Commercial Property law differs from residential property law in many different ways. Furthermore, the conveyancing laws will also differ when it comes to commercial property or residential property. Commercial properties can be bought and sold the same way as domestic properties, but they are also generally occupied by commercial tenants under a lease. In fact, most commercial property transactions will involve leasehold property. However, a few of them are also freehold property.
A person wishing to buy commercial property will wish to ensure that the premises are suitable for his business. Moreover one would prefer that, ideally, his occupation of the property is flexible enough to enable the client to respond to any changes in his business requirements.
Commercial conveyancing covers a wide range of diverse transactions that vary from clients and businesses. For example, it can be the acquisition of a small coffee shop, the lease of a warehouse unit on an industrial estate or the purchase of a chain of leasehold bakery shops. It can even be the purchase of a run-down factory site for demolition and redevelopment as a retail park.
In commercial conveyancing, different types of lease are suitable for different types of properties, such as office buildings, factory units, shops, blocks of flats. In residential conveyancing, however, leases are commonly used for flats and accommodations, although some houses are held under ‘long leases’. A typical commercial lease has many elements in common with a lease of residential premises. Besides the differences in the leases, the main conveyancing procedure remains the same, with the initial checks and investigations being carried out before exchanging contracts and the transfer taking effect on the completion date.
Freehold commercial premises can be bought and sold, but most commercial transactions will involve dealing with leases. A lease is an agreement made between a lessor (also known as a landlord) and a lessee (tenant) which creates an interest in property. Unlike a freehold property, the interest created by a lease is for a determined number of years, usually in return for the payment of rent and usually the payment at the beginning of a premium. A lease gives the lessee an exclusive right to occupy the property during the term: the lessor retains his freehold estate, subject to the rights of the lessee.
Some commercial property is bought and sold together with the business which is being carried on there. There is normally an additional payment to the seller for ‘goodwill’, which is essentially the right to carry on dealing with the customers of the business. The sale and purchase of a business will follow a similar pattern to the sale and purchase of a vacant commercial property, except that there will be additional clauses in the contract dealing with employees, which goodwill and stock, including other things. Regardless of whether the property is leasehold or freehold, there will still usually be a three-stage process involving the tasks outlined above. This type of transaction is sometimes referred to as the sale of a business ‘as a going concern’.
If the property is freehold, then as part of the investigations prior to exchanging contracts it will generally be necessary to carry out the full range of searches. Most companies will offer the same searches for commercial property of either type, although the fees are usually greater for a freehold. If a client is taking a short lease, it may not always be necessary to carry out all those searches.
It is important to know the differences between the laws of residential conveyancing and commercial conveyancing. The two have certain differences when it comes to transaction requirements, purposes, clients etc. However most of the procedures remain the same throughout. Commercial conveyancing does not usually have any complications due to mortgages, unlike residential conveyancing. As a result, conveyancers must know how the difference on handling the two types of conveyancing.