1. Quick Guide to
Buying Business Premises
With tips on:
The legal rights and restrictions which may affect your ability to trade
What to look out for in the contract you are signing
Why a deal that looks too good to be true probably is!
PLUS
Why your solicitor should inspect the premises with you
By Paul Harrison
Solicitor, Cousins Business Law
Cousins Business Law
Swam House, PO Box 11543
Birmingham, B13 0ZL
0845 003 5639
www.business-lawfirm.co.uk
Quick Guide to Buying Business Premises from Cousins Business Law (published May 2010) Page 1

2. Summary
This Quick Guide provides invaluable advice for anyone thinking of buying commercial
premises.
Written specifically for family owned and owner-managed businesses, the Guide will answer
all your questions and concerns about the legal issues you MUST consider when
researching and negotiating a commercial property purchase.
The Guide has been prepared by lawyers who work daily in the arena of commercial
property, and shares years of invaluable experience, short cuts and tips your lawyer wouldn‟t
normally hand out for free.
If you are facing issues not addressed in this guide, do let us know and we‟ll add your
comments on them in the next edition.
Paul Harrison
Solicitor
Cousins Business Law
Paul.harrison@business-lawfirm.co.uk
Quick Guide to Buying Business Premises from Cousins Business Law (published May 2010) Page 2

3. The Importance of Getting it Right
Whether you are a small business start-up or an established SME, getting the right premises
from which to operate is a crucial business decision.
Peter Faulkner of the Royal Institute of Chartered Surveyors was quoted back in May 2002
as saying, "A well managed business and great market prospects can be completely
negated by the wrong property strategy." His comment is just as true today as it was then.
Your investment in commercial property will probably be one of the largest items of
expenditure for your business, potentially carrying the most risk and the most reward.
With commercial property representing good value at the moment, many business owners
will be looking for a good deal. But make the wrong decision on a property and you could be
significantly out of pocket. Most business owners will take a commercial mortgage to buy
their business premises which represents a long term commitment. Alongside the 20-30%
deposit you‟re likely to need to find, you‟ll also need to make sure you have budgeted for on-
going repairs and maintenance.
Factors to Consider Before you Buy
This Quick Guide to the legal aspects of buying commercial premises highlights 18 factors
you need to look into before making a purchase. Each factor requires detailed knowledge
and understanding of the law. If you don‟t have this knowledge personally, make sure you
take advice from a specialist solicitor in commercial property transactions.
Importance of the survey
As the principle of buyer beware applies, you will take the property in the physical condition
that it stands. We would strongly advise you to arrange for a full structural survey and
valuation to be carried out. Make sure that your surveyor provides a full copy of the report to
your lawyer so that they can check any assumptions that have been made are correct.
Check the title
Is the tenure of the property you are buying freehold or leasehold? In the case of freehold,
you will own the land and buildings forever. With a leasehold property, you are actually
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4. buying the right to occupy and use the land and buildings for a set period of time, and you
will need to check the term of the lease at an early stage to ensure it will be acceptable.
What are the rights of access?
Make sure that the property has the benefit of all necessary rights over adjoining land. The
most common are access on foot and with vehicles over privately owned land, the ability to
use and connect to services, and access to a neighbour‟s land to carry out repairs. If
appropriate rights do not exist then there may be a problem.
Look out for restrictions
If you intend to develop, alter or change the use of the property, tell your lawyer so that they
can check if there are any restrictions registered at the Land Registry that prevent this and
ways to get around these.
Beware third party interests
Beware that certain third parties might have rights in the property even if their interest is not
registered at the Land Registry and can only be revealed by inspection. In particular check
for:
1. Any person who does not own the property who is in actual occupation;
2. Evidence of any public rights of way across the property; and
3. Rights of utility providers e.g. overhead cables.
Fixtures & Fittings
If you have agreed that certain items will be included in the sale, then check these are
mentioned in the purchase contract.
Consent for current use
Does the property have a specific consent from the local authority in place authorising its
current use? If not, the history will need to be investigated to ensure that there has been an
established use for a period of 10 years.
If you plan to develop or change the use of the property, then consider asking the seller to
enter into a contract conditional on planning permission being granted.
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5. Permission for alterations
If any recent changes have been made to the property, then ensure all relevant planning
permissions, listed building consents and building regulations have been obtained and
complied with. Also remember to consider any works carried out to a party wall, as special
requirements apply.
Warrantees and guarantees
If the property is new or recently built then it is crucial to find out what warranties and/or
guarantees are in place to provide cover against any structural defects.
Environmental issues
Is it possible the land may be contaminated? If „yes‟ then there is a potential risk of being
held liable to pay the costs of cleaning it up! The buyer should take all necessary steps to
investigate before the contract becomes binding.
Compliance with statutory requirements
Owners and occupiers of commercial property must comply with certain regulations including
those relating to Asbestos and Fire Safety.
Looking at any existing lease commitments
In many cases where a business is looking to buy their own premises, they will already be
tied into an existing lease. It is important to look at the options and check when the term
expires, any break clauses, whether there is the ability to assign the lease to a new tenant or
alternatively underlet the property. It may also be possible to negotiate with the landlord and
agree an early surrender of the lease in return for a premium.
Stamp Duty Land Tax (SDLT)
This is payable by the buyer on land transactions. The current rates (May 2010) for
commercial property are:
£150,001 - £250,000 (1%)
£250,001 - £500,000 (3%)
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6. £500,001 + (4%)
There are ways to reduce the amount of tax payable or avoid payment of SDLT entirely. A
specialist tax advisor will be able to provide advice on these schemes.
Be clear on VAT
This may also be charged by the seller, which can add 17.5% (the current VAT rate) to the
purchase price. On new properties this must be charged by the seller if they are VAT
registered. For existing properties it will be payable only if the seller has elected to charge
VAT, so always ask at the outset as these will add a considerable upfront cost even if it is
recoverable following completion.
If the property is tenanted then it is possible for the VAT payment to be avoided.
Finally on VAT, note that SDLT will be charged on the total price inclusive of VAT.
Business Rates
Check out the rateable value of the property at the Valuation Office but remember the
rateable value is not the amount you will actually pay. To calculate your approximate rates
bill use the following formula:
Rateable Value x 0.485 = Business Rates payable less any reliefs that are
applicable.
Ask about estate charges
If the Property is a unit forming part of an estate then beware that the owner is likely to be
required to contribute towards the repair and maintenance of any common parts such as the
estate road.
Ownership Issues
You will need to decide whether to purchase the property in personal names or via a
company. .Another option to consider is whether the commercial property should be put into
your pension.
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7. The major concern will be to buy the property in the most tax efficient way and so advice
should be sought from your accountant or a specialist tax advisor. Your solicitor might be
able to make a recommendation.
On site inspection
It is highly recommended that you ask your solicitor to physically inspect the property with
you to check the physical boundaries on the ground accord with the legal title and look for
any potential problems that require further investigation. They shouldn‟t charge you for this
inspection visit as it‟s an essential part of their job in understanding the property you are
buying.
The Dangers of Not Getting Advice
These scenarios are all based on real life experience. Being aware of these potential pitfalls
could save you thousands.
Buying only part of the land
As most land is now registered the land will be allocated a „title number‟ identifying it. The
property will then be shown edged red by reference to a plan. Beware though the seller of
the property may not have acquired all of the land at the same time and so it may be held
under several different title numbers. If only one title number is quoted in the contract then
this is all that will be transferred. It is very difficult after exchange of contracts to rectify the
situation. This is why it is important that the buyer and their solicitor carefully check the
extent of land included in the sale to ensure that you have no dispute over legal ownership in
the future. You do not want to end up having to buy the property twice!
Permissions on development land
Imagine this scenario – you have purchased an expensive piece of land, taken time to obtain
planning permission and now want to start building work. You then receive a letter from your
neighbour pointing out that the property title contains a restriction preventing the owner from
using it for any business or trade. If you start work, they may well seek an injunction to stop
you. This is why it is crucial for your legal advisor to check that the proposed use of the site
does not conflict with any limitations in the title documents so that you do not incur great
expense and delay arguing over whether or not the clause is enforceable. A recent case
highlighted the issue when the words “not to do anything that may cause a nuisance or
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8. annoyance” to the owners of neighbouring land prevented development taking place. In
these circumstances a site purchased for £750,000 could become worthless if the problem is
not resolved and at the very least will cost many thousands in legal costs.
Don’t be held to ransom for access rights
A site visit is essential to check the plan to ensure there is no gap between the road and the
boundary of the land being purchased that may be owned by a 3rd party. If it looks like there
may be a strip owned by a 3rd party this needs to be investigated as it could prevent access
to the land. If, after completion, you find out that the land can be “ransomed”, the costs can
potentially be devastating. The purchase price for a ransom strip is generally between 33%
and 50% of the development value of the ransomed land. For a site that is worth £400,000
you could have to pay another £200,000 just to get access to it!
Beware the VAT trap
Most commercial property contracts are for a fixed purchase price so the buyer knows
exactly what they need to pay on completion. Usually there will be a clause indicating that
the price is exclusive of VAT. This brings with it dangers, as it allows the owner of the
property to elect to charge VAT on the sale price at any time. You do not want to be in a
situation where you have to find an extra 17.5% on top of the purchase price a few days
before complete, so make sure a clause is included in the contract where the seller agrees
not to suddenly inform HMRC that it would like to collect VAT! Importantly this would also
increase your stamp duty liability as mentioned above.
Check for contamination
All owners and occupiers of commercial property have a duty to manage the risk of
asbestos. You should therefore request from the seller a copy of the survey they have
undertaken to find out whether there are any issues that require attention. If you don‟t, and
realise only after you have handed over the money, there is very little chance of getting
recompense from the seller. You would take on all the liability and business disruption that
any removal would cause. The situation is the same should the land be contaminated. As
the new owner you would be responsible for all clean up costs.
In 2009 it was reported that a former army base would cost up to £9m to clean up after it
was revealed half of the site was contaminated with heavy metals. This example alone
shows that the cost of removing the contaminants can far outweigh the actual value of the
property itself, so it is crucial to check this before exchanging contracts on your purchase of
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9. any land that may potentially be affected.
** BONUS INFORMATION **
Renting instead of buying – why it’s worth considering
Buying commercial premises isn‟t right for everyone. Being able to get a commercial
mortgage has become more difficult over recent years, meaning some business owners who
would like to buy end up renting instead. It needn‟t be the end of the world and these top
five tips for reducing premises costs could help reduce cash flow pressures as well as create
a firm footing for securing property bargains in the future.
1. If you are about to move premises, particularly in the office sector, consider taking a
short term lease rather than buying. Prices in commercial property have been falling
and may continue to do so. A short term lease would give you the opportunity to pick
up the right property or a real bargain if finances become available.
2. Negotiate hard for concessions for any new lease. Rent free periods of six months or
longer are common and are a real boost to cash flow in the short term.
3. Renegotiate existing leases. Ask your landlord if you can pay rent monthly rather
than quarterly. Many major high street chains have done this successfully, and you
could too.
4. Use lease renewals to take advantage of current market conditions. Rent reviews are
still almost always „upwards only‟ but when a lease is renewed it‟s your best
opportunity to negotiate a lower rent. Make sure you take control of the renewal
process to achieve this.
5. Minimise your initial Stamp Duty Land Tax liability on new leases by agreeing a
shorter term with an option to renew.
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10. What to do next
Need legal advice on your commercial property purchase? Cousins Business Law offers a
fixed fee service – and if your purchase doesn‟t go through there‟s nothing to pay.
To determine whether we can help, we‟ve developed a free “premises buying health-check”
which we conduct over the telephone. Here‟s what we accomplish in this straight-talking,
action oriented session:
 Getting clarity around your commercial property requirements: Identification of the
key points and issues and what steps you absolutely must not take if you want to find
commercial property suitable for your business.
 Identification of the top 3 likely issues you may face when reviewing the contract for
your commercial premises.
 Generation of a list of questions you should be asking the agent selling the property.
The health-check is conducted by Paul Harrison, a commercial property solicitor with
extensive experience of handling property sales and purchases for businesses around the
UK.
Paul has acted for all types of businesses, from pubs and restaurants to retailers and
manufacturers, assisting them with the purchase of warehouses, shop premises, offices and
land.
The consultation will normally take place within 3 working days of your contact with Cousins
Business Law. To secure your health-check call Paul Harrison on 01604 456 591 or email
paul.harrison@business-lawfirm.co.uk.
The Cousins Business Law Commercial Premises Purchase Promise
 FIXED fees linked directly to the purchase price
 NO SOLICITOR FEES chargeable if the purchase does not complete *
 IDENTIFICATION of issues and potential pitfalls you need to be aware of – BEFORE
you sign the contract
* search and documentation fees payable to third parties will still apply
Quick Guide to Buying Business Premises from Cousins Business Law (published May 2010) Page 10