Four top tips to prepare a commercial property for sale
14 August 2024
If you are thinking about selling a commercial property, there are a number of things you can do to get everything in order before a sale is agreed, giving yourself the best chance of ensuring that the sale process goes as swiftly and cost-efficiently as possible once a buyer is found.
Title considerations
Obtaining an up-to-date copy of the title to the property and making sure that any out-of-date entries (for example in relation to expired leases) are removed will reduce any delays in waiting for the Land Registry to process applications when the deal is underway.
The title should also remind you of any restrictions on title which you may have to consider when transferring it (such as ensuring the buyer enters into a deed of covenant in relation to estate covenants or discharging your existing mortgage). If the property is burdened by any restrictive covenants which you know are currently being breached, you should formulate a plan for how you will deal with the buyer’s inevitable queries in that respect. It may be possible to deal with this quickly and at relatively low cost with an indemnity policy depending on the nature of the breach.
If your property is not yet registered at HM Land Registry, you might wish to consider making a voluntary first registration application before going to market, particularly for more complicated titles as once a sale is agreed, it is generally quicker from that point to negotiate and document the transfer of a registered property, and a potential buyer may insist in you getting the property registered before they are prepared to buy it in any event.
If your interest in the property is long leasehold, you should review the terms of your lease to check whether, and to what extent, your landlord is required to consent to any proposed transfer of the lease (known as an assignment). You should also review the tenant covenants in the lease and take steps to ensure they are being observed and complied with.
Occupational agreements
If your property is subject to occupational arrangements with tenants make sure that these are tidied up ahead of agreeing a sale. This should involve making sure that:
- no leases have been allowed to expire with tenants continuing to occupy outside the term of lease;
- you are taking positive action in respect of any rental arrears;
- all rent reviews have been carried out and documented in accordance with the terms of the lease; and
- all assignments, alterations or other matters requiring landlord consent have been appropriately documented in accordance with the terms of the lease, usually by way of licence.
Statutory and regulatory requirements
Any buyer will want to ensure that all statutory and regulatory requirements which should have been complied with are up to date when they purchase the property. If any of these things are missing, then you can expect a buyer to ask you to rectify these at your own cost. As such, it makes good commercial sense to get ahead of this and ensure that everything is up to date, and you have copies to hand which can be provided to the buyer before queries are raised. This will include:
- Having a valid EPC of at least the minimum efficiency rating of E
- A fire risk assessment as well as evidence of compliance with any recommendations
- An asbestos survey (where the building was built before c.2000) as well as evidence of compliance with any recommendations for the management of asbestos
- Planning permissions in respect of the original construction (and any subsequent alterations) and the current authorised use and any building regulations compliance certificates.
If you have tenants which are responsible for procuring any of the above, we recommend you take steps to request copies of these documents from them, so that you have as complete a record of all regulatory requirements as possible.
Obtain a valuation
You should speak to a commercial surveyor to ensure that you receive good advice as to what purchase price you should be expecting to receive so that you are marketing it at the correct level. A building survey could also reveal issues which you wish to address before a buyer discovers them as part of their own inspections/surveys. In most cases we can put you in touch with surveyors operating in the area in which the property is located.
Every property is different, so in addition to those points discussed above there will likely be other considerations or preparations which you may need to make before putting your property on the market. Please do contact a member of our Commercial Real Estate Team if you wish to explore anything discussed here further.
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Andrea Bailiss
Services
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at August 2024.