Our top tips recommend ways in which you can prepare in advance of your intended property disposal so as to streamline the process and thereby minimise any potential delays and/or opportunities for price-chips by the buyer.
If your property is unregistered (usually because it has not changed hands since 1990), then having the original deeds is essential as these are the only evidence of your ownership.
However, much land in England and Wales is already registered at the Land Registry meaning that official copies of the registered title will be available for download from them. Documents which are referred to on the registers (or are referred to within title documents) may still need to be disclosed in full and, whilst copies may be available from the Land Registry for payment of their modest fee, copies may already be held with the deeds. It is therefore useful to locate the deeds (these are usually with the owner’s bank or the solicitor who handled the purchase) and to pass these to the solicitor who is handling your sale process in good time, ready for step 2 below.
Once in receipt of your title deeds, your solicitor should review the title, obtain copies of any missing documents where possible (or seek a quotation for missing deeds insurance as a potential way around this defect) and prepare a title pack so that all the title documents are readily available for disclosure to the buyer’s solicitor once the Heads of Terms have been agreed. This should also flush out any issues such as restrictive covenants, overage payments etc. which can then be discussed with you at an early stage, as well as any old entries, such as expired leases, which can be cleared off the register in a pro-active way (rather than waiting for the buyer’s solicitor to request this and potentially delaying exchange or completion).
3. Third party consent
On carrying out step 2, it should become apparent whether any third party consents are needed to complete the proposed sale. For example, if your property is on an industrial estate, there may be a requirement for the management company to consent and/or for the buyer to enter into a Deed of Covenant with them, as well a requirement for any share(s) which you hold in the management company to be transferred. This process can sometimes be frustratingly slow, especially if the process is managed by a committee of occupiers of the estate rather than by a professional management company or their solicitors. Opening up early lines of communication is likely to mean that the relevant parties are lined up ready to spring into action once the buyer instructs their solicitor.
In the same way, a review of the title will reveal any mortgages affecting the property, thereby enabling your solicitor to contact your lender at an early stage to obtain any title deeds or documents which they hold and to request an indicative redemption figure. It is important that you check this statement in advance so that you are aware of any early repayment penalties or interest or charges which may be applied to your account – and to ensure that there is no unexpected negative equity!
If you are disposing of part of a property then you will need to supply the buyer with a Land Registry compliant plan prepared to an acceptable scale, including a north point and a point of reference (usually an adopted highway or landmark). Usually you will need a surveyor to prepare this.
Care needs to be taken, particularly when disposing of unregistered land, to ensure that the plan accurately reflects what is being sold on the ground. A surveyor should be consulted if there is any discrepancy.
Having an accurate and suitable plan available at the start of the transaction will enable the buyer to submit a request for searches at an early stage. Search results can take a couple of weeks.
If you are VAT registered, you will need to confirm whether or not you have opted to tax the property for VAT i.e. whether VAT is chargeable on the sale price. The basic premise is that commercial property is exempt from VAT, so that no VAT is chargeable. Contrary to the perception of many owners, the VAT status of the sale is not governed by whether VAT was paid on the purchase of the property; it runs with the owner, not with the property and requires an option notice to be sent to HMRC. It may be that your accountant handled this, in which case they should have a copy. This will need to be disclosed to the buyer as part of step 7 below, as evidence of your obligation to charge VAT. You may not have opted to tax the property if there was no need to. If you are unsure, you can make an enquiry directly with HMRC but they can take 20 working days to respond, so this enquiry should be made at an early stage if necessary.
7. Commercial Property Standard Enquiries (CPSE)
Whilst seemingly long and off-putting, these are entirely industry-standard and are supported by the British Property Federation as covering the type of information which a prudent buyer would want to know about the property. There are different forms for different types of transaction, for example: a general commercial property sale, a sale subject to tenancies or on the assignment of a lease etc. The enquiries are updated as and when there are significant changes to law, regulation, practice etc. Giving thought to the answers to these enquiries in advance of the start of the actual sale transaction will again flush out any issues which need further investigation or explanation so that they are either resolved before the replies are issued to the buyer’s solicitor or they are presented in as full and clear a way as possible so as to minimise any further enquiries the buyer’s solicitor is likely to raise.
If the property is being sold with occupiers, whether commercial or residential, as well as providing the Leases/Tenancy Agreements, any supplemental licences, deeds etc to your solicitor (step 1), and answering the CPSE’s for properties subject to tenancies (step 7), you will need to prepare a payment schedule detailing all (or certainly all recent) payments made by the tenant(s), what period they relate to and provide details of any arrears. Your solicitor will then discuss with you how any arrears can be dealt with i.e. whether the pre-completion arrears stay with you to pursue post-completion or whether the buyer should be asked to pay the amount of the arrears to you in return for an assignment of the right to pursue the arrears (not many buyers will agree to this but sometimes they do!). Either way, provisions for apportionments and arrears can then be built into the contract as appropriate.
A buyer will also need to be provided with copies of any notices served or received under the Lease and details of any disputes.
Alternatively, if the sale is to be with vacant possession, your solicitor will be able to advise you if and when you are able to terminate the arrangement with your tenant(s).
9. Sit back and relax
Once you’ve attended to the above there shouldn’t be much left for you to do other than to sign on the dotted line once the paperwork is agreed and to prepare to sail off into the sunset, gin and tonic in hand!
4 January 2017: This factsheet contains general overview information only. It does not constitute, and should not be relied upon, as legal advice. You should consult a suitably qualified lawyer on any specific legal problem or matter. For further information please contact Helen: