How to Sell Your Commercial Property Successfully

This PDF outlines the best methods for selling your land or commercial property, or for keeping it and embarking on a project or joint venture to realise its full potential. So, here are our top tips to help you when selling land or commercial property.

1. Sell it as it is, without planning permission.

This is the quickest way to sell your land or commercial property is to sell without planning, but it’s also the option that will result in the lowest value. Any buyer would be investing their money in the hope that they would be able to secure planning permission in the future. However, with commercial properties it is likely that you will be able to develop the residential part within permitted development.

No matter how likely you think it is that planning consent will be granted, there is still risk involved. How many properties are likely to be granted, the cost involved, and the process of submitting pre-app plans or going straight away for full planning.

There are likely to be additional costs involved, such as CIL or MCIL, which are government-led taxes.

All those risks are considered by potential buyers when they do their due diligence. The price they are prepared to pay is therefore somewhere between the site’s value for its existing use and what it will be worth when planning is granted.

2. Sell it on a “subject to planning” basis.

Selling a site on a subject to planning basis is a viable option for some vendors, and can be very beneficial to a developer. This would be relevant to a site where it’s likely that planning will be granted; however, the decision has not been made yet.

This would typically mean agreeing a percentage of the potential asking price, and once planning has been granted, the rest of the amount would be payable. It will enable the buyer to secure the property, meaning it can’t be sold to anyone else, as long as the agreement stands.

It could also be agreed that if the desired planning isn’t granted, the buyer could walk away from the deal and potentially recoup the deposit; however, these specific terms would have to be agreed in a legally binding agreement

3. Sell it with a planning permission

By getting your own planning permission, you can remove much of the planning risk for developers. The best way of doing that is usually to secure an outline planning permission, which approves the possibility of a project in principle, but allows some of the specifics to be determined by a developer in the future.

Some vendors decide to go in for full permission, especially if they were planning to develop it themselves; this can still allow a developer to potentially tweak the existing plans to their preference.

Applying for planning permission can be a very expensive and complicated process – it typically costs between £100,000 and £300,000 depending on the size and complexity of the site. For very large sites, the costs can even reach seven figures.

See the link below to the planning portal calculator, which will help you to cost up.

https://1app.planningportal.co.uk/FeeCalculator/Standalone?region=1

3. Heads of Terms agreed between parties/agents

The Heads of Terms set out the main elements of the transaction when selling a commercial property. Although usually stated to be “subject to contract” and not legally binding, they are referred to for the legal drafting and should be accurate. Now is the time to consider price (including any VAT), the extent of the land to be sold, any rights to be retained, timescales, which solicitor to appoint and any special conditions which are to apply to the sale. You’ll also need to ensure the property has an Energy Performance Certificate (unless the property is exempt from having one).

4. Solicitors instructed

Once the Heads of Terms have been agreed between you and the buyer, these will be sent to the appointed solicitors. You will need to formally appoint your solicitor to act on your behalf when selling a commercial property. Your solicitor will usually send you his or her terms of business, ask for your identification documents and any money on account.

5. Title documents obtained

Assuming the property is registered at the Land Registry, your solicitor will be able to obtain the electronic title documents online.

6. Contract drafted, and title information prepared

Your solicitor will send to the buyer’s solicitor the contract package. The contract package will usually include the draft sale contract, the title documents, the energy performance certificate and replies to Commercial Property Standard Enquiries (CPSEs). CPSEs are general property enquiries raised when selling a commercial property. Your solicitor will usually assist you with the CPSE replies, but you will be required to verify the answers.

7. Buyer’s due diligence

Once the buyer’s solicitor has received the contract package, a process of due diligence is carried out by the buyer’s solicitor. The buyer’s solicitor will review the title and conduct any necessary searches; they will usually raise any necessary enquiries with your solicitor.

Due diligence can be the longest stage of the transaction when selling a commercial property, lasting a few weeks. The buyer’s solicitor will be reliant on search results coming from various bodies including the water company, the Environment Agency and the local council.

During the due diligence process, you may be asked for additional information about the property (such as business rates information, whether the property is VAT elected, if the property is subject to any occupational leases, asbestos report). Again, all information supplied should be accurate as the buyer is entitled to rely on the information given.

8. Documents agreed

Once the buyer’s solicitor is happy with the information gleaned from the due diligence, the terms of the sale contract will be negotiated and agreed.

The transfer deed (which is usually drafted by the buyer’s solicitor in the first instance) would also be agreed. The transfer deed will be registered at the Land Registry (on completion) and will pass legal title to the buyer.

At this point, you will be asked by your solicitor to sign the agreed form of contract and maybe even the transfer deed ahead of completion.

9. Redemption figure obtained

If you have a loan secured against the property, your solicitor will contact your lender and ask for a settlement figure (as any loan secured on the property must be settled on completion). Your solicitor will check that your sale proceeds will exceed the amount of money due to your lender.

10. Contracts exchanged

Once you and the buyer have signed your respective parts of the sale contract and the buyer has placed his or her solicitor in funds for the deposit, contracts will be exchanged. A deposit of 10% is usually due from the buyer on exchange, and the buyer will lose this if he or she fails to complete.

Exchange is usually a telephone call between solicitors, who follow up the call by exchanging the contracts formally in the post. On exchange, the sale is now legally bound,d and a completion date is set. Your solicitor will then send the transfer deed to you for signature if they have not already done so.

11. Pre-completion

If you have a loan secured against the property, your solicitor will obtain a final redemption figure from your lender, so your solicitor knows exactly what money will be required to discharge the mortgage on completion. Once your solicitor has this information, they will give undertakings to your buyer’s solicitors that the mortgage will be discharged on completion.

12. Completion

On completion, the balance of the purchase monies is sent to your solicitor, your mortgage will be discharged, and you will be sent any remaining sale proceeds. At completion, the transfer deed will be completed, and the legal title in the property passes to the buyer. You will be asked to hand over all keys to the buyer as the process of selling a commercial property is complete.

Your solicitor will send your signed transfer deed and any deeds relating to the property to the buyer’s solicitor.

Conclusion

We can cater to a variety of investors’ needs. If you are considering investing in a new property or project, contact us if you would like to discuss how we work and how we could possibly help you.

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