
Insight
In this article, Alex Lewsley sets out his key ingredients for a successful freehold property sale.
The two principal reasons for selling commercial freehold property are (i) to relocate the business that is in owner-occupation to a property that better fits its current or anticipated needs and/or (ii) to convert the property to cash, repay debt and/or reinvest.
There are various routes through which to sell commercial freehold property, e.g. at auction, through a sale by private treaty, or by selling the company that holds it.
There are many types of commercial freehold property, e.g. leisure, retail, offices and industrial.
With a few technical caveats, “buyer beware” still applies as a general principle to any type of property sale and buying method. This means that it is for the buyer to rely on its own investigations to establish any issues with a property, rather than the seller having to signpost them to the buyer (save when selling property as part of a company asset or share sale when disclosure and due diligence will be required in addition to property warranties from the seller being given where negotiated as part of the corporate sale transaction).
Whatever the reason, whatever the route and whatever the stock type, here are our key ingredients for a successful commercial freehold property sale:
Ensure you have documentation readily to hand in order to prove your identification, so that the necessary anti-money laundering checks against you can be completed without causing any delays. If the property is owned on trust for another, your lawyer will ask for details of your Trust Registration Service registration at HM Revenue & Customs (HMRC). If you are a foreign company, you need to be registered on the Register of Overseas Entities at Companies House.
Instruct an agent to market the property, find and assess prospective buyers, handle negotiations concerning price and draw up the Heads of Terms.
An agent will advise you:
An experienced agent will also know how to best pitch the basic non-technical aspects of your property, e.g.
In addition, such agents are likely to already have a list of possible buyers on their database and may circulate initial due diligence disclosures in respect of the property to interested parties for review. The agents may then set a final best offers date if there are a number of interested parties who may in turn require you, as part of their subject to contract offer, to enter into an exclusivity agreement which will prohibit you from entering into discussions or negotiations with any third party and for the heads of terms which have been agreed to be kept confidential.
Instruct an accountant to advise you on the associated tax issues and costs relating to the sale of commercial freehold property, e.g.
You should make the effort to try to locate your property deeds in order to see what’s there. If they are not held by you, then they should still be being held by whoever acted for you on your purchase or they would have been sent to your lender (if any) following registration at HM Land Registry (HMLR) of that purchase. These may be original papers or, failing that, electronic copies.
Not locating the deeds can lead to transactional issues e.g.
If these issues arise then it can translate into delay and increased costs whilst solutions have to be found. Locating your property deeds, be they original or electronic, can avoid that.
Instruct a lawyer to assist you with the disclosure exercise on the property and advise you on the property sale process (and pass them your deeds).
Our role is to:
Preparation is the main key ingredient to a smoother, speedier and successful transaction.
It is recommend that we carry out a reverse due diligence exercise against your title to the property before you go to market, or whilst you are in the process of finding a buyer, in order to identify any title issues (a.k.a. a “warts list”) and how they might be addressed. Otherwise any title issues will only come to light during the transaction and be a surprise to everyone, de-railing or delaying the sales process and sometimes resulting in a price chip.
In any event, you should not underestimate what will be personally required of you in order to compile replies to pre-contract enquiries and the time and effort that it takes.
The industry-standard pre-contract enquiries raised by buyers are the Commercial Property Standard Enquiries (CPSEs). For a commercial freehold property sale, the relevant sets are:
In order to compile answers to the relevant sets of these enquiries as may be applicable to your property, and so that your lawyer can advise you on what needs to be disclosed and what may not and what will need addressing in the contractual documentation, you will need to provide information about the following aspects:
e.g. if your property is on an estate: details of any estate service charge relating to the communal part of the estate, a copy of your share certificate in any freeholders’ management company that may own those communal parts and which will need transferring to your buyer on completion of the sale.
e.g. if your property is being sold in its “corporate wrapper”: details of the company that is being sold.
It should be apparent from this list that the sooner you start getting prepared, the better!
Replying to enquiries requires careful consideration, as any misrepresentation carries the risk of you subsequently facing a claim from your buyer for damages.
If we can be of any assistance in your commercial freehold property sale then please do not hesitate to contact Alex or one of the team info@ts-p.co.uk.