Step-by-Step Guide to Commercial Property Conveyancing: Part 2 – Selling a Commercial Property

In Part 1 of this series, we looked at the process of buying a commercial property. In this second instalment, we turn to the other side of the transaction: what is involved in selling a commercial property, and how sellers can prepare in advance to help the transaction run as smoothly as possible.

No two sales move at the same pace. How quickly a sale reaches completion depends on factors such as whether the property is tenanted and how quickly enquiries can be resolved. Being well prepared before the property is even marketed, particularly around title, tenancy and planning documentation, can make a significant difference to how quickly a sale progresses.

Below, we set out what to expect at each stage of a sale, along with practical guidance on costs and some of the questions we are most frequently asked.

Selling a commercial property

Before the property can be marketed, a valid Energy Performance Certificate (EPC) will usually need to be in place. Your solicitor or agent can advise on this if one is not already available.

Once a solicitor has been appointed and the client onboarding and identity verification checks are complete, your solicitor will begin gathering the information needed to produce a sale contract. This includes obtaining official copies of the title from HM Land Registry and requesting supporting documentation from you, such as leases, planning permissions, building regulations approvals, guarantees and warranties, and any relevant correspondence. In addition, you may be requested to supply electrical and gas safety certificates, an asbestos report and a fire risk assessment, depending on the type of property you are selling.

Your solicitor will prepare a draft sale contract and draft replies to Commercial Property Standard Enquiries (CPSEs), based on the information and documents you provide. Getting these details right at the outset helps to avoid delays once a buyer is found.

Once a buyer is identified and their solicitors are instructed, the contract, replies to CPSEs and the supporting title documentation, sometimes referred to as the “seller’s pack”, will be sent to the buyer’s solicitors.

The buyer’s solicitors will review this documentation, carry out their own property searches, and raise enquiries arising from the title, replies to CPSEs and search results. Your solicitor will liaise with you to answer these enquiries and negotiate the terms of the contract with the buyer’s solicitors.

If there is an existing mortgage or legal charge over the property, your solicitor will obtain a redemption statement from your lender so that the amount needed to release the charge on completion can be calculated, and will arrange for its release.

Where the property is tenanted, your solicitor will also need to consider the position of any tenants, including whether vacant possession is required, whether any consents or notices are needed, and how existing leases will be dealt with on completion.

A transfer deed will then be drafted and negotiated, ready for your signature.

Once all enquiries have been satisfied and the contract terms agreed, your solicitor will ask you to sign the contract and transfer deed in readiness for exchange of contracts and completion, and will confirm your preferred completion date.

Once a completion date has been agreed and both parties have signed the contract, contracts can be formally exchanged, and the completion date becomes fixed. This is done between the parties’ solicitors, usually by telephone, and the signed contracts are then dated and physically exchanged. Once contracts have been exchanged, completion must take place on the date agreed; otherwise, you will be in breach of contract, which could result in you being liable for costs.

On completion, the buyer’s solicitor transfers the balance of the purchase monies to your solicitor. Once received, your solicitor will redeem any outstanding mortgage or charge, release the keys to the buyer, either directly or through an agent, and date the signed transfer deed.

Following completion, your solicitor will prepare a final statement of account, deducting any sums due, such as mortgage redemption, agent’s fees and legal costs, and will transfer the net sale proceeds to you.

Costs and disbursements to budget for

As with a purchase, there are costs beyond the headline sale price that sellers should plan for, including:

• Legal fees for your solicitor’s work in progressing the sale;
• Agent or broker fees, where applicable;
• The cost of obtaining an Energy Performance Certificate (EPC), if a valid one is not already in place;
• Disbursements for obtaining copy documents, such as official copies of the title, leases or planning permissions, from HM Land Registry or other third parties;
• Any early repayment charges or administration fees associated with redeeming an existing mortgage or charge; and
• Potential Capital Gains Tax (CGT) on any profit made on the sale. We would always recommend seeking advice from your accountant or tax adviser on your CGT position well before completion.

Unlike a buyer, a seller does not pay Stamp Duty Land Tax or Land Registry registration fees, as these are the buyer’s responsibility.