What’s the difference between residential and commercial conveyancing?
Most of us will be familiar with the residential conveyancing process, either from buying a home ourselves or through a friend or family member’s experience. When it comes to buying or selling a business premises, you may think that the conveyancing process works in a similar way. However, whilst both residential and commercial conveyancing are transactional, they do have some fundamental differences.
What does conveyancing mean?
Conveyancing is the process of transferring a property from one legal owner to another. In basic terms, it involves an agreement on the sale, the exchange of contracts and completion.
The conveyancing process involves a conveyancing solicitor or licensed conveyancer who will act on your behalf carry out all the legal and administrative work required to ensure the purchase or sale is legally valid. This includes investigating the title to the property (or premises) and commissioning any appropriate searches.
What are the key differences between residential and commercial property conveyancing?
Business vs. personal use
Commercial property transactions tend to involve a business premises, for example, a shop, office or warehouse. These businesses are typically set up as a limited Company, partnership or as a sole trader. Residential property conveyancing involves individuals who are looking to buy or sell a home, e.g. a flat or house.
Commercial property owners are often looking to buy or sell an ‘area’ to run their business from, and these premises are often purchased or sold as part of a wider purchase of a business. Where this is the case, it is common for an additional goodwill payment to be made to ensure the buyer has the right to adopt the previous owner’s client base and can continue trading under the same name.
Residential conveyancing transactions involve individuals who are personally engaged in one of the highest value transactions of their lifetime.
Leasehold vs. freehold
The majority of commercial conveyancing transactions our solicitors deal with involve a leasehold premises where rent is due to a landlord. Our residential conveyancers deal with both freehold and leasehold properties; it is not uncommon for residential property to be leasehold, especially new builds or flats.
The conveyancing process
Once a conveyancer has been instructed by the buyer, they will contact the seller’s solicitor to obtain the contract pack. They then check it, raise any enquiries, carry out the necessary searches and obtain a copy of the mortgage offer.
Once any enquiries have been answered, the conveyancing solicitor will report back to their client, and, once they are happy, arrangements are made for the deposit to be paid ready for the exchange of contracts. The buyer and seller agree on a completion date and contracts are exchanged; this is when both parties are legally committed to the transaction.
Once both parties’ conveyancers have drafted and agreed on the transfer deed, a final copy is signed ahead of completion. On the day of completion, the buyer’s conveyancing solicitor will prepare a completion statement, carry out pre-completion searches and apply to the buyer’s mortgage lender for the loan. The keys are then released by an estate agent and the buyer’s solicitor sends any stamp duty payable to HMRC, receives the title deeds and transfer deed, and then registers the property in the buyer’s name with the Land Registry.
In the initial stages of a commercial conveyancing transaction, a commercial property solicitor will investigate the property title and conduct enquiries by way of CPSEs (Commercial Property Standard Enquiries).
Once the buyer is satisfied, parties on either side of the transaction can negotiate and then exchange draft contracts. At this point, the deposit is paid and the transaction becomes legally binding.
In the build up to completion, pre-completion searches are undertaken by the buyer and a transfer deed is approved. The buyer will prepare the balance of the purchase money and the seller will discharge any mortgage.
On completion, the buyer’s conveyancing solicitor will pay the purchase price to the seller’s solicitor along with making any payments to HMRC regarding any Stamp Duty Land Tax incurred on the transaction. They will also submit an application to the Land Registry to register the purchase.
A key difference between commercial and residential conveyancing arises when there is the need for a commercial lease.
Taking on a commercial lease
A commercial lease will need to be negotiated with the premises’ landlord’s solicitor. A commercial property solicitor acting for the prospective tenant will investigate the title, and make enquiries via CPSEs.
Once the lease document is agreed, it is signed by both parties. Any stamp duty is paid and the lease is registered at the Land Registry if required. The tenant is then able to move in and begin to operate the business from the premises.
Thinking of buying or selling a business premises? Get in touch
Commercial property transactions can often be part of a larger transaction, where assets or shares in a company are purchased or sold. Our commercial conveyancing lawyers work closely with our corporate and commercial department who are able to draft and negotiate the relevant documentation on behalf of our clients.
Our commercial property solicitors work with business owners across the South West from our offices in Bristol, and we work closely with our commercial lawyers to provide peace of mind when it comes to making changes to your business. Call us on 0117 325 2929 or fill out our online enquiry form.