Bates Wells & Braithwaite Commercial Property Services

If you are a business owner or intending to start up or take over a business there are inevitably times you need a solicitor to assist with property transactions or advice. For disputes Tim Parsons from our Dispute Resolution department can assist but our non-contentious property work is carried out by Robert Sainsbury. With over 30 years’ experience of property work in East Anglia you will find he is approachable, friendly, efficient and knowledgeable and will be able to provide you with cost effective assistance when needed.

See our Commercial Property Services below;

COMMERCIAL LAW
Freehold Sales and Purchases

We can act for you on your freehold purchase or sale of commercial property; development sites, industrial buildings, retail shops; offices and warehousing. With over 30 years of real property experience Robert Sainsbury will be able to support you and your other advisers, and complete your transaction, in a friendly and approachable way.

We may not always be your first point of contact for a property transaction but we are pleased to be involved at an early stage to try and make it more straightforward later.

Purchase

On a purchase we can support your commercial property surveyor or negotiator in agreeing suitable heads of terms and realistic timescales. Once these have been agreed we can let you have an estimate of costs, expenses and taxes (Stamp Duty Land Tax – SDLT) on your transaction and a realistic timescale from receipt of a full set of documentation from the Seller’s solicitors; we will check the title, raise enquiries, submit and examine pre-contract search results and deal with the negotiation of the contract documentation to make sure your transaction has a realistic timescale and runs, where possible, to plan. We provide face to face meetings locally, if need be on site to check boundaries or aspects only clear from a site visit and provide, where time allows a full written report so that you understand the legal aspects of your purchase; the documentation and the property. If there is insufficient time to do so before the contract signature meeting we will confirm the advice given before and at that meeting by a confirmatory report on title as soon as practical thereafter. If there are particular aspects of the procedure, in relation to the legal aspects of the property or where you might need to consider seeking other advice and assistance we can provide that help and more in depth discussions. We can act for the lenders in many transactions (though that is the lender’s choice) and for you in providing the required report on title to the lenders that the property has a marketable title or there are some areas they need to be aware of and in preparing security documents and to prefect that security by registration, later.

We will need to liaise with your Accountants and/or tax advisers on some aspects of the purchase in most cases and your commercial surveyor, who will value, survey and examine the property and whose report we will want to look through as soon as it is available.

An outline of a transaction:-

  • Subject to Contract Heads of Terms are agreed and these and the Particulars of the Property are forwarded to us. 
  • We will need to meet with you to obtain essential identification evidence face to face, get a picture of the transaction, the property and intended timescale, how it is to be financed and the source of funds.
  • We will let you have our initial client care letter and estimate of fees either before the initial meeting or more likely following it, when we understand the transaction proposed, though these initial details can often be taken over the telephone or by email. If we receive those initial instructions by telephone or email we will however rarely be able to act for clients we have not met and cannot ever act without full verified ID and confirmation of the source of funds. 
  • We will need to obtain Identification evidence to set up a file because that is part of our duty under Government requirements and as part of the Land Registration anti-fraud regime where we are required to act as “gatekeepers”. The majority of the money laundering and anti-fraud procedures rely on our knowing you and the source of the funds for your purchase.
  • You arrange your survey; if you have not done so before and any valuation for the lender (if any) as part of setting up your financial arrangements. You will need to ensure the lenders instructions are received by us in sufficient time to ensure before exchange of contracts you can fulfil them otherwise you are committed to the purchase and payment of monies without knowing they will be released by the lenders. On receipt of the instructions from the lenders we will complete those investigations and any pre-exchange clearances, which are generally run contemporaneously with the pre-contract negotiations and investigations we are carrying out for you.
  • Sometimes a lender will use their own independent solicitors and we will need to liaise with them to make sure all their enquiries and requirements are fulfilled (or can be) before you are committed to the purchase by an exchange of contracts.  
  • We will need to make contact with the Seller’s solicitors who will forward a draft contract package, including title, draft contract, and frequently replies to standard pre-contract enquiries. We will need a plan as part of that package, either from the title or if this is a sale of part of the property a Land Registry compliant plan prepared professionally for the Sellers, so that we can on receipt of confirmation of instructions from you and funds to cover expenses we can submit the usual and agreed searches. 
  • The legal transaction is now underway. 
  • On receipt of the survey report, which you may have to pass on to us or will be forwarded by your lender, replies to enquiries and receipt of the search results we will want to check through these and the title to see if there are aspects of the property or transaction you need to be aware of; might be of concern; where you or we, or your lenders (if any) need more information or clarification or further documentation, which in some cases we may need to obtain from the Seller’s solicitors or sometimes from third parties, such as the local authority. We may advise you of concerns that could change your view of the value of the property, about which the lenders will have to be informed if it affects the marketability or valuation of the property now or in the future; where further investigations, by way of example, a further survey, structural engineers’ report, the advice of a planning expert, your tax advisers or even an environmental investigation, might be needed. We may recommend these as precautionary or protective measures for you alone even if the Bank or other lender does not think they are needed.
  • All of these aspects of the legal investigations arise because of the basic principle “buyer beware” which means, in part, because of the use you might require for the property, the investment you or a lender is making and because generally property is (but not necessarily always) a fairly safe, solid investment, with more moderate risk, you will want to know what you are going to buy and whether, legally, at this point it is considered to have a marketable title and also for your particular use or purpose, will it be suitable?
  • We will at the same time be liaising with your other advisers, for example accountants, tax advisers and property surveyor/valuer to make sure they have the information about the property relevant to it value, tax for the transaction and statutory compliance, planning and use issues, where they may be involved.    
  • We will negotiate the contract and often the transfer document (the final legal document transferring the property to you) and prepare our report to you. 
  • These are not simple matters and they take time. Please, therefore, make sure that you consult with us early enough to ensure you will have sufficient time and have in mind and agreed a realistic timescale and target date. You will want to ensure you do not commit to expenditure or arrangements which cannot easily be adjusted, cancelled or rearranged without cost based. There is no legal certainty until exchange of contract and all this due diligence investigation and preparatory work to carry out before that stage is reached so you must not commit to timescales and expenditure based on subject to contract negotiations and target dates. 
  • We will prepare, when time allows (and preferably it will), a full written report on the legal aspects of the purchase and the property and usually meet with you to run through that report, before obtaining your approval of the transaction, property and contract and signature to it ready for exchange of contracts. If there is insufficient time to prepare this written report before the signature meeting our report will be sent, confirming the advice given at the meeting as soon as time allows.
  • Real property transactions require a written contract, hence the importance of the “exchange of contracts”, which means you will not be committed until all these matters have been dealt with, but neither will the Seller, either to sell to you or for the price agreed and with the completion date you are targeting. 
  • You will usually need to ensure that you have insurance set up ready for exchange of contracts as often the property will be at your risk from that point. So make your initial arrangements for insurance early and if your lenders, or you, are intending to back some borrowing with life insurance please also make sure you make those arrangements early so that last minute requirements of the insurers (for example a medical report) will not lead to a delay in exchange. 
  • On and from exchange you are committed to the purchase and completion on the date set, so everything needs to be in place and ready, whatever (generally) may happen from then.
  • When everyone is ready, the lenders (and sometimes their solicitors) and , you are comfortable with the transaction, the property and timescale, contracts, now agreed, will be signed by the parties, the deposit, which is usually 10% of the purchase price, collected and we will “exchange contracts” between solicitors. Always be careful not to sign anything before this point which might amount to a contract and bind you to something you are not yet ready for. The preparation and exchange of contracts should always be between solicitors unless it is the unusual circumstance of a sale at auction, where special rules apply and on which you should seek early and full advice from us before considering a purchase at auction.
  • On exchange of contracts you will have committed to the purchase and that will include the deposit you have paid and the completion date, which is when you will pay the balance of the monies and can obtain access/take over the property.
  • From exchange of contracts we will carry out final title searches, submit the report on title to the lender to obtain the monies the day before completion, and let you have our invoice and statement showing what will be needed to complete the transaction, pay any SDLT pay the balance of the monies or make up the difference  between lender’s advance and that sum, including Land Registry fees; have legal charge documents and transfers executed and generally set the transaction up ready for completion on the date agreed in the contract. 
  • On the completion date the balance of the monies will be paid and the title documents and transfer dated with the Sellers’ solicitors sending these to us following completion.
  • Sometimes exchange and completion will take place on the same date.
  • We will then submit the SDLT return within the 14 days required and the registration within the priority of our search result and on completion of the registration will send you a copy for checking and send the essential title documents to the Lenders in accordance with their charge over the property or retain the deeds if we have a storage agreement with you in our strong-room, letting you have our file closure letter at that point. 

Sale

On a sale we are also happy to assist from an early stage and it can have real benefits for the transaction it you make contact with us early, let us know your intentions, hoped for sale arrangements and timescales. We can advise on the availability and possible whereabouts of deeds, registered title and other necessary documentation. We can review with you, early on, the standard commercial property enquiries used on most commercial property transactions and you can seek out and obtain documents, such as planning documents, fire risk assessments, EPC’s and recommendation reports Asbestos Reports and other standard documentation that a Buyer’s solicitor will be expecting and might take time later in the transaction to locate, or which you may not have and so need to obtain, for example, from third party sources and then to pass on to us. Early preparatory work can sometimes save time and delays later, but there will nearly always be something unexpected or un-thought of that arises during the transaction, either because of a lawyer’s requirements, surveyor’s or lender’s queries or requirements which were not or could not be anticipated or might not have been considered of significance when the sale documentation was being prepared. However, early preparation will always help.

You will want to discuss the arrangements for the sale with your Commercial Property Agent, but you will also want to talk to your accountants and tax advisers to ensure the tax implications are understood and planned for. There might be timing issues and very occasionally a better structure to the sale but in all cases you will need to budget for the tax implications if any. There are standard commercial enquiries about Capital Allowances and VAT that will need to be referred to your accountants and tax advisers in any event to make sure replies given are accurate and prepared with care.

An Outline of a Transaction:-

  • Discuss the proposed sale with your accountants and tax advisers. 
  • Seek your preferred Commercial Property Agent.
  • Seek out your preferred solicitors – hopefully BWB. Often the first the solicitors hear about an intended sale is when a Buyer has been found and then there is surprise that it takes time to put together all the legal documents and the “contract package” ready to send out to the Buyer’s Solicitors. The time to instruct your solicitor is as you place the property on the market so some of the simple preparatory steps can be taken, not when the Buyer is found.
  • We will let you have our standard Client Care Letter and an Estimate of fees, if it is feasible, for the transaction or just for the preparatory work, if it is too early to do more. 
  • We will need to obtain Identification Evidence to set up a file and because that is part of our duty under Government requirements and as part of the Land Registration regime where we have effectively been appointed as the “gatekeepers” for the anti-fraud protection they operate. The money laundering and anti-fraud procedures rely on our knowing you and the source of any capital invested or tied up in property which is then to be sold.  
  • We will need to obtain the title, deeds if there are any and information held by lenders, by us, in our strong-room, or by you. The first matter to deal with is to check the title and make sure we have all the documents and information needed to prove title and the right to sell. You may need to provide authority to your Bank or other Lender to send us the Deeds.
  • We will send you the standard commercial property enquiries that seem most likely to be relevant to your transaction and liaise with you to obtain full details and supporting documents to draft replies to these standard enquires.  
  • We will usually send to your accountants the relevant tax enquiries so that these can also be prepared with care. The replies may also be relevant to the draft clauses to be used in the contract to be prepared. 
  • We can if you wish prepare at this stage “skeleton” draft documents so that we know when the instructions on a sale come in we can send out “the draft contract package” of contract, draft transfer (if relevant), title and replies to standard enquiries together with relevant supplementary documents such as planning permissions, building control approvals and final certificates, S.106 Agreements, environmental reports, asbestos reports, fire risk assessments and tax documents such as options to charge VAT and background to Capital Allowance claims. 
  • You may prefer to leave those preparations for when you have a firm, subject to contract, Buyer lined up but please bear in mind that it will take time to put all of these together at that time and therefore to issue the documents. 
  • Having issued the contract package the Buyer’s solicitors will usually have specific enquiries to raise either related to their client’s intentions, requirements or arising from the standard documents received, where further information is sought, changes to the drafted documents will be asked for and negotiated on and the Buyer’s will be sorting out their lender’s requirements, if they, have one, submitting searches and taking up any points from those search results, which can often lead to a request for further documents or additional replies to new enquiries. 
  • When the Buyer’s solicitor has its search results, lender’s mortgage offer or loan agreement and related security details (if any) and is happy with these and the contract documents and replies to enquiries they will report to their client and approve the documents so that we can report to you and obtain your signature to the contract in preparation for an exchange of contracts. 
  • We may need to liaise with you on completion dates, when you can give vacant possession, and the deposit to be accepted on exchange of contracts if the Buyer offers less than the usual 10%. Generally you will want to insist on a 10% deposit as it gives you greater security that the Buyer will fulfil the contract, the Buyer has sufficient incentive not to renege on their contract having more at stake if they fail to. Default on a contract is rare but not unknown and having that 10% to forfeit helpful to deal with such a blow, cover the costs of re-sale, disruption to your own plans and costs resulting and of course in a less buoyant market allow for any necessary reduction in the eventual sale price. 
  • We need to know about any borrowings secured on the property and security in existence if you have a lender at an early stage. We will seek an idea of the amount outstanding and will have to obtain final redemption/repayment figures or undertake to pay the net proceeds of sale to the lenders following completion if there is a charge on the property as under the standard contract terms these have to be paid off before or at completion. At completion they will need to be discharged from the proceeds of sale. We need to ensure you can comply with the terms of the contract and therefore that the sale price will allow for this repayment in full and cover all the sale costs etc. 
  • We will then exchange contracts at which time the completion date will be set when you generally must give vacant possession on a fixed date unless you are selling subject to a tenancy, for example, and the Buyer must pay the balance of the purchase money. 
  • We will have let you have our invoice and statement confirming the financial transactions that will take place at completion and will let you have that and the balance of the completion monies following completion. 
  • Final redemption figures will be obtained. 
  • Transfers executed ready for completion. 
  • We will need to reply to the Standard Requisitions on title and Completion information form sent by the Buyer’s solicitors to clarify and confirm the completion arrangements. 
  • We will then complete and the lender’s will be repaid and their discharge or END notification directly to the Land Registry Confirmed. 
  • We may need to monitor the Buyer’s progress on registration if it a sale of part or there is an overage agreement and let you have details once we have seen and checked their registration has been correctly completed, which can take several months. 
  • Once everything is tidied up we will send out our client closure letter. 

Costs and timescale

Once we have the details of a transaction or matter Robert Sainsbury can give you a better idea of the likely cost and timescale for an average transaction. His time is charged at £185 for a standard transaction and at £225 for larger or more complex transactions or matters. All files are time-costed but the charges will reflect the nature of the matter and the time involved so it is worth meeting Robert to see if he can assist once he has the background and indeed if there is anything it would be wise to look out for or take advice on before you are further committed. He will once he has an idea of the details of a transaction not only be able to confirm in writing the charges but the related expenses that you would incur whoever you instructed to act, such as Stamp Duty Land Tax (SDLT), search fees and Land Registry Fees.

Business Leases

We can act for you on your taking of a Lease of Commercial premises, which could be of an industrial or warehouse building, retail shops, offices, parks, hotels and conversions of agriculture buildings. A Lease or tenancy is essentially a grant of rights to use Property over a period of years, or perhaps only months. There are many areas in relation to business Leases in which the law intervenes by statute or regulation, and so you should always discus with your solicitors the implications of granting or taking a Lease or tenancy of commercial premises before you consider doing so.

There are various options available and the implications of the terms of the Lease can be very significant, particularly if the Lease is over a long term but even in a short term letting the obligations on the Tenant, in particular, can be very onerous, so you need legal advice on all aspects of the Lease or tenancy before you enter into it. With over 30 years of real Property experience, Robert Sainsbury will be able to support you and/or your other Advisers and complete your transaction in a friendly and approachable way.

We may not always be your first point of contact for a Property transaction but we are pleased to be involved at an early stage to try and make it more straight forward later.

Taking a Lease of Commercial/Business Property

A Lease, which is often 30 pages or many more usually of covenants and obligations imposed on the Tenant, should never be entered in to without taking legal advice on the implications of what you are considering signing.

Preparation by you

If you are taking a Lease on a full repairing obligation, or even a more limited to repairing obligation, you may want to have a survey carried out of the Property; and if it is part of a much larger building on which a service charge is payable by the individual Tenant of part, that survey might need to involve the other parts of the Building, as this could have serious implications on the level of service charge you must pay. Whether you wish to go to the expense of such surveys, or would prefer to try and mitigate in negotiations the risks of these obligations and negotiate some protection within the Leasehold terms, will depend very much on the nature of the negotiations between Landlord and Tenant, the length of the Lease, and the relative negotiating strengths of the two parties.

If you require finance in connection with the taking of the Lease, carrying out refurbishments, or other works and is intended to use the Lease as security for any borrowings, please let us have full details of your Lenders their contacts and their requirements, as soon as possible. You will not want to enter into the Lease until you know that you can comply with all the Lender’s requirements.

If you have received or started negotiating on the ‘Heads of Terms’ (a simple statement of the main terms of the Lease), please can you discus these with us before you agree them so that we can give you any advice at this stage to improve of the Heads of Terms before we find ourselves having to ‘negotiate against the Heads of Terms. If a Lease is produced by a Landlord’s solicitor based on Heads of Terms and we seek to change them the initial response is always this was a provision agreed and contained in the Heads of Terms, even if you as the potential Tenant had little idea of what the true implications of the proposed terms were or what is normal in the market place or possible with some negotiation.

If the Heads of Terms have been agreed please can you let us have them together with any Particulars of the Property Energy Performance Certificates (EPC) and Recommendation Reports etc that you have received from the Landlord or the Landlord’s agents. 

The procedure in outline

No two transactions involving the taking of a Lease are the same as each Property’s requirements and length of term will be different in each case, of course. If it is a new Lease one would normally expect that the Landlord’s agent will forward to us the Heads of Terms and Particulars of the Property together with the EPC and Recommendation Report. The Heads of Terms set out the fundamental and principle terms of the negotiated arrangement. The Landlords solicitors will obtain the freehold title out of which the Lease is to be granted (in most cases but not always) be checking whether Lender’s consent is required to the grant of the Lease, and whether there is anything in the freehold title that needs to be referred to or mentioned within the Lease.

We will need to meet with you to obtain essential identification evidence face to face, a picture of the transaction the Property and intended timescale, proposed terms of the Lease, how it is to be finance and the source of the funds.

The Landlord’s solicitors will then draft and issue the draft Lease to us for approval. We will go through the Lease and advise you and the Landlord’s solicitors of any amendments we consider essential or would recommend. We will liaise with you before we return the Lease amended to make sure that it contains everything you need in the way of rights, and that you have a reasonable understanding of the main terms of the Lease; the circumstances and obligations within it and you can then let us know whether you are comfortable with those in the circumcises of your previous negotiations with the Landlord and your comparative negotiation strengths. We will also be able to give you some idea of what is common within Leases in the current market.

We do not advise on the structure, state of repair statuary, compliance, value or rental value or a Property. These are matters for your commercial Property surveyor/adviser. They will obviously need to inspect and check over the Property before they can report to you on any particular aspects of the building proposed rental, main terms and conditions of the Lease that are uncommon in the market place, might give you particular problems, or even dissuade you from continuing with the Lease negotiations. There is of course no such thing as ‘a perfect Lease’ particularly as far as the Tenant is concerned, because of all the obligations on the Tenant, of which there are many, as compared to the obligations on the Landlord, which are few in comparison, for example of quiet enjoyment in the legal sense, perhaps an obligation to maintain some common parts or services of the Property and to insure the Property for example, whilst you will find there are 30 or 40 (at least) covenants and obligations imposed on the Tenant, which it must comply with.

Having discussed the Lease with you, amended it as far as you and we are comfortable with and returned it to the Landlord’s solicitors, we will have to await their response, and it may often be useful for you to have contact if possible with the Landlord or Landlords agent’s to negotiate or discuss changes directly that you or we would wish for, where the Landlord’s solicitors are infeasible or unhelpful. Raising them directly with Landlord or the Landlord’s agent may speed up the process of agreeing the final acceptable form of Lease.

We will submit standard commercial Property and grant of Lease inquiries although sometimes these will be supplied automatically by the Landlord’s solicitors with the draft Lease. We may need to raise specific enquiries that you require or from our investigations of the freehold title, or that arise from the draft Lease nature of the Property valuation or surveyor’s reports and pre-Lease search results.

When you are purchasing a freehold Property and we would strongly advise that any purchaser of a freehold Property has a full suite of standard pre-contract searches, with perhaps some specific to the Property. These are the pre-contract/pre-grant of Lease searches are would usually include, for example a local authority search; Enviro search; Commercial Drainage and Water search; Chancel Repair Liability search; probably highway enquiry search as to the extent of the highway in relation to the Property; and then further searches and enquires that may arise as a result of the search results received for example a request for further planning building regulations or other documentations. For most Leasehold transactions carrying out a full set of searches which might be unavoidable if a Lender is involved and requires it, would be recommended and advisable. However the shorter the terms of the Lease and the less onerous the covenants and obligations imposed by the Landlord on the Tenant. The more difficult it is to justify the cost of carrying out a full set of searches which we have to submit, you have to pay for, we have to peruse the results of these, and raise inquires and further matters relating to those with the relevant third parties. We will usually discus with you whether you wish us to carry out these searches, the likely cost of those searches and why they might less essential, or simply justified on costs grounds for some transaction than others.

We will on receipt of replies to enquires raise any additional enquires and likewise any requisitions on the title.

We would always advise that we seek details of the Landlords superior Leasehold/Freehold title, to make sure that the Landlord can in fact grant the Lease proposed; whether the Landlord requires consent from its own Lender; whether there are any covenants within the freehold title that might interfere with your proposed use or occupation of the Leasehold Property; and check whether there are any restrictions, rights etc. that effect the freehold title, that could cause you difficulties or actually prevent you using the premise to be Leased to you.

Generally on a transaction where you are taking a Lease just as on any other land transaction or acquisition of a Property the rule is ‘Buyer Beware’. You need us and your other Advisers to carry out as much ‘due diligence’ as possible to reduce the risk to you of taking on an unsustainable unfair or overly onerous obligation, which in some cases can actually ‘crush’ the business that you wish to carry out from the Property.

If security is to be taken by a Lender we will have to report to them on the title and consider any valuation report and their instructions as to their requirements in relation to the Lease, which will be included in negotiations that take place for the Lease.

We will need to consider whether Stamp Duty Land Tax (SDLT) is payable on the rental or premium for the Lease which is a complex calculation. We will need full details of the rent before we can submit our enquiry using the Government’s website, calculator of both the details of the rental, and VAT payable and any premium and VAT, to make an assessment of the potential SDLT that will be payable on the grant of the Lease.

A SDLT return – this we will generally draft for you but it is your responsibility to ensure that it is correct and includes all the correct details. We will therefore send you the draft a SDLT return for you to countersign it and confirm that you are happy for us to submit it at the time you take the grant of the Lease. The deadline for submission of the SDLT return, and for payment, is now within only 14 days of the Lease date.

In terms of speed and keeping cost within reason we may recommend to you making contact with the local planning authority or other utility companies or authorities who will be able to advise you directly on for example the planning history of the site and the need for Planning Permission, Listed Building Consent or Building Regulation Approval for any change of use, building or engineering works etc. you propose. The building regulation approval history of the site and what further action you might need to take here to take the Lease, complete any alterations (usually repairing the Landlord’s consent as well) and use the premises as you wish.

In some cases, and this is more common than not now for new Lease you will be requested to accept a Lease outside the renewal provisions of the Landlord and Tenant act 1954, which will mean that you will have no statutory right to renew the Lease or to hold it over at the end of the contractual terms, subject to the provisions of this act. If this is the case a notice will have to serve on you and a simple declaration or statutory declaration will have to be completed by the Tenant to acknowledge that notice. If this is all done properly your Lease will end on the date its states it will end in the Lease, and you will have no right to stay in the premises after that date.

For a Lease inside the renewal provisions of the Landlord and Tenant act 1954 you have other rights. Some particular short forms of Lease; a Tenancy at Will, a fixed term of Leases for 6 months or less, and perhaps some rights to occupy which are not exclusive and might correctly be called a licence will be outside the renewal provisions of the Landlord and Tenant act 1954 in any event, but you would need our advice on whether this proposed form of occupation is in reality a tenancy and within the act or might not be, or is of such duration (for example a fixed term tenancy of 6 months or less) that you are most unlikely to have security in tenure under the Act. Seek advice early, so you know the implications of what is being discussed.

Once the procedure to investigate the Property and negotiate the Lease has been completed and the Lease has been agreed with any supplementary documentation for example Rent deposit Deeds or Licences to Alter etc., the documents will be drawn up executed and the grant of the Lease can be completed.

A SDLT return will have to be draw up and submitted, with any SDLT due, within 14 days of the completion of the Lease.

For many Leases some form of registration of either the rights under the Lease or the Lease itself will have to take place, following completion.

We do not generally advise on tax matters so where these are relevant for example in relation to VAT etc we will liaise with your Accountant or you with them, to make sure everything is in order from the date of Grant of the Lease.

Security of a Business Tenant under the Landlord and Tenant act 1954

I cannot go into great detail about the security you are given as a Business Tenant under the Landlord and Tenant act 1954, what amounts to a Lease within the act or not; what business use provides this additional security and what does not, or on the complicated interaction of various rules and requirements, all of which will become more apparent as the negotiations progress. However in very simple terms a Business Tenant occupying Leasehold premises for their own use will be entitled to hold over on the terms that they have let the premises on under the Landlord and Tenant Act 1954 following the end their contractual term. There are also specific requirements as to the notices that ate served by the Landlord to terminate a tenancy within the Act whether the Landlord will offer the Tenant the opportunity to negotiate a renewal at that time; or whether the Landlord intends to challenge the Tenants right to apply to the court for a new Lease on similar terms. At the then market rental, which unlike most rent review clauses within Leases is actually upwards and downwards in terms of whether the rent will increase or decrease in line with the market rental.

The Landlord may serve notice (not less than 6 months’ notice and not more than 12 months’ notice), in a prescribed form under the 1954 Act, indicating that the Landlord intends to challenge the Tenants right to renew which it can do on various grounds for example:-

  1. Breach of repairing obligations;
  2. Persistent delay in paying rent;
  3. Other substantial breaches of obligations;
  4. Availability of suitable alternative accommodation offered by the Landlord;
  5. Possession required for letting or disposing of the Property as a whole in the case of a sub-tenancy;
  6. that the Landlord intends to demolish or reconstruct the Property and to do so must have back occupation;
  7. that the Landlord has acquired the freehold over 5 years ago and intends to use the Property for its own business

Points you should be aware of

You need to appreciate the time it takes to carefully read through a commercial Lease; both for you and for us as your legal advisers. Leases have become longer documents over time and they are generally biased in favour of the Landlord. They are frequently over 50 pages long. Since one or two sentences within the Lease could have a very significant effect, for example limiting your use of the Property; providing for how long you will be liable to pay the rent and use the Property; whether you will be required to keep the Property in full repair or even put it in to full repair, under the repairing obligation; what you might be allowed to do in the future by way of alterations and what requirements you might have to comply with to obtain the Landlords consent to do so; whether you can transfer the Lease to someone else or sublet the premises in whole or part; and whether for example you will have a break clause within the Lease that you alone or perhaps you and the Landlord can activate to end your Lease, all of which can be included in a few words. Therefore you and we need to read through the Lease carefully and advise you as far as we can on a document of that length in highlighting the most important provisions and leaving you to check through the less significant areas, which may however be important to you either now or in the future. This will take time as our perusal and reading of a Lease must take place when we are not interrupted by phone calls meetings etc.

Timescale – the average

Taking the grant of the Lease will usually talk between 6 to 12 weeks from issue of the Lease package by the Landlord’s solicitors. This timescale is rarely taken into account by those who are discussing the taking of the Lease or the grant of one, and often the timescales for the grant of the Lease are completely unrealistic in terms of the work that has to take place, bearing in mind its complexity and the responses that might be required from third parties etc., to answer the questions that have to raised.

There may be particular provisions of the Lease that you wish to renegotiate or need to fully appreciate such as a full repairing obligation or an unlimited service charge which you will have to contribute a proportion of. We will want to go through with you all of these main covenants, obligations and provisions, to make sure you understand them and appreciate their future significance, if that is predictable.

The Leasehold obligations can be very significant (as we have already pointed) out expensive to comply with, and there is usually little flexibility within what a Landlord can enforce or not and therefore your potential liability. As a Lease is for a term of years and the provisions are complex and lengthy, you need also to take into account what might happen in the future in terms of wishing to terminate your liability under the Lease, transfer it to a purchaser of the business, or underlet it, so that you can obtain larger premises, or premises in a different area more suitable to you and your business, or to divert yourself of this Lease and its obligations.

The Landlord will want to impose obligations when you do so and these have implications to you for you as a Tenant as well.

There may be guarantees to consider and the implications of these. 

Development Agreements

We can act for you in connection with various development agreements such as options or conditional contracts overage agreements and promotional agreements. With over 30 years of real property experience Robert Sainsbury will be able to support you and your other advisers and complete the transaction in a friendly and approachable way.

We may not always be your first point of contact for a property transaction but we are pleased to be involved at an early stage to try and make it more straight forward later. Options conditional contracts and promotional agreements are complex. They involve negotiating a balance between you as the land owner for whom we will act and the Developers Promoters or those who will apply for planning permission on the basis of these contractual provisions.

The idea is to get a realistic and acceptable balance between the two parties during the negotiations to give you as the land owner the protection you deserve, the Developers or Promoters a reasonable return and the best opportunity of obtaining planning permission to develop the land, and to try and ensure that you will received a realistic and fair return on your input into this transaction namely the essential development of the land.

An outline of how the transaction might develop

The form of these transactions can vary significantly depending on the size of the proposed development the area of land the complexity of the requirements the Developer or Promoter will have to fulfil the time over which it might be subject to these provisions and the Developer or Promoter will need to seek planning permission.

One of the biggest issues in relation to Options, Conditional Contracts or Promotional Agreements is the attempt to predict an unpredictable future and within the agreement to try and provide for the obvious, or most likely scenarios and make sure there is a fair balance between the two of you, for these more predictable requirements.

We do not generally get in involved in negotiating the respective returns that you will achieve but these will be negotiated for you by your own Commercial or Agriculture Property Advisers who will be able to tell you what is common in the marketplace at the moment.

The Developers and Promoters will have experience in this area if chosen carefully and know what is needed to obtain the required planning permission. This nowadays can involve a considerable amount of preliminary work in terms of highway investigation environment investigation animal investigations archaeological investigations design and development plans; Community Infrastructure Levy costs or Section 106 Agreement costs and for external additional development infrastructure and cost; aside from the cost of the time expertise’s and planning fees that will have to be met in promoting the site or seeking Planning Permission which may involve actually obtaining designation of the site in The Local Plan or similar Local Planning Authority assessment of where development should take place, before the more detailed application for Planning Permission is sought.

The arrangements can take many months and often years and the idea behind a Promotion Option or Conditional Contract agreement is that the Developers or Promoters will take on that responsibility and finance it and the return will come and be reflected in the Option Agreement, Promotion Agreement or Conditional Contract agreement through the division of liabilities and/or reflected in the Purchase Price they will pay.

If the land is charged to a lender for security obviously their consent will be needed to do the transaction.

You will need to take into account the restrictions the Developer Promoter or Conditional Contract holder will want to impose to protect their interest in the Property and the limitations this may give rise to for you on future use and dispositions in relation to the Property. This also needs to be taken into account when agreeing the length of term of the option conditional contract or promotion agreement.

It also has to be understood that circumstances can change in the future and a site that looked ideal for development and economic may not be so in the future; market conditions can change and affect the interest that the Promoter Option holder and Conditional Contract holder has in the site and promoting it or obtaining planning permission for it. For Options and Promotional agreements there may be no end result in terms of a sale as the Option holder may not take up the option. The Promoter may be unable to find a Buyer. For a Conditional Contract in theory having obtained Planning Permission the Developer will have to proceed with the purchase the condition being fulfilled, but there are usually so many qualifications imposed on the exercise and bite of the condition by the Developers and their Solicitors that a Conditional Contract can end up looking very much like an Option.

Overage

When selling land with development potential (and sometimes when selling land with in fact no development potential or little or none), agreement may be reached on what is known as an Overage.

The attempt is being made to participate in the future increase in the value of the Property if it can be developed, even though you are selling the freehold by imposing overage on it for the future.

Again the overage agreement attempts to predict an unpredictable future and take into account the most likely scenarios. There is an additional difficulty with Overage and Overage Agreements in that this is not a recognised property right. Unlike for example a restrictive covenant imposed on land where you retain adjoining land or an easement over land where you retain the adjoining property that benefits from which easement or right, Overage is not recognised as a separate ‘property’ right to bind the land you have sold in the future.

One of the decisions to be made therefore when imposing Overage is how you will protect it for the future, and that in itself is a balance between imposing restrictions obligations or limitations on the land that make it unacceptable to a purchaser or their lender, and having an effective means of enforcing these obligations against future owners of the Property.

You will also have to consider Overage as the ‘cherry on top of a cake’ and not the cake. If you seek to obtain a high percentage on any overage provision you are giving the owner of the land a greater incentive to try and circumvent it, not to carry out or seek the Development, because they will not get significant return on it, or simply to wait to until the overage expires before they take that step.

Your Commercial Property Survey/Negotiator or Land Agent or Agricultural and Commercial Land Agent will be able to advise you on what are appropriate terms for the Overage; the period you should try to secure it for the percentage and what should give rise to trigger the payment. We will be able to advise on appropriate means to try and secure the Overage but you need to appreciate that it is not a certainty it will be secured. All of these arrangements are too complex to go into in detail here but we are happy to discuss them further with you if you think you have proposals to consider further. The ideal is to meet with your Land Agent/Commercial Property Adviser/Accountant and Planning Advisors (if you have them) and discus what the options are and the best way forward which will also depend on the Developers/Promoters and those interested in the Property and what they are prepared to agree with you as well as what the current market standards and arrangements are.

Cost and timescale

Once we have the details of the transaction or proposal Robert Sainsbury can give you a better idea of the likely cost and timescale for an average transaction, if there can be said to be an average for such arrangements. His time is changed at £185.00 per hour for a standard transaction and that £225.00 per hour for larger more complex transaction or matters; which most Option Conditional Contracts and Overage arrangements come under. All files are time costed but the charges will reflect the nature of the matter and the time involved so it is worth meeting Robert to see if he can assist and to let him have the back ground and indeed if there is anything it would be wise to look into further or take advise on now before you are further committed. He will, once he has an idea of the details of the transaction not only be able to confirm in writing the estimated fees but the related expenses you might incur whoever you instruct. By liaising with your Land Agent/Commercial Property Adviser and Accountants, he will be able to consider the other elements of the transaction that will be important to you including tax; future tax liability, so far as this can be assessed costs and expenses of future development of adjoining land and what the market appears to be like at the present time.

Freehold Sales and Purchases

We can act for you on your freehold purchase or sale of commercial property; development sites, industrial buildings, retail shops; offices and warehousing. With over 30 years of real property experience Robert Sainsbury will be able to support you and your other advisers, and complete your transaction, in a friendly and approachable way.

We may not always be your first point of contact for a property transaction but we are pleased to be involved at an early stage to try and make it more straightforward later.

Purchase

On a purchase we can support your commercial property surveyor or negotiator in agreeing suitable heads of terms and realistic timescales. Once these have been agreed we can let you have an estimate of costs, expenses and taxes (Stamp Duty Land Tax – SDLT) on your transaction and a realistic timescale from receipt of a full set of documentation from the Seller’s solicitors; we will check the title, raise enquiries, submit and examine pre-contract search results and deal with the negotiation of the contract documentation to make sure your transaction has a realistic timescale and runs, where possible, to plan. We provide face to face meetings locally, if need be on site to check boundaries or aspects only clear from a site visit and provide, where time allows a full written report so that you understand the legal aspects of your purchase; the documentation and the property. If there is insufficient time to do so before the contract signature meeting we will confirm the advice given before and at that meeting by a confirmatory report on title as soon as practical thereafter. If there are particular aspects of the procedure, in relation to the legal aspects of the property or where you might need to consider seeking other advice and assistance we can provide that help and more in depth discussions. We can act for the lenders in many transactions (though that is the lender’s choice) and for you in providing the required report on title to the lenders that the property has a marketable title or there are some areas they need to be aware of and in preparing security documents and to prefect that security by registration, later.

We will need to liaise with your Accountants and/or tax advisers on some aspects of the purchase in most cases and your commercial surveyor, who will value, survey and examine the property and whose report we will want to look through as soon as it is available.

An outline of a transaction:-

  • Subject to Contract Heads of Terms are agreed and these and the Particulars of the Property are forwarded to us. 
  • We will need to meet with you to obtain essential identification evidence face to face, get a picture of the transaction, the property and intended timescale, how it is to be financed and the source of funds.
  • We will let you have our initial client care letter and estimate of fees either before the initial meeting or more likely following it, when we understand the transaction proposed, though these initial details can often be taken over the telephone or by email. If we receive those initial instructions by telephone or email we will however rarely be able to act for clients we have not met and cannot ever act without full verified ID and confirmation of the source of funds. 
  • We will need to obtain Identification evidence to set up a file because that is part of our duty under Government requirements and as part of the Land Registration anti-fraud regime where we are required to act as “gatekeepers”. The majority of the money laundering and anti-fraud procedures rely on our knowing you and the source of the funds for your purchase.
  • You arrange your survey; if you have not done so before and any valuation for the lender (if any) as part of setting up your financial arrangements. You will need to ensure the lenders instructions are received by us in sufficient time to ensure before exchange of contracts you can fulfil them otherwise you are committed to the purchase and payment of monies without knowing they will be released by the lenders. On receipt of the instructions from the lenders we will complete those investigations and any pre-exchange clearances, which are generally run contemporaneously with the pre-contract negotiations and investigations we are carrying out for you.
  • Sometimes a lender will use their own independent solicitors and we will need to liaise with them to make sure all their enquiries and requirements are fulfilled (or can be) before you are committed to the purchase by an exchange of contracts.  
  • We will need to make contact with the Seller’s solicitors who will forward a draft contract package, including title, draft contract, and frequently replies to standard pre-contract enquiries. We will need a plan as part of that package, either from the title or if this is a sale of part of the property a Land Registry compliant plan prepared professionally for the Sellers, so that we can on receipt of confirmation of instructions from you and funds to cover expenses we can submit the usual and agreed searches. 
  • The legal transaction is now underway. 
  • On receipt of the survey report, which you may have to pass on to us or will be forwarded by your lender, replies to enquiries and receipt of the search results we will want to check through these and the title to see if there are aspects of the property or transaction you need to be aware of; might be of concern; where you or we, or your lenders (if any) need more information or clarification or further documentation, which in some cases we may need to obtain from the Seller’s solicitors or sometimes from third parties, such as the local authority. We may advise you of concerns that could change your view of the value of the property, about which the lenders will have to be informed if it affects the marketability or valuation of the property now or in the future; where further investigations, by way of example, a further survey, structural engineers’ report, the advice of a planning expert, your tax advisers or even an environmental investigation, might be needed. We may recommend these as precautionary or protective measures for you alone even if the Bank or other lender does not think they are needed.
  • All of these aspects of the legal investigations arise because of the basic principle “buyer beware” which means, in part, because of the use you might require for the property, the investment you or a lender is making and because generally property is (but not necessarily always) a fairly safe, solid investment, with more moderate risk, you will want to know what you are going to buy and whether, legally, at this point it is considered to have a marketable title and also for your particular use or purpose, will it be suitable?
  • We will at the same time be liaising with your other advisers, for example accountants, tax advisers and property surveyor/valuer to make sure they have the information about the property relevant to it value, tax for the transaction and statutory compliance, planning and use issues, where they may be involved.    
  • We will negotiate the contract and often the transfer document (the final legal document transferring the property to you) and prepare our report to you. 
  • These are not simple matters and they take time. Please, therefore, make sure that you consult with us early enough to ensure you will have sufficient time and have in mind and agreed a realistic timescale and target date. You will want to ensure you do not commit to expenditure or arrangements which cannot easily be adjusted, cancelled or rearranged without cost based. There is no legal certainty until exchange of contract and all this due diligence investigation and preparatory work to carry out before that stage is reached so you must not commit to timescales and expenditure based on subject to contract negotiations and target dates. 
  • We will prepare, when time allows (and preferably it will), a full written report on the legal aspects of the purchase and the property and usually meet with you to run through that report, before obtaining your approval of the transaction, property and contract and signature to it ready for exchange of contracts. If there is insufficient time to prepare this written report before the signature meeting our report will be sent, confirming the advice given at the meeting as soon as time allows.
  • Real property transactions require a written contract, hence the importance of the “exchange of contracts”, which means you will not be committed until all these matters have been dealt with, but neither will the Seller, either to sell to you or for the price agreed and with the completion date you are targeting. 
  • You will usually need to ensure that you have insurance set up ready for exchange of contracts as often the property will be at your risk from that point. So make your initial arrangements for insurance early and if your lenders, or you, are intending to back some borrowing with life insurance please also make sure you make those arrangements early so that last minute requirements of the insurers (for example a medical report) will not lead to a delay in exchange. 
  • On and from exchange you are committed to the purchase and completion on the date set, so everything needs to be in place and ready, whatever (generally) may happen from then.
  • When everyone is ready, the lenders (and sometimes their solicitors) and , you are comfortable with the transaction, the property and timescale, contracts, now agreed, will be signed by the parties, the deposit, which is usually 10% of the purchase price, collected and we will “exchange contracts” between solicitors. Always be careful not to sign anything before this point which might amount to a contract and bind you to something you are not yet ready for. The preparation and exchange of contracts should always be between solicitors unless it is the unusual circumstance of a sale at auction, where special rules apply and on which you should seek early and full advice from us before considering a purchase at auction.
  • On exchange of contracts you will have committed to the purchase and that will include the deposit you have paid and the completion date, which is when you will pay the balance of the monies and can obtain access/take over the property.
  • From exchange of contracts we will carry out final title searches, submit the report on title to the lender to obtain the monies the day before completion, and let you have our invoice and statement showing what will be needed to complete the transaction, pay any SDLT pay the balance of the monies or make up the difference  between lender’s advance and that sum, including Land Registry fees; have legal charge documents and transfers executed and generally set the transaction up ready for completion on the date agreed in the contract. 
  • On the completion date the balance of the monies will be paid and the title documents and transfer dated with the Sellers’ solicitors sending these to us following completion.
  • Sometimes exchange and completion will take place on the same date.
  • We will then submit the SDLT return within the 14 days required and the registration within the priority of our search result and on completion of the registration will send you a copy for checking and send the essential title documents to the Lenders in accordance with their charge over the property or retain the deeds if we have a storage agreement with you in our strong-room, letting you have our file closure letter at that point. 

Sale

On a sale we are also happy to assist from an early stage and it can have real benefits for the transaction it you make contact with us early, let us know your intentions, hoped for sale arrangements and timescales. We can advise on the availability and possible whereabouts of deeds, registered title and other necessary documentation. We can review with you, early on, the standard commercial property enquiries used on most commercial property transactions and you can seek out and obtain documents, such as planning documents, fire risk assessments, EPC’s and recommendation reports Asbestos Reports and other standard documentation that a Buyer’s solicitor will be expecting and might take time later in the transaction to locate, or which you may not have and so need to obtain, for example, from third party sources and then to pass on to us. Early preparatory work can sometimes save time and delays later, but there will nearly always be something unexpected or un-thought of that arises during the transaction, either because of a lawyer’s requirements, surveyor’s or lender’s queries or requirements which were not or could not be anticipated or might not have been considered of significance when the sale documentation was being prepared. However, early preparation will always help.

You will want to discuss the arrangements for the sale with your Commercial Property Agent, but you will also want to talk to your accountants and tax advisers to ensure the tax implications are understood and planned for. There might be timing issues and very occasionally a better structure to the sale but in all cases you will need to budget for the tax implications if any. There are standard commercial enquiries about Capital Allowances and VAT that will need to be referred to your accountants and tax advisers in any event to make sure replies given are accurate and prepared with care.

An Outline of a Transaction:-

  • Discuss the proposed sale with your accountants and tax advisers. 
  • Seek your preferred Commercial Property Agent.
  • Seek out your preferred solicitors – hopefully BWB. Often the first the solicitors hear about an intended sale is when a Buyer has been found and then there is surprise that it takes time to put together all the legal documents and the “contract package” ready to send out to the Buyer’s Solicitors. The time to instruct your solicitor is as you place the property on the market so some of the simple preparatory steps can be taken, not when the Buyer is found.
  • We will let you have our standard Client Care Letter and an Estimate of fees, if it is feasible, for the transaction or just for the preparatory work, if it is too early to do more. 
  • We will need to obtain Identification Evidence to set up a file and because that is part of our duty under Government requirements and as part of the Land Registration regime where we have effectively been appointed as the “gatekeepers” for the anti-fraud protection they operate. The money laundering and anti-fraud procedures rely on our knowing you and the source of any capital invested or tied up in property which is then to be sold.  
  • We will need to obtain the title, deeds if there are any and information held by lenders, by us, in our strong-room, or by you. The first matter to deal with is to check the title and make sure we have all the documents and information needed to prove title and the right to sell. You may need to provide authority to your Bank or other Lender to send us the Deeds.
  • We will send you the standard commercial property enquiries that seem most likely to be relevant to your transaction and liaise with you to obtain full details and supporting documents to draft replies to these standard enquires.  
  • We will usually send to your accountants the relevant tax enquiries so that these can also be prepared with care. The replies may also be relevant to the draft clauses to be used in the contract to be prepared. 
  • We can if you wish prepare at this stage “skeleton” draft documents so that we know when the instructions on a sale come in we can send out “the draft contract package” of contract, draft transfer (if relevant), title and replies to standard enquiries together with relevant supplementary documents such as planning permissions, building control approvals and final certificates, S.106 Agreements, environmental reports, asbestos reports, fire risk assessments and tax documents such as options to charge VAT and background to Capital Allowance claims. 
  • You may prefer to leave those preparations for when you have a firm, subject to contract, Buyer lined up but please bear in mind that it will take time to put all of these together at that time and therefore to issue the documents. 
  • Having issued the contract package the Buyer’s solicitors will usually have specific enquiries to raise either related to their client’s intentions, requirements or arising from the standard documents received, where further information is sought, changes to the drafted documents will be asked for and negotiated on and the Buyer’s will be sorting out their lender’s requirements, if they, have one, submitting searches and taking up any points from those search results, which can often lead to a request for further documents or additional replies to new enquiries. 
  • When the Buyer’s solicitor has its search results, lender’s mortgage offer or loan agreement and related security details (if any) and is happy with these and the contract documents and replies to enquiries they will report to their client and approve the documents so that we can report to you and obtain your signature to the contract in preparation for an exchange of contracts. 
  • We may need to liaise with you on completion dates, when you can give vacant possession, and the deposit to be accepted on exchange of contracts if the Buyer offers less than the usual 10%. Generally you will want to insist on a 10% deposit as it gives you greater security that the Buyer will fulfil the contract, the Buyer has sufficient incentive not to renege on their contract having more at stake if they fail to. Default on a contract is rare but not unknown and having that 10% to forfeit helpful to deal with such a blow, cover the costs of re-sale, disruption to your own plans and costs resulting and of course in a less buoyant market allow for any necessary reduction in the eventual sale price. 
  • We need to know about any borrowings secured on the property and security in existence if you have a lender at an early stage. We will seek an idea of the amount outstanding and will have to obtain final redemption/repayment figures or undertake to pay the net proceeds of sale to the lenders following completion if there is a charge on the property as under the standard contract terms these have to be paid off before or at completion. At completion they will need to be discharged from the proceeds of sale. We need to ensure you can comply with the terms of the contract and therefore that the sale price will allow for this repayment in full and cover all the sale costs etc. 
  • We will then exchange contracts at which time the completion date will be set when you generally must give vacant possession on a fixed date unless you are selling subject to a tenancy, for example, and the Buyer must pay the balance of the purchase money. 
  • We will have let you have our invoice and statement confirming the financial transactions that will take place at completion and will let you have that and the balance of the completion monies following completion. 
  • Final redemption figures will be obtained. 
  • Transfers executed ready for completion. 
  • We will need to reply to the Standard Requisitions on title and Completion information form sent by the Buyer’s solicitors to clarify and confirm the completion arrangements. 
  • We will then complete and the lender’s will be repaid and their discharge or END notification directly to the Land Registry Confirmed. 
  • We may need to monitor the Buyer’s progress on registration if it a sale of part or there is an overage agreement and let you have details once we have seen and checked their registration has been correctly completed, which can take several months. 
  • Once everything is tidied up we will send out our client closure letter. 

Costs and timescale

Once we have the details of a transaction or matter Robert Sainsbury can give you a better idea of the likely cost and timescale for an average transaction. His time is charged at £185 for a standard transaction and at £225 for larger or more complex transactions or matters. All files are time-costed but the charges will reflect the nature of the matter and the time involved so it is worth meeting Robert to see if he can assist once he has the background and indeed if there is anything it would be wise to look out for or take advice on before you are further committed. He will once he has an idea of the details of a transaction not only be able to confirm in writing the charges but the related expenses that you would incur whoever you instructed to act, such as Stamp Duty Land Tax (SDLT), search fees and Land Registry Fees.

Business Leases

We can act for you on your taking of a Lease of Commercial premises, which could be of an industrial or warehouse building, retail shops, offices, parks, hotels and conversions of agriculture buildings. A Lease or tenancy is essentially a grant of rights to use Property over a period of years, or perhaps only months. There are many areas in relation to business Leases in which the law intervenes by statute or regulation, and so you should always discus with your solicitors the implications of granting or taking a Lease or tenancy of commercial premises before you consider doing so.

There are various options available and the implications of the terms of the Lease can be very significant, particularly if the Lease is over a long term but even in a short term letting the obligations on the Tenant, in particular, can be very onerous, so you need legal advice on all aspects of the Lease or tenancy before you enter into it. With over 30 years of real Property experience, Robert Sainsbury will be able to support you and/or your other Advisers and complete your transaction in a friendly and approachable way.

We may not always be your first point of contact for a Property transaction but we are pleased to be involved at an early stage to try and make it more straight forward later.

Taking a Lease of Commercial/Business Property

A Lease, which is often 30 pages or many more usually of covenants and obligations imposed on the Tenant, should never be entered in to without taking legal advice on the implications of what you are considering signing.

Preparation by you

If you are taking a Lease on a full repairing obligation, or even a more limited to repairing obligation, you may want to have a survey carried out of the Property; and if it is part of a much larger building on which a service charge is payable by the individual Tenant of part, that survey might need to involve the other parts of the Building, as this could have serious implications on the level of service charge you must pay. Whether you wish to go to the expense of such surveys, or would prefer to try and mitigate in negotiations the risks of these obligations and negotiate some protection within the Leasehold terms, will depend very much on the nature of the negotiations between Landlord and Tenant, the length of the Lease, and the relative negotiating strengths of the two parties.

If you require finance in connection with the taking of the Lease, carrying out refurbishments, or other works and is intended to use the Lease as security for any borrowings, please let us have full details of your Lenders their contacts and their requirements, as soon as possible. You will not want to enter into the Lease until you know that you can comply with all the Lender’s requirements.

If you have received or started negotiating on the ‘Heads of Terms’ (a simple statement of the main terms of the Lease), please can you discus these with us before you agree them so that we can give you any advice at this stage to improve of the Heads of Terms before we find ourselves having to ‘negotiate against the Heads of Terms. If a Lease is produced by a Landlord’s solicitor based on Heads of Terms and we seek to change them the initial response is always this was a provision agreed and contained in the Heads of Terms, even if you as the potential Tenant had little idea of what the true implications of the proposed terms were or what is normal in the market place or possible with some negotiation.

If the Heads of Terms have been agreed please can you let us have them together with any Particulars of the Property Energy Performance Certificates (EPC) and Recommendation Reports etc that you have received from the Landlord or the Landlord’s agents. 

The procedure in outline

No two transactions involving the taking of a Lease are the same as each Property’s requirements and length of term will be different in each case, of course. If it is a new Lease one would normally expect that the Landlord’s agent will forward to us the Heads of Terms and Particulars of the Property together with the EPC and Recommendation Report. The Heads of Terms set out the fundamental and principle terms of the negotiated arrangement. The Landlords solicitors will obtain the freehold title out of which the Lease is to be granted (in most cases but not always) be checking whether Lender’s consent is required to the grant of the Lease, and whether there is anything in the freehold title that needs to be referred to or mentioned within the Lease.

We will need to meet with you to obtain essential identification evidence face to face, a picture of the transaction the Property and intended timescale, proposed terms of the Lease, how it is to be finance and the source of the funds.

The Landlord’s solicitors will then draft and issue the draft Lease to us for approval. We will go through the Lease and advise you and the Landlord’s solicitors of any amendments we consider essential or would recommend. We will liaise with you before we return the Lease amended to make sure that it contains everything you need in the way of rights, and that you have a reasonable understanding of the main terms of the Lease; the circumstances and obligations within it and you can then let us know whether you are comfortable with those in the circumcises of your previous negotiations with the Landlord and your comparative negotiation strengths. We will also be able to give you some idea of what is common within Leases in the current market.

We do not advise on the structure, state of repair statuary, compliance, value or rental value or a Property. These are matters for your commercial Property surveyor/adviser. They will obviously need to inspect and check over the Property before they can report to you on any particular aspects of the building proposed rental, main terms and conditions of the Lease that are uncommon in the market place, might give you particular problems, or even dissuade you from continuing with the Lease negotiations. There is of course no such thing as ‘a perfect Lease’ particularly as far as the Tenant is concerned, because of all the obligations on the Tenant, of which there are many, as compared to the obligations on the Landlord, which are few in comparison, for example of quiet enjoyment in the legal sense, perhaps an obligation to maintain some common parts or services of the Property and to insure the Property for example, whilst you will find there are 30 or 40 (at least) covenants and obligations imposed on the Tenant, which it must comply with.

Having discussed the Lease with you, amended it as far as you and we are comfortable with and returned it to the Landlord’s solicitors, we will have to await their response, and it may often be useful for you to have contact if possible with the Landlord or Landlords agent’s to negotiate or discuss changes directly that you or we would wish for, where the Landlord’s solicitors are infeasible or unhelpful. Raising them directly with Landlord or the Landlord’s agent may speed up the process of agreeing the final acceptable form of Lease.

We will submit standard commercial Property and grant of Lease inquiries although sometimes these will be supplied automatically by the Landlord’s solicitors with the draft Lease. We may need to raise specific enquiries that you require or from our investigations of the freehold title, or that arise from the draft Lease nature of the Property valuation or surveyor’s reports and pre-Lease search results.

When you are purchasing a freehold Property and we would strongly advise that any purchaser of a freehold Property has a full suite of standard pre-contract searches, with perhaps some specific to the Property. These are the pre-contract/pre-grant of Lease searches are would usually include, for example a local authority search; Enviro search; Commercial Drainage and Water search; Chancel Repair Liability search; probably highway enquiry search as to the extent of the highway in relation to the Property; and then further searches and enquires that may arise as a result of the search results received for example a request for further planning building regulations or other documentations. For most Leasehold transactions carrying out a full set of searches which might be unavoidable if a Lender is involved and requires it, would be recommended and advisable. However the shorter the terms of the Lease and the less onerous the covenants and obligations imposed by the Landlord on the Tenant. The more difficult it is to justify the cost of carrying out a full set of searches which we have to submit, you have to pay for, we have to peruse the results of these, and raise inquires and further matters relating to those with the relevant third parties. We will usually discus with you whether you wish us to carry out these searches, the likely cost of those searches and why they might less essential, or simply justified on costs grounds for some transaction than others.

We will on receipt of replies to enquires raise any additional enquires and likewise any requisitions on the title.

We would always advise that we seek details of the Landlords superior Leasehold/Freehold title, to make sure that the Landlord can in fact grant the Lease proposed; whether the Landlord requires consent from its own Lender; whether there are any covenants within the freehold title that might interfere with your proposed use or occupation of the Leasehold Property; and check whether there are any restrictions, rights etc. that effect the freehold title, that could cause you difficulties or actually prevent you using the premise to be Leased to you.

Generally on a transaction where you are taking a Lease just as on any other land transaction or acquisition of a Property the rule is ‘Buyer Beware’. You need us and your other Advisers to carry out as much ‘due diligence’ as possible to reduce the risk to you of taking on an unsustainable unfair or overly onerous obligation, which in some cases can actually ‘crush’ the business that you wish to carry out from the Property.

If security is to be taken by a Lender we will have to report to them on the title and consider any valuation report and their instructions as to their requirements in relation to the Lease, which will be included in negotiations that take place for the Lease.

We will need to consider whether Stamp Duty Land Tax (SDLT) is payable on the rental or premium for the Lease which is a complex calculation. We will need full details of the rent before we can submit our enquiry using the Government’s website, calculator of both the details of the rental, and VAT payable and any premium and VAT, to make an assessment of the potential SDLT that will be payable on the grant of the Lease.

A SDLT return – this we will generally draft for you but it is your responsibility to ensure that it is correct and includes all the correct details. We will therefore send you the draft a SDLT return for you to countersign it and confirm that you are happy for us to submit it at the time you take the grant of the Lease. The deadline for submission of the SDLT return, and for payment, is now within only 14 days of the Lease date.

In terms of speed and keeping cost within reason we may recommend to you making contact with the local planning authority or other utility companies or authorities who will be able to advise you directly on for example the planning history of the site and the need for Planning Permission, Listed Building Consent or Building Regulation Approval for any change of use, building or engineering works etc. you propose. The building regulation approval history of the site and what further action you might need to take here to take the Lease, complete any alterations (usually repairing the Landlord’s consent as well) and use the premises as you wish.

In some cases, and this is more common than not now for new Lease you will be requested to accept a Lease outside the renewal provisions of the Landlord and Tenant act 1954, which will mean that you will have no statutory right to renew the Lease or to hold it over at the end of the contractual terms, subject to the provisions of this act. If this is the case a notice will have to serve on you and a simple declaration or statutory declaration will have to be completed by the Tenant to acknowledge that notice. If this is all done properly your Lease will end on the date its states it will end in the Lease, and you will have no right to stay in the premises after that date.

For a Lease inside the renewal provisions of the Landlord and Tenant act 1954 you have other rights. Some particular short forms of Lease; a Tenancy at Will, a fixed term of Leases for 6 months or less, and perhaps some rights to occupy which are not exclusive and might correctly be called a licence will be outside the renewal provisions of the Landlord and Tenant act 1954 in any event, but you would need our advice on whether this proposed form of occupation is in reality a tenancy and within the act or might not be, or is of such duration (for example a fixed term tenancy of 6 months or less) that you are most unlikely to have security in tenure under the Act. Seek advice early, so you know the implications of what is being discussed.

Once the procedure to investigate the Property and negotiate the Lease has been completed and the Lease has been agreed with any supplementary documentation for example Rent deposit Deeds or Licences to Alter etc., the documents will be drawn up executed and the grant of the Lease can be completed.

A SDLT return will have to be draw up and submitted, with any SDLT due, within 14 days of the completion of the Lease.

For many Leases some form of registration of either the rights under the Lease or the Lease itself will have to take place, following completion.

We do not generally advise on tax matters so where these are relevant for example in relation to VAT etc we will liaise with your Accountant or you with them, to make sure everything is in order from the date of Grant of the Lease.

Security of a Business Tenant under the Landlord and Tenant act 1954

I cannot go into great detail about the security you are given as a Business Tenant under the Landlord and Tenant act 1954, what amounts to a Lease within the act or not; what business use provides this additional security and what does not, or on the complicated interaction of various rules and requirements, all of which will become more apparent as the negotiations progress. However in very simple terms a Business Tenant occupying Leasehold premises for their own use will be entitled to hold over on the terms that they have let the premises on under the Landlord and Tenant Act 1954 following the end their contractual term. There are also specific requirements as to the notices that ate served by the Landlord to terminate a tenancy within the Act whether the Landlord will offer the Tenant the opportunity to negotiate a renewal at that time; or whether the Landlord intends to challenge the Tenants right to apply to the court for a new Lease on similar terms. At the then market rental, which unlike most rent review clauses within Leases is actually upwards and downwards in terms of whether the rent will increase or decrease in line with the market rental.

The Landlord may serve notice (not less than 6 months’ notice and not more than 12 months’ notice), in a prescribed form under the 1954 Act, indicating that the Landlord intends to challenge the Tenants right to renew which it can do on various grounds for example:-

  1. Breach of repairing obligations;
  2. Persistent delay in paying rent;
  3. Other substantial breaches of obligations;
  4. Availability of suitable alternative accommodation offered by the Landlord;
  5. Possession required for letting or disposing of the Property as a whole in the case of a sub-tenancy;
  6. that the Landlord intends to demolish or reconstruct the Property and to do so must have back occupation;
  7. that the Landlord has acquired the freehold over 5 years ago and intends to use the Property for its own business

Points you should be aware of

You need to appreciate the time it takes to carefully read through a commercial Lease; both for you and for us as your legal advisers. Leases have become longer documents over time and they are generally biased in favour of the Landlord. They are frequently over 50 pages long. Since one or two sentences within the Lease could have a very significant effect, for example limiting your use of the Property; providing for how long you will be liable to pay the rent and use the Property; whether you will be required to keep the Property in full repair or even put it in to full repair, under the repairing obligation; what you might be allowed to do in the future by way of alterations and what requirements you might have to comply with to obtain the Landlords consent to do so; whether you can transfer the Lease to someone else or sublet the premises in whole or part; and whether for example you will have a break clause within the Lease that you alone or perhaps you and the Landlord can activate to end your Lease, all of which can be included in a few words. Therefore you and we need to read through the Lease carefully and advise you as far as we can on a document of that length in highlighting the most important provisions and leaving you to check through the less significant areas, which may however be important to you either now or in the future. This will take time as our perusal and reading of a Lease must take place when we are not interrupted by phone calls meetings etc.

Timescale – the average

Taking the grant of the Lease will usually talk between 6 to 12 weeks from issue of the Lease package by the Landlord’s solicitors. This timescale is rarely taken into account by those who are discussing the taking of the Lease or the grant of one, and often the timescales for the grant of the Lease are completely unrealistic in terms of the work that has to take place, bearing in mind its complexity and the responses that might be required from third parties etc., to answer the questions that have to raised.

There may be particular provisions of the Lease that you wish to renegotiate or need to fully appreciate such as a full repairing obligation or an unlimited service charge which you will have to contribute a proportion of. We will want to go through with you all of these main covenants, obligations and provisions, to make sure you understand them and appreciate their future significance, if that is predictable.

The Leasehold obligations can be very significant (as we have already pointed) out expensive to comply with, and there is usually little flexibility within what a Landlord can enforce or not and therefore your potential liability. As a Lease is for a term of years and the provisions are complex and lengthy, you need also to take into account what might happen in the future in terms of wishing to terminate your liability under the Lease, transfer it to a purchaser of the business, or underlet it, so that you can obtain larger premises, or premises in a different area more suitable to you and your business, or to divert yourself of this Lease and its obligations.

The Landlord will want to impose obligations when you do so and these have implications to you for you as a Tenant as well.

There may be guarantees to consider and the implications of these. 

Development Agreements

We can act for you in connection with various development agreements such as options or conditional contracts overage agreements and promotional agreements. With over 30 years of real property experience Robert Sainsbury will be able to support you and your other advisers and complete the transaction in a friendly and approachable way.

We may not always be your first point of contact for a property transaction but we are pleased to be involved at an early stage to try and make it more straight forward later. Options conditional contracts and promotional agreements are complex. They involve negotiating a balance between you as the land owner for whom we will act and the Developers Promoters or those who will apply for planning permission on the basis of these contractual provisions.

The idea is to get a realistic and acceptable balance between the two parties during the negotiations to give you as the land owner the protection you deserve, the Developers or Promoters a reasonable return and the best opportunity of obtaining planning permission to develop the land, and to try and ensure that you will received a realistic and fair return on your input into this transaction namely the essential development of the land.

An outline of how the transaction might develop

The form of these transactions can vary significantly depending on the size of the proposed development the area of land the complexity of the requirements the Developer or Promoter will have to fulfil the time over which it might be subject to these provisions and the Developer or Promoter will need to seek planning permission.

One of the biggest issues in relation to Options, Conditional Contracts or Promotional Agreements is the attempt to predict an unpredictable future and within the agreement to try and provide for the obvious, or most likely scenarios and make sure there is a fair balance between the two of you, for these more predictable requirements.

We do not generally get in involved in negotiating the respective returns that you will achieve but these will be negotiated for you by your own Commercial or Agriculture Property Advisers who will be able to tell you what is common in the marketplace at the moment.

The Developers and Promoters will have experience in this area if chosen carefully and know what is needed to obtain the required planning permission. This nowadays can involve a considerable amount of preliminary work in terms of highway investigation environment investigation animal investigations archaeological investigations design and development plans; Community Infrastructure Levy costs or Section 106 Agreement costs and for external additional development infrastructure and cost; aside from the cost of the time expertise’s and planning fees that will have to be met in promoting the site or seeking Planning Permission which may involve actually obtaining designation of the site in The Local Plan or similar Local Planning Authority assessment of where development should take place, before the more detailed application for Planning Permission is sought.

The arrangements can take many months and often years and the idea behind a Promotion Option or Conditional Contract agreement is that the Developers or Promoters will take on that responsibility and finance it and the return will come and be reflected in the Option Agreement, Promotion Agreement or Conditional Contract agreement through the division of liabilities and/or reflected in the Purchase Price they will pay.

If the land is charged to a lender for security obviously their consent will be needed to do the transaction.

You will need to take into account the restrictions the Developer Promoter or Conditional Contract holder will want to impose to protect their interest in the Property and the limitations this may give rise to for you on future use and dispositions in relation to the Property. This also needs to be taken into account when agreeing the length of term of the option conditional contract or promotion agreement.

It also has to be understood that circumstances can change in the future and a site that looked ideal for development and economic may not be so in the future; market conditions can change and affect the interest that the Promoter Option holder and Conditional Contract holder has in the site and promoting it or obtaining planning permission for it. For Options and Promotional agreements there may be no end result in terms of a sale as the Option holder may not take up the option. The Promoter may be unable to find a Buyer. For a Conditional Contract in theory having obtained Planning Permission the Developer will have to proceed with the purchase the condition being fulfilled, but there are usually so many qualifications imposed on the exercise and bite of the condition by the Developers and their Solicitors that a Conditional Contract can end up looking very much like an Option.

Overage

When selling land with development potential (and sometimes when selling land with in fact no development potential or little or none), agreement may be reached on what is known as an Overage.

The attempt is being made to participate in the future increase in the value of the Property if it can be developed, even though you are selling the freehold by imposing overage on it for the future.

Again the overage agreement attempts to predict an unpredictable future and take into account the most likely scenarios. There is an additional difficulty with Overage and Overage Agreements in that this is not a recognised property right. Unlike for example a restrictive covenant imposed on land where you retain adjoining land or an easement over land where you retain the adjoining property that benefits from which easement or right, Overage is not recognised as a separate ‘property’ right to bind the land you have sold in the future.

One of the decisions to be made therefore when imposing Overage is how you will protect it for the future, and that in itself is a balance between imposing restrictions obligations or limitations on the land that make it unacceptable to a purchaser or their lender, and having an effective means of enforcing these obligations against future owners of the Property.

You will also have to consider Overage as the ‘cherry on top of a cake’ and not the cake. If you seek to obtain a high percentage on any overage provision you are giving the owner of the land a greater incentive to try and circumvent it, not to carry out or seek the Development, because they will not get significant return on it, or simply to wait to until the overage expires before they take that step.

Your Commercial Property Survey/Negotiator or Land Agent or Agricultural and Commercial Land Agent will be able to advise you on what are appropriate terms for the Overage; the period you should try to secure it for the percentage and what should give rise to trigger the payment. We will be able to advise on appropriate means to try and secure the Overage but you need to appreciate that it is not a certainty it will be secured. All of these arrangements are too complex to go into in detail here but we are happy to discuss them further with you if you think you have proposals to consider further. The ideal is to meet with your Land Agent/Commercial Property Adviser/Accountant and Planning Advisors (if you have them) and discus what the options are and the best way forward which will also depend on the Developers/Promoters and those interested in the Property and what they are prepared to agree with you as well as what the current market standards and arrangements are.

Cost and timescale

Once we have the details of the transaction or proposal Robert Sainsbury can give you a better idea of the likely cost and timescale for an average transaction, if there can be said to be an average for such arrangements. His time is changed at £185.00 per hour for a standard transaction and that £225.00 per hour for larger more complex transaction or matters; which most Option Conditional Contracts and Overage arrangements come under. All files are time costed but the charges will reflect the nature of the matter and the time involved so it is worth meeting Robert to see if he can assist and to let him have the back ground and indeed if there is anything it would be wise to look into further or take advise on now before you are further committed. He will, once he has an idea of the details of the transaction not only be able to confirm in writing the estimated fees but the related expenses you might incur whoever you instruct. By liaising with your Land Agent/Commercial Property Adviser and Accountants, he will be able to consider the other elements of the transaction that will be important to you including tax; future tax liability, so far as this can be assessed costs and expenses of future development of adjoining land and what the market appears to be like at the present time.

Our team of specialist commercial property solicitors have extensive knowledge and experience which will enable us to deal with all aspects of your enquiry.

Call us on 01787 880440 or complete our online enquiry form so that we can arrange to speak to you.

Robert Sainsbury

Robert is the firm’s agricultural and commercial property lawyer. He joined Bates Wells & Braithwaite in 2003 having worked in East Anglia since qualifying as a solicitor in 1984.

Robert has many years’ experience of agricultural and commercial property work both freehold sales and purchases and the grant and taking of leases, options, promotional and overage agreements. He has given the Cambridge Law Society’s Agricultural Law up-date seminar in recent years.

In his spare time Robert spends a lot of time with his family, enjoys badminton and tennis and plays an active role within St Mary’s Church Bury St Edmunds.

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