Q: What is meant by exchange of contracts?
A: In a property transaction, contracts must be exchanged before the purchase of the property can go on to be completed. Until there has been an exchange of contracts, you do not have a legal obligation to purchase the property and may withdraw from the transaction. Contracts can be signed by both parties but they are not considered legally binding until they have been formally exchanged.
This formal exchange of contracts usually takes place over the telephone between the seller’s and the purchaser’s solicitor in accordance with one of the formulas set out by the Law Society.
Once exchange of contracts has taken place the contract becomes legally binding and neither party will be able to pull out of the transaction without facing certain penalties.
Q: If I am taking out a mortgage, what rights does this give the lender over the property?
A: The lender’s specific rights will always be stated within the mortgage deed and the corresponding documents. These provisions will mainly refer to the state in which you should keep the property and the requirement that you keep the property insured.
When taking out a mortgage for commercial property, the lender may require that their permission is obtained before you do certain things with the property, for example, if you wish to let the property to somebody else or to make any alterations to it.
Q: When will completion take place and what needs to be done afterwards?
A: Completion will take place on the agreed date set out in the contract and happens when the purchase price (or balance purchase price) is sent from your solicitor to the Seller’s solicitor. After completion, your solicitor will deal with the post completion requirements of the purchase. This will mainly include:
- Payment of Stamp Duty Land Tax (if applicable); and
- Registering your ownership at the Land Registry
Q: Why are searches carried out prior to the purchase of a commercial property?
A: Before entering into the purchase of a commercial property, your solicitor will carry out searches in order to establish as much information as possible about the property that you are buying before you legally commit to the purchase. There are several searches that can be carried out including: drainage and water, coal mining, chancel repair, environmental and probably the most important search when purchasing a commercial property; a Local Authority Search.
Q: Why is a Local Authority search important to carry out before purchasing commercial property?
A: A Local Authority search can provide a potential buyer with important information about a property that may substantially affect their decision to buy. This search provides you with detail on the use of the property and any planning applications that have been made in relation to the property and very importantly whether the property is subject to any compulsory purchase order. By obtaining this information, you can be confident that you can use your property for your intended purposes once the purchase has gone through.
Advice about buying a commercial property
If you are considering buying a commercial property and need an expert commercial property solicitor to answer any questions that you may have, call us at our offices in Leicester, Hinckley and Market Harborough.
Alternatively, you can contact me directly with any questions, at email@example.com