So you have spotted the property from which you would like to operate your business, and you would like to get that property (your target property). What happens next?
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Get the details
It is quite obvious, but sometimes I come across a situation where new tenants do not have sufficient details of the property when they come to a solicitor . The target property may be a freehold property or a leasehold property or a mere licence to occupy a property. At the outset you should at least grasp: –
- Exact extent of the property and the exact address;
- Use class of the property; and
- Names (and addresses) of all the parties in the proposed transaction – Seller, Landlord, management company, agents, guarantor (if any) etc.
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Heads of Terms
In acquiring a leasehold property, you would like to discuss and agree on the main terms of the proposed lease and set out the main terms. Typical heads of terms would include: –
(i） Parties’ details – i.e. Landlord/Seller, Tenant/Buyer, and Guarantor (if any);
(ii） Property description (and a plan);
(iii） Term of the years and whether the lease is protected under the 1954 Act (you should also consider if any break clause is necessary for your business);
(iv） Premium (if any);
(v） Principal rent and rent review outline;
(vi） Rent deposit (if any);
(vii） Services and service charge;
(viii） Insurance;
(ix） Use of the property;
(x） Assignment, underlease and other dealings (e.g. charge, sharing occupation etc);
(xi） Repairing obligations;
(xii） Alterations;
(xiii） Tenant’s fitting out works;
(xiv） Landlord’s works;
(xv） Conditions (also consider whether you require confidentiality agreement and/or exclusivity agreement);
(xvi） Costs – whether each party be reasonable for its own legal costs; and
(xvii） Solicitors’ details.
We would be happy to assist you when you are going through discussion with the Landlord/Seller and/or agents. If you would like, we can also review the heads of terms before you settle them.
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What your solicitors do for you
Once the Heads of Terms are agreed between you and the Landlord/Seller, your solicitors would usually carry out the necessary desk-top searches for you, so that they can detect the likely risks and be able to deal with them in a timely manner.
Your solicitors will also review the draft lease and other lease documents (such as rent depot deed and/or licence for alterations, as may be required), and raise enquiries to the Landlord/Seller. If the transaction involves any lender, your solicitors may have to liaise with such lender(s) and deal with their enquiries.
Depending on your requirements in the transaction and how quickly other parties would deal with your solicitors, this process might take longer than what you had initially anticipated. You should therefore allow sufficient time in your plan/timetable as to when you would start carrying out your business operation from the target property.
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What solicitors would not do – you should get others to help you
Whilst your solicitors are carrying out desk-top searches and reviewing the necessary documents, you should instruct a suitable surveyor (and other experts as may be necessary) to investigate the physical property. Remember your solicitors may not be able to access the value of the target property or to inspect the physical state of the property. If you have negotiated a limited repairing covenant, it would be sensible to have a Schedule of Condition attached to the lease. A Schedule of Condition is a record (prepared by a building surveyor) of the physical state and condition of a property at a particular date.
If you are contemplating any works to be carried out at the property, you should get all necessary work details and liaise with your solicitors and your surveyors as soon as possible. The Landlord would want to see those work details before granting any licence (permission). It is important that you ensure that all the proposed works be feasible and to be allowed before you contractually commit to a lease of the target property.
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Completion and post-completion
When the lease and other documents have been agreed between the parties’ solicitors and they are duly executed by all parties, you can now expect completion. By that time you should have paid all the required funds to your solicitors for completion of the transaction.
Upon completion, your solicitors will deal with your SDLT (or LTT in Wales) and registration with HM Land Registry. If there is any charge to be registered with this transaction and that you are a company, then the charge document(s) must be registered with the Companies House. Note these procedures are with tight deadines and you should co-operate with your solicitors as swiftly as possible, please!
At Cognitive Law we would be very happy to assist and advise you on your commercial property transactions. Please feel free to drop me a line at mayumi.hawkes@cognitivelaw.co.uk or ring me on 020 3034 0501.