A Guide to Selling Commercial Property

The process for selling commercial property

There are a number of stages in the commercial property sale process, including the following:

Preparation

When you sell a commercial property, you will be asked to provide a substantial amount of information about the property to the buyer’s solicitor. You can start to prepare this as soon as you decide to put the property on the market to avoid delays once a buyer has been found.

If you ask us to act for you, we can guide you with the paperwork that will be needed and obtain a copy of your legal title to the property in readiness.

Other necessary information will include:

• A commercial Energy Performance Certificate (EPC)
• Fire risk assessment
• An asbestos survey
• Details of business rates and other regular costs associated with ownership of the premises
• Planning consents
• Lawful use certificates
• Details of the classes of use that apply

We can also help you complete the replies to standard commercial property enquiries that will be sent to your buyer’s solicitor with the draft contract.

Heads of terms

Once you have accepted an offer from a buyer, we can negotiate the heads of terms on your behalf. These are the terms that will be included in the contract for sale, such as:

• The agreed price
• Retained rights
• The time frame for the sale
• A description of the premises that is being sold
• Details of the solicitors acting for both you and the buyer
• Any special conditions that you have agreed upon

Enquiries and due diligence

We will send the sale documentation to the buyer’s solicitor together with a draft contract. They will carry out a number of searches and raise enquiries at this stage, which often takes several weeks.

The buyer is also likely to have a survey of the property carried out and may wish to negotiate the price if they find that work needs to be done. We will negotiate robustly on your behalf if necessary.

Exchange of contracts

Once the buyer is happy with the information provided and the contract has been approved, exchange of contracts can take place. The buyer will provide a deposit and the date for completion will be set upon the exchange. This is the point at which the sale becomes legally binding.

Completion

Completion of the sale often takes place around a month after exchange of contracts, with the buyer’s solicitor sending the balance of the sale price and any agreed extras to your solicitor.

Selling commercial property with tenants

A property can be sold with tenants in situ; in which case the buyer would have to comply with the terms of the lease. As the seller, you will have to provide all relevant information about the tenant to the buyer’s solicitor, to include a copy of the commercial lease.

You should notify the tenant of the sale and on completion your solicitor will arrange for the tenancy deposit to be transferred to the buyer. You may want to add the amount of the deposit to the sale price as it will not be returned to you once the property has been sold.

Selling commercial property at auction

Selling a commercial property at auction is a much quicker process than selling by private treaty. You will know the date of the auction and completion will follow 28 days later, meaning the timing is far more certain than with a private sale.

The drawback is that the price may be lower than you were hoping for.

The costs of selling commercial property

Commercial estate agents and auction houses charge commercial property selling fees for marketing properties and finding a buyer. There will also be legal costs in respect of your representation.

In addition, you may be required to pay a mortgage redemption fee if you have a mortgage over the property that is being paid off before the end of a fixed term.

You will also need to arrange for the property to be cleared and cleaned so that it is handed over in good condition and in accordance with the terms of the contract for sale.

Tax implications of selling commercial property

Commercial property tax rules are complex and it is recommended that professional advice is taken in respect of the likely taxes that must be paid on selling a commercial property.

Capital Gains Tax (CGT) on commercial property is payable on gains made on the sale of any commercial property at the rate of 10% or 20%, depending on whether you have any of your income tax basic rate band remaining.

The costs of significant works that you have carried out to the property can usually be deducted from the increase in the value of the property during your ownership, but minor enhancements or maintenance are not deductible.

If the property is owned by a company, then corporation tax will be payable instead of Capital Gains Tax.

Selling commercial property in a SIPP (Self-invested Personal Pension) will not attract Capital Gains Tax because the increase in value is held to belong to the pension fund and not to you.

Key pitfalls to look out for when selling commercial property

It is important to have a good grasp of the sale process and the current state of the market when approaching a commercial property sale. You will want to ensure you approach the transaction in a strong position. If you have a deadline that you want to meet, you may have to compromise on price, but you should ensure that any buyer understands the conditions that you are imposing on the transaction.

Not preparing enough in advance can cause difficulties if the sale is delayed. By working with your solicitor to put all of the necessary information in place, you will not only stand a better chance of avoiding hold-ups, but you will also show the buyer that you are efficient and that the sale process is being well-run.

You should make sure that you keep your relationship with any tenants as amicable as possible by keeping them informed and providing reassurance where necessary. The buyer may hesitate to take on a property where the relationship with the tenant has become difficult.

Professional advice is invaluable in dealing with commercial property. An experienced commercial property solicitor will be able to find solutions to the difficulties that often arise in a sale and will generally be able to smooth the path to a successful sale.

Why use our commercial property conveyancing solicitors in South Wales?

At JCP Solicitors we are known for our expertise and professionalism in dealing with commercial property transactions.

As well as years of experience in the commercial rental sector, our solicitors have the following recognition in the Legal 500:

• Planning & Environment
• Agriculture & Estates (for which we hold the top Tier 1 ranking, with Director and Head of Rural Practice Rory Hutchings recognised as a Leading Individual
• Head of Commercial Property Mark Gilroy has been quoted by a client as  being “…approachable, readily contactable and highly efficient”

We also hold Chambers & Partners’ top Band 1 ranking for Agriculture & Rural Affairs, with Rory Hutchings also being individually ranked Band 1.

JCP Solicitors has local offices covering the whole of South Wales, East Wales and West Wales in Cardiff, Swansea, Caerphilly, Carmarthen, Cowbridge, Fishguard, Haverfordwest and St Davids. This allows us to offer a convenient local service and excellent knowledge of local property markets and issues for our clients.

Speak to our commercial conveyancing solicitors in South Wales

To speak to our expert commercial property solicitors in South Wales about selling commercial property, please contact your local JCP Solicitors office:

• Swansea
• Caerphilly
• Cardiff
• Carmarthen
• Cowbridge
• Fishguard
• Haverfordwest
• St Davids

To ask a quick question or arrange a call back, use our simple contact form to make an enquiry.