Purchasing commercial property is often one of the largest investments a business will make, so it can carry a lot of risk.
Conducting careful due diligence can uncover issues that could affect value, future use and the ability to sell the property.
Costly issues might not always be immediately obvious and many only become apparent when a sale has been finalised.
We encourage businesses to be aware of some legal implications associated with commercial property transactions and to seek guidance from an expert to avoid any headaches down the line.
Hidden planning restrictions and title covenants
If you were to buy a property with existing planning conditions that limit trade, you would also inherit these constraints.
Examples include restricted delivery hours, limits on occupancy and restrictions on food preparation.
As planning conditions are bound to the land and not the owner, your commercial property might become an accidental bottleneck to your business operations.
Constraints can be discovered by investigations into title deeds and reviews of Land Registry entries, which can be performed by a solicitor.
Poor environmental conditions
Much like planning conditions, environmental liability becomes the responsibility of the new landowner even if issues predate the property purchase.
While environmental searches are a good starting point, they might not provide the full picture needed to assess risk.
These kinds of searches only review historical digital records and cannot be used to verify the actual physical condition of a site.
Specialist reports may be necessary to identify missed issues such as flood risk, invasive species and historic contamination from previous commercial use.
Concealed financial liabilities
If a buyer has signed a lease before checking the planning position of a new commercial property, they might incur unexpected fees and enforcement notices.
These include Community Infrastructure Levy (CIL) charges, breaches of planning enforcement notices or unfulfilled planning obligations by previous owners or occupiers.
If this was not checked prior, your investment could rapidly diminish in value, leaving you unable to use the property as intended.
In extreme cases, you could even face enforcement action and be required to remedy breaches at substantial cost.
Legal due diligence checks can protect tenants from concealed liabilities, unearthing any hidden debts and ongoing financial obligations before contracts are finalised.
Building safety issues
While a property may appear safe upon first inspection, there can be significant inherited responsibilities to bring it in line with regulations.
Issues that are often overlooked are the presence of asbestos, fire safety risks and compliance with the Energy Performance Certificate (EPC).
As building safety compliance has become an increasingly significant regulatory risk, due diligence is crucial during the conveyancing process.
While a surveyor physically visits a property, a solicitor can investigate the legal paper trail to ensure you do not inherit safety and compliance roadblocks.
Inability to redevelop or alter property use
While an owner or occupier might initially believe they are able to change the use of a commercial property, this might not be the case.
Some buildings are protected by listed building status, conservation area controls or an Article 4 Direction which removes permitted development rights.
Ensuring a property can be redeveloped or altered involves identifying any hidden legal obstacles that are situated outside the standard planning system.
While architects and planning consultants might focus on local planning policies, a solicitor can investigate the hidden title restrictions and statutory constraints.
Meaby & Co’s solution – Thorough legal due diligence
Commercial property transactions are rarely a straightforward affair, as many potential issues require thorough checks to identify.
When evaluating if a property is the right fit for you, legal due diligence gives you confidence that you won’t be inheriting any unexpected liabilities.
A solicitor can make sure these checks are comprehensive, verifying every aspect of the transaction and alerting you to any red flags.
Before you can commit to a property, you need to make sure each legal box is ticked.
Speak to a member of Meaby & Co’s Commercial Property team for expert advice throughout the conveyancing process.
