The Purchase of a Commercial Property with Vacant Possession

On or before the completion of the purchase, the following costs typically apply: 

• Purchase price plus VAT if the seller has opted to tax the property 
• Solicitors’ fees (often linked to value and complexity of the transaction) 
• Building survey 
• Any finance costs, including mortgage arrangement fees, lender’s legal fees and valuation fees 
• Search fees, usually in the region of £1,000 plus VAT. We can also provide a quote for searches 
• Stamp Duty Land Tax. The following link can be used to calculate SDLT payable: Stamp Duty Land Tax Calculator. If you are unsure how to calculate the same, we can do this for you. Please note this is based on the VAT inclusive figure 
• Land Registry fees for registering the purchase and any lender’s security, generally ranging from £100-£500 depending on the purchase price  

After completion of the purchase, please also consider the practical costs of moving onto the premises. Other costs include fit-out, furniture, expenses to improve the property generally, and business rates.  

Please also note that the above assumes the purchase is of freehold property. If the property is leasehold, additional costs may include landlord’s fees, ground rent, insurance rent and service charges. 

If you are happy to proceed with the purchase, the agent will advise you to instruct a lawyer.  

Step 1

Before you agree to the Heads of Terms, it may be worth discussing with a lawyer to obtain their input. This may help as the transaction progresses, allowing certain additional aspects to be agreed upon or resolved sooner rather than later. 

In any event, once the Heads of Terms are agreed, these will need to be provided to your solicitor so that they may begin the legal process. This will be the case for both you and the seller.  

Step 2

While you may have viewed the property and are happy that everything looks as expected, we would always recommend that you instruct a property surveyor to inspect the property.  

Although a valuation may have already been obtained if you are securing third-party financing for the purchase, a survey is very different from a valuation. The latter is simply establishing with the value of the Property is sufficient value to justify the loan amount.  

A building survey assesses the physical condition of the property, identifying any defects and estimating the cost of any necessary repairs.  

Clearly the results of such a survey could affect your willingness to proceed and/or the price agreed and therefore should be carried out as early as possible in the process before other costs/fees are incurred. 

Step 3

Any tax implications should also be considered. There may be tax efficient ways to structure the transaction that should be considered.   

While your solicitor will not be able to assist with this, a tax specialist/accountant will be able to advise you on the financial/tax implications and recommend the most tax-efficient method of acquiring the property. They will also be able to guide you on how to proceed if VAT is payable on the purchase price. 

Your solicitor will “onboard” you as a client. This will involve ID checks and “source of funds” questions.  As part of this process, your solicitor will provide you with a quote and an engagement letter for you to sign which will set out the relevant terms and conditions of the instruction.   

Pre-exchange  

The seller’s solicitor will supply a legal pack containing the property title, replies to industry-standard enquiries (CPSEs) that offer information about the property (such as planning issues, any disputes affecting the property, VAT status, environmental or structural issues), and a draft contract and transfer. 

Your solicitor will submit searches and review the results of those together with the seller’s title and the draft documentation provided. They will then raise any necessary additional enquiries, negotiate, and amend the contract terms and transfer, deal with the requirements of your lender (if any) and report to you and your lender.  

Pre completion  

If you are satisfied with the information provided and both parties are prepared to proceed, your solicitor will exchange contracts. On exchange you will likely be required to pay a deposit (usually 10%) and, once contracts are exchanged, both parties will be legally bound to complete.  

Dependent on the terms agreed, completion may be a set date or conditional on certain factors (e.g. obtaining any requisite planning for the property).  On completion the balance of the purchase price will be payable. 

If you fail to complete the transaction on the agreed date, thereby breaching the contract, the seller may have the right to retain the deposit you paid. 

Post completion  

After completion, your solicitor will handle any post-completion requirements, such as paying Stamp Duty Land Tax and managing registration formalities at Companies House (if applicable) and the Land Registry. 

This can vary significantly depending on the terms and complexity of the deal but as a rough guide a relatively straightforward transaction will tend to take 6-8 weeks to complete. If there are complexities or the other side proves to be particularly slow or unhelpful then these timescales can shift accordingly.