A commercial property purchase guide is most useful before a price is agreed, not after. Whether you are buying a shop with a flat above it, an office, a warehouse or premises for your growing business, the right property can support your plans for years. The wrong legal structure, restrictive lease or unexpected repair liability can be expensive long after completion.

Commercial purchases are not simply larger versions of residential conveyancing. The due diligence is shaped by how the premises will be used, how they will be funded and whether tenants will occupy all or part of the building. A clear legal plan at the outset helps you assess the real cost and risk of the transaction before you commit.

Start with the right buying structure

Before making an offer, decide who will own the property. A company may buy premises for its trade, an individual may buy as an investor, or a pension arrangement may be suitable in some circumstances. Each option can have different tax, borrowing and liability consequences.

If a business will trade from the property, consider whether the trading company should own it or whether a separate property company should hold it and grant a lease to the trading company. Separating the asset from the trading business can sometimes offer protection, but it also creates ongoing landlord and tenant obligations. There is no standard answer: the right approach depends on your commercial objectives, finance terms and tax advice.

Buyers should also establish their authority to proceed. For a company purchase, this may include board approval, confirmation of directors and evidence of the company’s borrowing powers. Where several investors are involved, an agreement on decision-making, funding shortfalls and exit arrangements is sensible before contracts are exchanged.

Agree heads of terms before legal work begins

Heads of terms are usually not legally binding, but they set the commercial foundation for the deal. They should record the agreed price, deposit, target timetable, what is included in the sale and any conditions such as finance, planning consent or vacant possession.

For investment property, the terms should identify the existing tenants, the rent passing, rent review dates, arrears, rent deposits and any incentives or side arrangements. A headline rental figure can be misleading if a tenant has been given a lengthy rent-free period, a substantial break right or an informal concession.

Exclusivity is also worth considering. An exclusivity agreement can give a buyer a limited period in which the seller agrees not to negotiate with other purchasers. It will not remove every risk, but it may justify the time and cost of detailed investigations where the property is particularly important to your business.

Commercial property purchase guide: investigate the title

Your solicitor will review the title documents and raise enquiries with the seller’s legal representative. This is where a purchase moves beyond the brochure and estate agent’s description.

The title should confirm that the seller owns the interest being sold and has the right to transfer it. It should also reveal rights benefiting the property, such as access over a shared roadway, and rights burdening it, such as restrictions on use, rights of way, rights to run services or obligations to contribute to maintenance.

Particular attention is needed where the premises form part of a larger estate or building. You may rely on a shared entrance, loading area, car park, refuse area or service route that is not included in the title. The legal rights must be sufficient for the intended use. A warehouse is of limited value if delivery vehicles cannot lawfully access it, and a restaurant may face serious difficulties if extraction equipment or signage is restricted.

Restrictive covenants can limit the property’s use, appearance or future development. They may prohibit certain trades, prevent alterations without consent or require contributions towards estate costs. Some restrictions may be manageable, but they should never be treated as a minor detail where they affect your business model.

Check planning, building regulations and permitted use

Do not assume a building can be used for your preferred purpose because a similar business previously operated there. Planning use classes, local planning conditions and licensing requirements may affect whether your intended occupation is lawful.

A buyer considering a change of use, extension, subdivision or redevelopment should investigate planning position early. You may need planning permission, listed building consent, landlord consent or consent from a superior landlord. Conditions attached to historic permissions can also impose operational limits, including trading hours, delivery times, noise controls or restrictions on ventilation equipment.

Your legal adviser will consider planning information and building regulations documentation, but specialist planning advice may be necessary for a development-led purchase. If your plans are fundamental to the transaction, the contract may need to be conditional on securing the required consent.

Understand the lease if you are buying leasehold

Many commercial properties in London are leasehold. The remaining term, rent review provisions and repairing obligations can be just as important as the purchase price.

A lease with a short remaining term may be harder to finance and sell. Ground rent, service charge and insurance contributions should be reviewed carefully, particularly in multi-let buildings and managed estates. Ask for recent service charge accounts, budgets and details of planned major works. An apparently affordable unit can become a poor investment if significant repair costs are expected shortly after completion.

Commercial leases often place extensive repair obligations on the tenant. A full repairing and insuring lease may require the tenant to keep the premises in good repair even where they were already in poor condition at the start of the lease. A schedule of condition can limit that exposure in some cases, but its effectiveness depends on the wording of the lease and the quality of the evidence.

You should also check whether the lease allows your proposed use, assignment, underletting and alterations. If you intend to sell the business or sublet surplus space in future, restrictions in these areas can have a material effect on flexibility and value.

Inspect the building and environmental position

Legal due diligence does not replace a physical survey. A suitably qualified surveyor can identify defects, structural concerns, roof condition, asbestos risks, damp, fire safety issues and likely repair costs. This is especially important for older London buildings, converted premises and industrial units.

Environmental matters require careful thought where there has been manufacturing, storage, fuel use or other potentially contaminating activity. Liability for contaminated land can arise in circumstances that are not always obvious from a viewing. Environmental searches and, where appropriate, specialist reports can help assess the risk.

Energy performance requirements should also be considered. A property with a poor Energy Performance Certificate rating may require improvement works before it can lawfully be let, subject to applicable exemptions. This can affect both an investor’s income and an occupier’s future costs.

Finance, tax and transaction costs need early attention

Lenders usually require their own legal due diligence, valuation and conditions before releasing funds. Do not exchange contracts until the finance is in place or you are prepared to complete without it. Unlike many residential transactions, commercial contracts may offer little protection if funding falls through.

The purchase price is only one part of the budget. Costs can include Stamp Duty Land Tax, VAT, Land Registry fees, survey costs, lender fees, legal fees, insurance and any immediate works. The VAT treatment of commercial property can be particularly significant. A seller may have opted to tax the property, meaning VAT could be payable unless a transfer of a going concern applies. Specialist tax advice should be obtained early, as the structure and timing of the transaction matter.

Buyers using Islamic finance or another alternative funding structure should involve their legal and finance advisers from the beginning. These arrangements can involve additional documents, ownership steps or security requirements that affect the timetable.

Exchange only when the risk is understood

Once contracts are exchanged, the buyer is normally committed to complete on the agreed date. The contract should accurately reflect what is being bought, the agreed completion arrangements, VAT treatment, any conditions and responsibility for risks between exchange and completion.

Where a property is occupied, the seller should provide the tenancy documents, rent records, deposit information, insurance details and evidence of compliance with key lease obligations. If you are buying with vacant possession, the contract should make clear what that means and what happens if occupants remain.

After completion, the legal work continues. Your solicitor will deal with Stamp Duty Land Tax formalities, registration at HM Land Registry and notices required under leases or lender documents. Prompt registration is important because it protects your ownership and enables future borrowing or sale.

A commercial property purchase is a business decision with legal consequences that can last for decades. Taking advice early gives you more scope to renegotiate, impose conditions or walk away before you are contractually bound. White Horse Solicitors & Notary Public can provide practical, responsive support throughout the transaction, helping you proceed with a clear view of the property, the costs and the commitments you are taking on.