote separates the legal fee, VAT, searches and an estimate of SDLT or LTT (the property taxes in England and Northern Ireland, and in Wales) on the VAT-inclusive price, and the law firm confirms its fee in writing before you instruct it.
What is involved
Once heads of terms are agreed, the work usually runs in this order:
- Checks and instructions: identity and anti-money laundering checks on you or your company, including the people who ultimately own and control it.
- Title and contract: reviewing the title, plans, rights and covenants, then the draft contract, which is often based on the Standard Commercial Property Conditions (standard terms widely used for commercial deals).
- Enquiries: the seller answers the CPSE (Commercial Property Standard Enquiries), the standard questions on boundaries, services, disputes, planning, environmental matters and occupiers, and your solicitor follows up anything unclear.
- Searches: local authority, drainage and environmental searches, plus others the location calls for, such as mining or flood reports.
- VAT and tax: checking whether the seller has opted to tax (chosen to charge VAT on the property), whether the sale can be a transfer of a going concern so that no VAT is charged, and how capital allowances (tax relief on fixtures such as heating and lighting) will be handled.
- Tenancies: for a let building, reviewing each lease, the rent, arrears, deposits and any right to renew, and summarising them for you and your lender.
- Report and exchange: a written report on title, then exchange of contracts, the point where the deal becomes legally binding and a deposit, often 10%, is paid.
- Completion and afterwards: paying the price, telling tenants where to pay rent, filing the tax return and registering your ownership.
What the legal fee covers
- Reviewing the heads of terms and confirming who the buyer will be
- Identity and anti-money laundering checks on the buyer and its owners
- Investigating the title, plans, rights, covenants and restrictions
- Raising the standard commercial enquiries (CPSE) and following up the seller's replies
- Ordering and reporting on the standard commercial searches
- Reviewing the leases of any tenants you are buying subject to
- Negotiating the contract and the transfer deed
- A written report on title before you exchange
- Exchange, completion and handling the purchase money through the firm
- Filing the property tax return and registering your ownership
Costs you may see on top
- Searches beyond the standard set, such as mining, flood or highways reports
- HM Land Registry fees for the transfer and any lender's charge
- SDLT or LTT, worked out on the VAT-inclusive price if VAT is charged
- VAT on the price, if the seller has opted to tax and the sale is not a transfer of a going concern
- Your lender's legal fees and valuation fee, if you are borrowing
- Building surveys, environmental reports and specialist VAT or capital allowances advice
- Extra legal work for unregistered land, many tenancies or unusual title problems
What to have ready
- The agreed heads of terms and the agent's details
- Full details of the buyer: company number, directors, shareholders and anyone who controls it
- Photo identification and proof of address for individual buyers or directors
- Evidence of the deposit and where the purchase money is coming from
- Your lender's details and facility letter, if you are borrowing
- Your VAT registration number and whether you have opted to tax, or plan to
- What you intend to use the property for and any works you have in mind
- Contact details for your surveyor and your accountant or tax adviser
How long it takes
A purchase of vacant premises with a clean title commonly takes 8 to 12 weeks from agreed heads of terms to completion. A let investment, a site with environmental or planning questions, or a deal that depends on new finance often takes 12 to 16 weeks or more.
Things move faster when the seller's solicitor sends title documents and CPSE replies at the start, your funding is approved early and the VAT treatment is settled before the contract is drafted. Slow search results, missing planning consents, rent arrears that need explaining and late lender conditions are the usual causes of delay.
Things to watch for
- Ask about VAT before you sign heads of terms. If VAT is added to the price and your business cannot recover it, for example because it makes VAT exempt supplies, it is a real cost, and SDLT is charged on the VAT-inclusive figure.
- For a let building to pass as a transfer of a going concern, you usually need to opt to tax and notify HMRC before the relevant date, which is normally completion. Missing that step can turn a VAT free purchase into one with VAT added.
- Check that the planning use matches your plans. In England many shop, office, café and light industrial uses sit in a single use class, Class E, which does not apply in Wales, and some uses, such as hot food takeaways, need their own permission.
- Environmental liability can pass to the owner of the land. If the site has an industrial past, an environmental report before exchange usually costs far less than dealing with contamination after you own it.
- An overseas company usually has to be on the Register of Overseas Entities at Companies House before it can be registered as the owner of UK land. Allow time for this if you are buying through a non-UK entity.
- Agree in the contract how capital allowances on fixtures will be dealt with. A joint election with the seller normally has to be made within two years of the purchase, and without one you may lose the allowances.
Questions people ask
How is SDLT worked out on a commercial purchase?
In England and Northern Ireland, SDLT on non-residential property is 0% on the first £150,000, 2% on the next £100,000 and 5% on everything above £250,000. Where VAT is charged, the tax is worked out on the VAT-inclusive price. For example, a £500,000 warehouse would carry £14,500 of SDLT, but with VAT at 20% added the tax is based on £600,000 and rises to £19,500. Wales has its own non-residential bands, and your solicitor confirms the final figure.
What is a transfer of a going concern?
It is a VAT rule that allows a business, including a property letting business, to be sold without VAT being charged, provided certain conditions are met. For let property, the buyer usually has to be VAT registered, carry on the letting, opt to tax the property, notify HMRC in time and tell the seller that its option will not be disapplied. Your solicitor checks the conditions and the contract wording, and your accountant should confirm the position. The VAT on commercial property guide explains more.
Do I need a survey as well as the legal work?
Usually, yes. Your solicitor investigates the legal side, such as ownership, rights, planning and tenancies, but does not inspect the building. A building surveyor can report on its condition, defects and likely repair costs, and an environmental consultant can assess contamination risk. Commercial buyers rarely have any comeback against the seller for physical defects, so the survey is your main protection.
Can I buy through my company or pension scheme?
Yes, and many buyers do. The solicitor needs the company's or scheme's documents, details of the people who own and control it and confirmation of who can sign. A pension scheme purchase also involves the trustees or the scheme administrator, who often have their own requirements and timetable. The choice of buyer affects tax, finance and the quote, so settle it before heads of terms are signed. See buying property through a company.
Who does the work
Your matter is handled by a law firm regulated by the Solicitors Regulation Authority, the Council for Licensed Conveyancers or CILEx Regulation, or in Northern Ireland by a solicitor regulated by the Law Society of Northern Ireland. At the moment the law firms on our panel act for property in England and Wales, so for property in Northern Ireland we tell you whether a firm can act for you before we pass your details to anyone. The firm confirms who will work on your file, their experience and its terms before you instruct it. How we choose our firms.