Business Law
January 10, 2018

What's the difference between commercial & domestic conveyancing?

Whether you’re buying a house or a business, a flat or a shop, part of the process is invariably the conveyancing. If you’re leasing or renting a commercial property too, you’ll need to make sure everything is checked before you sign the contract. So what are the differences between commercial and domestic conveyancing?

What is conveyancing?

Firstly, let’s define exactly what ‘conveyancing’ means. Whether you’re buying or long-term renting a domestic or commercial property, conveyancing is the legal process of buying/ selling/ renting that property. It is possible to do it yourself without a legal representative, but as property law can be incredibly complicated and full of traps for the untrained, it’s best to trust the professionals.

A conveyancer is there to check over the legal documentation to ensure all parties are meeting their legal obligations. They also check deeds, and ensure that financial transactions are carried out correctly.

Commercial conveyancing

While there are a lot of similarities between commercial and residential conveyancing, there are some differences too.

In general terms, commercial property is exempt from VAT (currently 20%) unless it is less than 3 years old or the seller has elected to waive that exemption – known as an Option to Tax. Residential property in general is not subject to VAT. In the majority of cases (depending on the type of exchange) it is the purchaser who pays VAT. It is essential to get expert legal help to make sure you are paying the correct amount of VAT on a commercial property purchase.

In general, residential conveyancing happens when a deal has already been agreed between a buyer and a seller. The conveyancing expert then steps in to take over the process and make sure all paperwork and agreements are in order, and all financial transactions are processed correctly. In commercial conveyancing, the expert will often be involved in the process much earlier. So you’ll find that commercial conveyancers deal with a wider range of processes, including:

  • The sale and purchase of premises
  • Re-contract or revisions of new leasing or long-term rental agreements
  • The revision of existing leases or change of use agreements
  • Drawing up and arranging permit plans
  • Dealing with all paperwork for rent reviews, including ground rent in leased premises
  • Association Agreements
  • Arranging and Licensing applications

Commercial conveyancing is far more likely to deal with leasing agreements than residential conveyancing (except in London, which has a much higher proportion of residential leaseholds). So often owners are in fact commercial tenants, rather than property owners. In some cases, that can mean public sector landlords such as councils, which can further complicate the process.

The purchase of derelict property (such as an old factory) for demolition and conversion into a new industrial site would also fall under commercial conveyancing categories, and can be fraught with complications. This is especially the case if there are unusual factors to take into consideration before the purchase can be completed, such as the treatment of contaminated land, EIAs (environmental impact assessments), and planning permission.

The client’s role

In residential conveyancing, the client has a big role to play in the process, and the conveyancing expert will take instruction from them at all stages. The same applies to commercial conveyancing (if not more so), as the client’s knowledge of the terms of the lease, any planning permission applications and main terms need to be considered.

The main lease terms will be agreed and summarised in a letter know as a Heads of Terms. This lists all the essential information such as names and addresses, terms and conditions of the lease, and rent review periods (including any rent-free periods). You will need to work closely with your conveyancer to provide them with the information they need, bearing in mind, too, that leases are also very time sensitive. Always talk to a commercial conveyance specialist sooner rather than later, especially if your lease is coming up for renewal.

To discuss your residential or commercial property email Will Moore, Property Solicitor, or call Will on 01732 460565

The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice.  The law may have changed since this article was published.   Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.

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