A buyer wishing to purchase a commercial property submits an offer to the seller through an estate agent. As part of the offer the estate agent will require details of funding, a proposed time scale, solicitors acting etc. Negotiations on price and other matters are usually conducted through the estate agent. Once terms are agreed, details are submitted to each party's solicitors.
The general rule is 'caveat emptor' (buyer beware). The onus is on the buyer to carry out physical, structural and environmental surveys and valuation reports on the property. Usually there will be no guarantees/warranties available in relation to the physical condition of the property. A buyer should instruct a surveyor to carry out a survey in order to establish the physical state of the property and whether there is any disrepair or defects. The buyer's solicitor will investigate the title to the property, raise enquiries of the seller's solicitor and carry out other appropriate searches before an exchange of contracts takes place.
The seller's solicitors draft a sale agreement. The sale agreement is negotiated by the parties' solicitors and the agreed document is then signed by both parties. The sale agreement becomes legally binding upon exchange. Prior to this point, the seller and buyer are not legally bound to proceed. Exchange occurs when each party's solicitor delivers to the other a signed and dated agreement. A deposit (usually 5-10% of the purchase price) is normally payable by the buyer to the seller upon exchange. Once the exchange takes place, neither party can withdraw without incurring liability.
The property will usually be at the buyer's risk from exchange. If the property is substantially damaged after exchange but before completion (see below), the buyer is still obliged to proceed. Insurance arrangements must, therefore, be considered.
Completion occurs on the date specified in the sale agreement (this can be on the same day as exchange, although usually there is a short period between exchange and completion). At completion, the balance of the purchase price is paid and the formal documents transferring the property are dated. Legal title to the property passes to the buyer at this stage and the beneficial interest in the property passes upon registration of the transaction at the Land Registry. The buyer's lawyer deals with registration.
