A Guide to Commercial Conveyancing

Written by Adele MacGregor Reviewed by Tetyana Rehman

25th Jul 2022 (Last updated on 11th Apr 2024) 5 minute read

What is the Difference Between Commercial and Residential Conveyancing?

Whereas residential conveyancing is for residential homes, commercial conveyancing deals with properties used for business purposes.

Commercial conveyancing often takes longer due to the extensive legal investigations required. Also keep in mind that in general, the larger the property, the longer the process is likely to take.

Commercial property can also be more complex than a residential transaction. This is in part due to the fact that commercial properties are often occupied by tenants. The rights of these tenants must be taken into account by both the seller and the buyer.

The paperwork will also be different, as more documents are required for commercial property. The buyer’s conveyancer will want to see details of the Fire Risk assessment for the property. They will also need details of current business rates.

Common Instances of Commercial Conveyancing

Commercial properties include but are not limited to:

• Retail units
• Restaurants and bars
• Offices and warehouses
• Industrial sites
• Land for development

Freehold vs. Leasehold

Commercial properties will be sold either freehold or leasehold. Freehold is the absolute ownership of both the property and the land it stands on. The ownership remains in place until you decide to sell. There are many steps and costs involved with buying the freehold.

Leasehold means leasing from the freeholder for the right to use the property for a fixed period of time. This means you won’t own the property outright. The freeholder or landlord will continue to own the property and the land it is built on. Leases typically last between 99 to 125 years but can extend the lease for up to 999 years.

Commercial Conveyancing Fees

The cost of your conveyancing will depend on the cost of the property and how complex the transaction is. The biggest expense is the legal costs. This is the fee you pay your conveyancer for the work they do during the transactions. This is generally between 0.5% to 1.25% of the value of the transaction.

Conveyancing fees will also include disbursements. These are the fees paid by your conveyancer on your behalf, for which you will need to reimburse them. They include:

• Land registry fees
• Property searches
• ID verification
• ID and Bankruptcy search
• Stamp Duty Land Tax
• VAT
• Transfer fee

Commercial Conveyancing for Sellers

The conveyancing process begins for sellers once the premises are put on the market. A seller’s conveyancer will be responsible for:

• Ensuring the seller has completed for CPSE form
• Confirming what is included in the sale, including fixtures and fittings, with the buyer’s conveyancer
• Drawing up the sale contract
• Liaise with the buyer’s conveyancer and negotiate the price and completion date on the seller’s behalf.
• Exchange contracts
• Arrange for keys to be collected
• Approve the Transfer Deed from the buyer’s solicitor

Once the sale is complete, the seller’s conveyancer will use the funds of the sale to pay off any outstanding mortgage. They will then deduct their fees, transferring the remaining amount to the seller.

What is a Commercial Property Standard Enquiries (CPSE) Form?

The CPSEs are pre-contract forms that must be completed by the seller. Introduced in October 2002, they aim to speed up commercial property transactions.

Form CPSE 1 will cover all commercial property transactions. This includes freehold or leasehold, vacant or tenanted. Extra enquiries are made in the form of:

CPSE 2 - if the property is sold subject to commercial tenancies.

CPSE 2 - where a leasehold for the property is being granted

CPSE 4 - if the property is being sold leasehold

CPSE 5 - when the lease is being surrendered

The CPSEs include a comprehensive set of enquiries about the property in question. These include:

• Who owns the boundaries around the property and any maintenance that has taken place on them.
• Any notices regarding the Party Wall Act
• Details of rights and easements
• Details of the physical condition of the property and if there are any structural defects.
• Whether asbestos is present on the property.
• Any extensions or building works that have been carried out in the last 12 years.
• A list of contents that are being removed from the properties
• Details of utilities and services
• Details of the Fire Risk Assessment for the property
• Details of current business rates
• Any insurance claims against the property and the existing insurance policy
• VAT number and any group registration details

Sellers must have warranties, planning consent, and building control approvals for work on the property. They will also be required to include a copy of the Energy Performance Certificates (EPC).

Sellers may wish to consult their accountant to complete any financial aspects of the CPSE forms.

Commercial Conveyancing for Buyers

As the buyer of a commercial property, your conveyancer will be responsible for:

• Investigate the title (who legally owns the property)
• Arranging for commercial property searches to take place
• Liaising with the seller’s conveyancer and negotiating the contract
• Making any enquiries regarding the property and the details found in the CPSE form
• Ensuring all finances are in order
• Arrange exchange of contract and transfer funds on completion day
• Paying Stamp Duty Tax
• Register the buyer as the new owner via the Land Registry

What is a Commercial Lease?

A commercial lease is an agreement for property or land that is leased for business purposes. This means the person who holds the lease doesn’t own the property in question.

Many commercial properties are occupied by tenants with a lease. This means anyone buying or selling the property must take into account the rights of the leaseholders. The leaseholder is a tenant who pays rent and has the right to occupy the land or property for an agreed period of time.