How to prepare your commercial property for sale – some useful tips to ensure a quicker transaction

Whilst you may think that preparing the property for sale relates to showcasing the physical condition – clearing rubbish and touching up paint work, the truth is that there is much more you can do to ready a property for a smooth sale.

This article sets out some useful tips for preparing the paperwork which is necessary for a sale.

1. Obtain an EPC

Unless exempt, all properties being marketed for sale or letting should have a valid EPC.  If you are not sure if your property does you can check the EPC register at Find an energy certificate - GOV.UK

If you have a multi let building it may be that some parts have valid EPCs.  This is not sufficient, you will need an EPC for the entirety of what is being sold.
Your selling agent should be able to give you details of local EPC assessors who can visit your property and provide an EPC.

2. Check the VAT position

The general position in respect of property is that VAT is not payable unless the seller, or a previous owner, has waived the VAT exemption/opted to tax.  Often this is done if there have been refurbishment works and VAT costs were incurred which the owner wanted to reclaim.

If you are adding VAT to the purchase price then a buyer’s solicitor will need to see evidence of the VAT election.

If you have been letting your property and charging VAT on the rent to the tenants then you should already have this documentation in place as you will have supplied it to their solicitor at the time of the grant of the tenancy.

If you don’t have the documentation to hand check with your accountant or check the paperwork you received from solicitor who acted when you purchased the property.
Historically if you weren’t sure then you could contact HMRC and request confirmation as to the VAT position for your property.  Since 1st February 2023 unless it falls within an exception they won’t provide confirmation of a VAT election.

Not having the correct VAT paperwork can slow a transaction with the parties not being able to exchange or worse from a sellers point of view – the buyer insisting on the seller taking the risk in respect of VAT.  If you think your property is not registered, so agree to take the risk and it turns out that VAT does apply you will be responsible for paying the VAT which could prove to be costly.

3. Get a fire risk assessment

Legally the person or entity who is in control of the property is required to have a Fire Risk Assessment.  Depending on the type of building and the occupation this could be the landlord or the tenant.

If you have let the whole of your building without retaining any parts then the tenant would take on this responsibility so you should ask them to provide you with a copy.

If you are still the responsible person and don’t have a recent FRA then you need to commission one.

If you do have a existing FRA then check that all of the requirements and recommendations have been complied with.

4. Obtain an asbestos survey

As with the FRA the person responsible for obtaining an asbestos survey (“the dutyholder”) can vary, it can be the freeholder, tenant or managing agent.

If you don’t have an existing asbestos survey then it is sensible to arrange for one to be commissioned whilst the property is being marketed – the buyer’s solicitor will ask to see it and commissioning one once the transaction has started can lead to delays.

5. Tidy up your title

This is one which you will need your solicitor’s help with.  In the majority of sales the solicitor is not appointed until the deal has been agreed and your agent asks for the solicitor’s details for the memorandum of sale.

If you want to get ahead of the game you can appoint your solicitor whilst the property is still being marketed to help you get the legal pack prepared in readiness for an acceptable offer.

As part of doing so they can obtain a copy of your title.  Often there are old mortgages, debentures or other entries on the title which may no longer apply and parties have forgotten about.  A buyer’s solicitor will want them cleared off of the title prior to exchange of contracts. 

You can instruct your solicitor to make the necessary applications to the Land Registry now to remove any superfluous entries so as not to delay exchange.  

6. Consider development potential

It is likely when you instruct a solicitor to act for you in the sale of a commercial property that they will ask about development potential and whether you want to consider an overage payment should a future owner redevelop the property.

Overage agreements can be complicated and thought needs to be given as to what situations would trigger an overage payment, how it is to be calculated and who is responsible for paying it.

They take time to negotiate and so if you think it would be something you may require you should discuss it with your selling agent so they can advise on the possibility of development and any overage can be negotiated at the time offers are received from prospective buyers.

7. Prepare replies to CPSE

The buyer will require replies to commercial property standard  enquiries. These are industry standard enquiries and are very comprehensive.  The enquiries cover matters such as the planning history of the property, VAT, details of occupiers and any disputes.

There are different sets of CPSE depending on the transaction and your solicitor will be able to advise you as to which ones will apply to your transaction.

To avoid any delays in progressing the sale you should try and gather as much information as you can at an early stage so that the replies and accompanying documents can be provided to the buyer’s solicitor at the outset. 

8. Contract

If you have followed the above advice and appointed your solicitor to help prepare the property for sale they can also prepare the first draft of the contract.  This can then be tailored to include the buyer’s details, price and any specific points which have been agreed.   

Conclusion

Whilst you may not wish to incur legal costs in preparing the contract pack before you have a firm offer taking the steps outlined above to gather the necessary paperwork can save you significant time in getting from offer to exchange and completion.

For expert advice on preparing your property for sale, contact, Susan Collins on 020 8461 6135, or Sibel Vurdu on 020 8461 6179.