Case study: advising a developer on the conversion of a store into flats

Our commercial property lawyers acted for a property developer who purchased a closed-down store in Bristol to develop into 12 residential flats on a conditional basis.

During the purchase, the developer signed a conditional contract which specified that he would only be required to complete if he obtained satisfactory planning permission to develop the store into flats.

What is a conditional contract?

A conditional contract is a legally binding agreement where completion of the sale and purchase of a property is conditional based on specific requirements; for example, the buyer seeking planning permission. It is commonly used by developers.

What’s the difference between a conditional contract and an option agreement?

Unlike a conditional contract, where the purchase is dependent on a precedent, an option agreement grants the buyer exclusive rights to purchase a property from the other party, with no obligation to commit further, i.e. to obtain planning permission to develop. The agreement is usually made between a landowner and a developer.

Planning permission obtained

Last year, our client obtained planning permission (per the conditional contract) to develop the property. This included creating 12 residential flats, with the ground floor remaining as a commercial unit.

Delay in completion

The purchase contract required a timescale for competition of six months from the planning permission being granted. When the completion date approached, our client wasn’t ready to complete. Our solicitors prepared, agreed and completed a supplemental agreement to extend the completion date.

What is a supplemental agreement?

This is a legal document in which alterations can be made, adding to the terms of an existing contract without having to amend/rewrite the entire contract. Both parties to the existing contract would need to agree to a supplemental variation agreement, and it cannot be unilateral.

Development finance advice

Our specialist commercial property finance solicitors provided our client with legal advice on development finance, which included:

• Dealing with lender requirements
• Advising on the finance loan agreement, legal charge and debenture

Our client’s owner/director was also required to provide a Personal Guarantee for the loan. Barcan and Kirby’s Corporate and Commercial team reviewed the guarantee paperwork and advised on the risks associated with this.

What is a Personal Guarantee?

A Personal Guarantee (PG) is a form of additional security that lenders put in place whereby the company director agrees to be personally liable for debt should the company cease trading. Many lenders now require that guarantors receive advice from a solicitor before signing a PG.

Contact our commercial property lawyers

If you’re in the process of purchasing a commercial property and require advice regarding a commercial lease or any other commercial property matter, call our specialist team in Bristol on 0117 325 2929 or complete our online enquiry form.