Top 5 Pitfalls for Small Businesses Leasing Commercial Premises
Leasing a commercial property is a significant step for any small business. Whether you’re opening a retail shop, office, or industrial space, the lease agreement you sign will govern your rights and responsibilities for the duration of your occupation.
For many small businesses, navigating these leases can be a bit of a minefield. In this Blog, we highlight the top 5 pitfalls to watch out for when leasing commercial premises, and how to avoid them.
How do I Lease a Commercial Property?
To lease a commercial property for use as a business premises it’s advisable to employ the assistance and expertise of a solicitor or lawyer who specialises in commercial property leasing. The commercial property solicitor will ensure that the lease agreement you are intending on signing is fair and transparent and provides you, as the prospective tenant of a commercial property, with the necessary protections which includes fully understanding the terms of the commercial lease, your obligations as a tenant of a commercial property, any clauses relating to ending the commercial property lease agreement early and rental reviews.
Pitfall #1 – Not Understanding the Terms of the Lease
Commercial leases are often lengthy and filled with complex legal jargon. Some businesses can fall into the trap of not fully understanding key clauses such as rent reviews, service charges, and break clauses. Rent reviews, for example, may be based on market rates or RPI, which could result in unexpected increases.
How to avoid it: Engage a solicitor to review the lease and explain it to you in plain English. Make sure you understand your obligations as a tenant, particularly in relation to rent increases and any additional costs.
Pitfall #2 – Overlooking Repair and Maintenance Obligations
Many commercial leases include a “full repairing and insuring” (FRI) clause, which means that the tenant is responsible for the upkeep of the property, including structural repairs. This can lead to significant and unexpected costs, especially if the property is older or requires substantial work during the lease term.
How to avoid it: Always inspect the property thoroughly before signing the lease. It is also a good idea to negotiate for a schedule of condition, which limits your repair responsibilities to the condition the property was in when the lease started. Your solicitor can help you push for more favourable terms.
Pitfall #3 – Failure to Negotiate Break Clauses
A break clause gives the tenant the right to terminate the lease early, typically after a set period. Many small businesses don’t realise they can negotiate this clause, which can be vital for maintaining flexibility, particularly in uncertain economic times.
How to avoid it: When negotiating the lease, ensure a break clause is included, and check the conditions attached to it. Most break clauses can only be triggered if the tenant has fully complied with all terms of the lease, so it is essential to understand these conditions from the outset.
Pitfall #4 – Unclear Provisions for Rent Reviews
Commercial leases often contain rent review clauses, which allow the landlord to increase the rent at set intervals. However, the method for calculating the new rent can vary and may not always be transparent. Some small businesses are surprised by steep rent increases that they didn’t anticipate.
How to avoid it: Ask for clarity on how the rent review will be calculated and, if possible, try to negotiate for fixed rent increases or cap the amount by which it can be raised. Having a clear understanding of the rent review process before signing can prevent financial surprises down the line.
Pitfall #5 – Ignoring the Impact of Assignment and Subletting Restrictions
As your business grows or your needs change, you may want to assign (transfer) the lease to another party or sublet part of the premises. Many commercial leases contain strict restrictions on assignment or subletting, which can leave you stuck with premises that no longer suit your business.
How to avoid it: Ensure the lease terms give you some flexibility to assign or sublet if needed. This can be a vital safeguard if your business circumstances change, and it can offer a potential exit strategy if you need to either downsize or move to larger premises.
Demystifying Security of Tenure: Understanding the Landlord and Tenant Act 1954
In commercial property leasing, the Landlord and Tenant Act 1954 stands as a cornerstone statute, particularly concerning security of tenure – a concept that holds significant implications for both landlords and tenants. Let’s delve into what security of tenure entails under this landmark legislation and why it’s frequently excluded from commercial property leases.
A Blog by Stuart Knox. Partner and Head of Commercial Property
Final Thoughts
Leasing a commercial property can be one of the most significant financial commitments for a small business. By understanding and negotiating key lease terms, you can avoid common legal pitfalls and protect your business from costly surprises. Consulting with a solicitor experienced in commercial property law is essential to ensure your lease works for you, not against you.
A break clause is a provision in a commercial lease that allows either the landlord or the tenant to end a lease early without facing a penalty.
A break clause would typically specify the conditions for when it can be activated including any notice period for either party to exercise their right to terminate the lease and conditions that must be met to allow either party to exercise their right to terminate the lease, such as all rent payments must be up to date.
A rent review clause is an entry in a commercial lease agreement that specifies the frequency of any rent reviews that may take place. It provides the landlord with the opportunity to review the rent being charged on the lease and change the rent accordingly. A rent review clause specifies that the rent will increase during the term of the lease upon certain predetermined rent review dates. The new rent can be a fixed and certain sum, or the lease may state that the new rent shall be determined by reference to some formula or uplifted to current market value.
A Full Repairing and Insuring lease places the responsibility upon the tenant for the upkeep of the property and includes structural repairs. It also requires the tenant to either arrange the buildings insurance for the property or, more commonly, to cover to landlord’s costs for keeping the property fully insured.
Need help with a commercial lease?
Our team at Thornton Jones is here to assist. Get in touch with us today to discuss your leasing needs and ensure your business is protected from the start.
☎️ Call our Wakefield office on 01924 290 029
☎️ Call our Garforth office on 0113 246 4423
☎️ Call our Sherburn in Elmet office on 01977 350 500
☎️ Call our Mapplewell office on 01226 339 009
☎️ Call our Ossett office on 01924 586 466
The content of this blog post is for information only and does not constitute formal legal advice and should not be relied upon as advice. Thornton Jones Solicitors Limited accepts no liability for any such reliance upon this content. Where the post includes links to external websites, Thornton Jones Solicitors Limited accepts no responsibility for the content of such sites. Any link to a third-party website should not be construed as endorsement by Thornton Jones Solicitors Limited of any content, products or services which are outside our direct control.
Understanding Overage Agreements: What to Know Before Buying Land
An overage agreement serves as a strategic tool designed to safeguard the seller’s future interests. This contractual arrangement allows the seller to potentially receive additional payments if specific conditions – often tied to the property’s future value – are met after the sale. Whether it’s due to new planning permissions, land use changes, or successful development projects, understanding how overage agreements function can offer both buyers and sellers a way to navigate and benefit from the evolving property market.
An overage agreement is a contractual arrangement typically used in property transactions where the seller retains the right to receive additional payment in the future if certain conditions are met, usually related to the increase in the property’s value. These agreements are designed to protect the seller’s interest in situations where a property’s potential value may increase after the sale, for instance, due to planning permission or development.
How Does an Overage Agreement Work?
- Initial Sale: The property is sold at an agreed price, but the overage agreement stipulates that the seller may receive further payments if certain “trigger events” happen.
- Trigger Events: These are specific events that could increase the value of the land or property after the sale. Common examples include:
- Grant of planning permission for development.
- Change in land use (e.g., from agricultural to residential or commercial).
- Completion of a development project or sale of developed units.
- Overage Payment: When a trigger event occurs, the buyer must make an additional payment to the seller, usually calculated as a percentage of the increase in the property’s value or the profits generated from development.
What Are the Key Features of Overage Agreements?
- Time Limits: Overage agreements often have a set timeframe (e.g., 10-20 years) within which a trigger event must occur for the seller to receive additional payment.
- Payment Calculation: The amount the seller is entitled to can vary and is usually linked to the uplift in value or profits. For example, if planning permission is granted for housing on previously agricultural land, the seller might receive a percentage of the increase in land value.
- Mechanisms to Secure Payment: The seller may require legal mechanisms to ensure they are paid when the trigger event occurs. This can include registering a charge on the property, using restrictive covenants, or creating a contractual obligation.
What Are the Uses of an Overage Agreement?
- Development Land Sales: Often used when a buyer plans to develop land but has not yet secured planning permission. The seller wants to benefit from the increased value when permission is obtained.
- Land with Uncertain Future Value: Used when the future value of the land is speculative, such as land zoned for potential development or change of use.
What Are the Risks and Considerations of an Overage Agreement?
- Disputes: Overage agreements can lead to disputes over the timing of the trigger event, how the uplift in value is calculated, or whether certain obligations have been met.
- Complexity: These agreements can be legally complex, requiring clear and precise drafting to avoid misunderstandings.
Final Thoughts
In summary, overage agreements provide a valuable mechanism for sellers to benefit from potential future increases in property value. By establishing clear conditions and payment structures, both parties can ensure a fair arrangement that addresses the evolving nature of property development and value. Whether navigating a land sale with uncertain future potential or securing a fair share of future profits, overage agreements can play a crucial role in property transactions.
Contact us
☎️ Call our Wakefield office on 01924 290 029
☎️ Call our Garforth office on 0113 246 4423
☎️ Call our Sherburn in Elmet office on 01977 350 500
☎️ Call our Mapplewell office on 01226 339 009
☎️ Call our Ossett office on 01924 586 466
The content of this blog post is for information only and does not constitute formal legal advice and should not be relied upon as advice. Thornton Jones Solicitors Limited accepts no liability for any such reliance upon this content. Where the post includes links to external websites, Thornton Jones Solicitors Limited accepts no responsibility for the content of such sites. Any link to a third-party website should not be construed as endorsement by Thornton Jones Solicitors Limited of any content, products or services which are outside our direct control.
What to Expect in the Initial Stages of a Conveyancing Transaction
There are many steps involved in the initial stage (which we often call the initial instructions) of conveyancing. Here we attempt to break them down into easy-to-understand and digestible steps.
Step 1: How do I get a conveyancing quotation?
Obtaining a quote is easy. You can get a quote by using our online calculator, or you can call us and we’ll take your details over the phone and provide you with an instant quotation. The quote will be based on many factors such as the value of the property, whether the property is freehold or leasehold, or whether it’s an existing property or a new build property. Whilst it’s not always possible to know all the detail at the outset, the quote can give you a guide of how much the legal services and additional costs would be.
There are many differences between Freehold and Leasehold Properties. A freehold property means you own the property and the land it stands on outright and indefinitely, giving you full control and responsibility for maintenance. In contrast, a leasehold property means you own the property for a fixed period as per the lease agreement, but not the land. After the lease expires, ownership reverts to the landowner unless renewed. Leaseholders may need permission for major changes and must pay ground rent and possibly service charges, whereas freeholders do not have these recurring costs. Freehold properties generally have higher market value and provide more autonomy.
The conveyancing process for a new build property differs from that for a standard (resale) property due to several unique factors associated with new builds. Some key differences are highlighted below:
For New Build Properties, Buyers often deal with contracts and agreements specific to developers, which can be complex and include clauses about property completion dates, build quality guarantees, and potential modifications. Although, with a Standard Property, the contract is typically simpler and standard, involving the current owner and covering the immediate transfer of ownership. Secondly, New Build Properties Completion is often based on the construction timeline. There can be delays, and buyers might be given a “long-stop” date (a latest possible completion date) compared to a Standard Property, where Completion dates are usually set mutually by the buyer and seller and are more predictable.
Furthermore, the solicitor acting on New build transaction must ensure the developer has proper title to the land and that the new build is correctly registered. There might be additional considerations if the property is part of a larger development. However, Standard Property Title checks are usually more straightforward, focusing on the current owner’s title and any existing issues.
Step 2: How do I Instruct a Solicitor for a property purchase or a property sale?
If you are ready to proceed with your house purchase and/or sale, then instructing your solicitor is often as easy as calling them or clicking on an “instruct solicitor” button contained within an email you may have received. Here at Thornton Jones Solicitors, we will email you your detailed quotation and within your email is a button you can click to instruct us. Of course, if you prefer you may choose to instruct us over the phone.
Once instructed, we will ‘open a file’ for you, which basically means we input your details onto our computer system and use this ‘file’ to track the progress of your conveyancing transaction. Within 48 hours of instruction we will send to you your Client Care Pack.
Step 3: What is the Client Care Pack and what checks will be done?
The Client Care Pack is a set of documents that are both important and useful. It’s important that you take time to read everything that is sent to you in your Client Care Pack. Your Client Care Pack will include:
• A letter outlining the scope of our work and our fees and other conveyancing related costs;
• A Client Declaration Form which you must read, sign, and return to us;
• A Payment Diversion Fraud Leaflet (need a small explanation of what this is);
• Our Third Fort ID App Leaflet which explains how we use an application called Third Fort to verify your identity;
• Questionnaires relating to your transaction that you should complete and return.
This leaflet is provided to all our clients to explain the different types of scenarios whereby you should be more vigilant to minimise your exposure to property fraud. This leaflet specifically highlights how to protect yourself from becoming a victim of conveyancing fraud, and what action you should take if you suspect that you have been a victim to conveyancing fraud. These schemes that are conducted by criminals are highly sophisticated, and can include them impersonating your lawyer, to con you into making a payment to their account.
Ways to spot conveyancing fraud:
– Being cautious of unsolicited emails or calls
– Checking for email address inconsistencies
– Verifying bank account details with your solicitor
– Watching out for warning signs like pressure tactics
Lastly, if you’ve fallen victim to a scam, you must take immediate action. Report the fraud to your bank to allow them to freeze the funds and advise them of the fraudulent activity that’s occurred. You must also inform your solicitor and estate agent, change passwords and secure your email account. Cooperate with law enforcement and consider seeking legal advice for recovering financial losses.
Step 4: What happens once I’ve returned my initial instructions?
Once you have completed and returned your initial instructions (Client Declaration and questionnaires), the documents will be reviewed by your appointed Conveyancer and their assistant, and we will inform you if we require anything further. You will also receive a request to your mobile phone number and your email address asking you to complete your identification checks using our Third Fort app. If you have any issues with this, then by all means contact us so that we can arrange for your identify to be verified in person at one of our offices.
Third fort is an online app which we use to conduct enhanced Identity checks on clients. The client will firstly receive an invitation from their solicitor or conveyancer to use the Third fort app. This invitation typically comes via email or SMS and includes a link to download the app. The client can then download and install the Third fort app on their smartphone from the App Store and set up an account by entering their email address and creating a password. They may also need to verify their email address. The app guides the client through the process of verifying their identity which typically involves:
Document Upload: The client is prompted to take photos of identification documents, such as a passport, driving license, or national ID card.
Selfie: The client takes a selfie within the app to match their face with the photo on the ID document using facial recognition technology. The client may also be asked to provide proof of address. This usually involves taking a photo of a utility bill, bank statement, or other acceptable documents that show their name and address. Once all required information and documents are uploaded, the client submits them through the app. The information is then securely sent to the solicitor or conveyancer for review.
Contact us
If you are looking to buy or sell a property then call us today for a free no-obligation quote or use our online conveyancing calculator for an instant quote.
The content of this blog post is for information only and does not constitute formal legal advice and should not be relied upon as advice. Thornton Jones Solicitors Limited accepts no liability for any such reliance upon this content. Where the post includes links to external websites, Thornton Jones Solicitors Limited accepts no responsibility for the content of such sites. Any link to a third-party website should not be construed as endorsement by Thornton Jones Solicitors Limited of any content, products or services which are outside our direct control.
Seven Things to Look Out for When Converting a Commercial Property for Residential Use
Converting a commercial property into a residential space can be a lucrative investment, but it involves several legal and practical considerations. Here are seven crucial things to look out for.
1. Planning Permission and Permitted Development Rights
Understanding whether your property conversion falls under Permitted Development Rights (PDR) is crucial. PDR allows certain changes without planning permission, but it is essential to confirm if your project qualifies. The current user class designation will be relevant, together with the property’s location, size, and the extent of alterations.
- Action Point: Consult with the local planning authority (LPA) to determine if your project qualifies for PDR and understand any prior approval requirements.
2. Building Regulations Compliance
Conversions must comply with building regulations to ensure safety, health, and energy efficiency. These regulations cover structural integrity, fire safety, insulation, ventilation, and accessibility.
- Action Point: Engage a qualified architect or surveyor to guide you through the building regulations approval process. Consider getting a building control officer involved early on.
3. Local Planning Policies and Restrictions
Local authorities may have specific policies or restrictions that could affect your conversion project. These could include conservation area restrictions, Article 4 Directions (which can remove PDR), or requirements for affordable housing contributions.
- Action Point: Research the local planning development plan. It is also wise to seek advice from a local planning consultant.
4. Leasehold Issues and Freeholder Consent
If the commercial property is leasehold, you’ll need to obtain consent from the freeholder for the change of use. This can sometimes involve negotiating new lease terms or paying a premium. Additionally, you should check if the lease itself imposes any restrictions on use or alterations.
- Action Point: Review the lease terms thoroughly and communicate with the freeholder early in the process. Consulting a property lawyer can help navigate this stage smoothly.
5. Financing and Property Valuation
Securing financing for a conversion project is usually more complex than arranging a normal residential mortgage. Lenders will want to see a detailed plan, including cost estimates and timelines. Additionally, understanding the post-conversion value of the property is crucial for assessing the project’s viability.
- Action Point: Work with a financial adviser who specialises in property development to explore your financing options. Consider a valuation from a chartered surveyor to understand the potential value uplift post-conversion.
6. Environmental and Sustainability Considerations
Modern buyers are increasingly concerned with sustainability. Ensuring your conversion meets high environmental standards can make the property more attractive and future-proof. Consider energy-efficient windows, insulation, and sustainable materials. Also, check for any environmental restrictions or requirements that could affect your project.
- Action Point: Incorporate sustainable practices and materials into your design. Consult an environmental consultant to ensure compliance with relevant regulations and to improve the building’s energy performance certificate (EPC) rating.
7. Impact on Neighbouring Properties and Community
Converting a commercial property can impact the local community and neighbouring properties. Issues such as increased traffic, changes in local amenities, and noise during construction should be considered. Engaging with the community and addressing their concerns can help in gaining support for your project.
- Action Point: For larger developments, conduct a community impact assessment and engage with local residents and businesses early in the planning stages. Consider their feedback in you are planning to minimise negative impacts and enhance community support.
Permitted Development Rights (PDR) allow certain types of property changes without needing full planning permission. In the context of commercial to residential conversions, PDR can simplify the process by bypassing the need for a detailed planning application, provided the conversion meets specific criteria outlined by the local planning authority.
Freehold ownership means you own the building and the land it stands on indefinitely. Leasehold ownership, however, means you own the property for a set period (the lease term) but not the land. Leaseholders may face restrictions on property modifications and are usually required to pay ground rent and maintenance fees to the freeholder.
Conclusion
Converting a commercial property to residential use involves navigating various legal, financial, and practical challenges. By understanding planning permission, building regulations, property tenure, financing, utilities, community impact, and legal obligations, you can better manage the conversion process and ensure a successful and compliant project. For more detailed guidance, consult with property professionals and local authorities to tailor your approach to your specific project needs.
Contact us
☎️ Call our Wakefield office on 01924 290 029
☎️ Call our Garforth office on 0113 246 4423
☎️ Call our Sherburn in Elmet office on 01977 350 500
☎️ Call our Mapplewell office on 01226 339 009
☎️ Call our Ossett office on 01924 586 466
The content of this blog post is for information only and does not constitute formal legal advice and should not be relied upon as advice. Thornton Jones Solicitors Limited accepts no liability for any such reliance upon this content. Where the post includes links to external websites, Thornton Jones Solicitors Limited accepts no responsibility for the content of such sites. Any link to a third-party website should not be construed as endorsement by Thornton Jones Solicitors Limited of any content, products or services which are outside our direct control.
Commercial Property Stamp Duty Land Tax
Understanding Stamp Duty Land Tax (SDLT) for Commercial Property Leases
Most people understand that Stamp Duty Land Tax (SDLT) is a tax payable when purchasing residential or commercial property. However, many are unaware that SDLT can also be payable by a tenant when taking a new commercial lease, provided certain thresholds are met. SDLT is imposed on the value of the lease transaction, and failure to deal with it correctly can result in penalties and interest.
This guide explains how SDLT applies to commercial property leases and what tenants need to be aware of.
What is Stamp Duty Land Tax (SDLT)?
Stamp Duty Land Tax (SDLT) is a tax on land and property transactions in England and Northern Ireland. In the context of commercial property leases, SDLT may be payable on the Net Present Value (NPV) of the rent payable over the term of the lease, and any premium paid for the grant of the lease (an upfront lump sum).
How do I Calculate SDLT Liability on Commercial Leases?
SDLT on commercial leases is calculated differently from SDLT on freehold property purchases. There are two potential elements to consider: rent and premium.
Stamp Duty on the Net Present Value (NPV) of the Rent
The Net Present Value represents the total value of rent payable over the lease term, discounted to today’s value. The calculation itself is complex, but HMRC provides an online SDLT calculator that will calculate the NPV automatically once the rent and lease length are entered. The SDLT rates applied to the NPV of rent are:
- Up to £150,000: 0%
- Over £150,000: 1% on the amount exceeding £150,000
Only the portion above £150,000 is taxed at 1%.
Stamp Duty on Lease Premiums
If a premium is paid for the grant of the lease, SDLT is payable on that premium in addition to any SDLT due on the rent. SDLT on premiums is calculated in the same way as SDLT on commercial property purchases, using the following rates:
- Up to £150,000: 0%
- £150,001 to £250,000: 2%
- Over £250,000: 5%
Both elements (rent and premium) are assessed separately and then combined to determine the total SDLT liability.
How do I Calculate SDLT Liability on Commercial Leases?
In almost all cases, the tenant is responsible for paying SDLT on a commercial lease. This applies whether the SDLT arises from the rent, a premium, or both.
The landlord does not usually have any SDLT liability in relation to the grant of a lease, although they may have other tax obligations depending on their circumstances. It is therefore essential for tenants to factor SDLT into their overall transaction costs at an early stage.
SDLT Filing Deadlines, Penalties and Common Mistakes for Commercial Tenants
SDLT Deadlines
An SDLT return must be submitted, and any SDLT due must be paid, within 14 days of the “effective date” of the lease. The effective date is usually the lease commencement date, but it can be earlier if, for example, the tenant takes possession before the lease is formally completed.
Penalties and Interest
If the SDLT return is filed late or the tax is paid after the deadline, HMRC may impose:
- Automatic late filing penalties
- Daily penalties for prolonged delays
- Interest on late-paid tax
These costs can quickly escalate, even where the amount of SDLT due is relatively modest.
Common SDLT Mistakes
Commercial tenants frequently encounter problems due to:
- Assuming SDLT is not payable because no premium is paid
- Failing to calculate or declare SDLT on the NPV of rent
- Missing the 14-day filing deadline
- Incorrectly calculating rent reviews or stepped rent for NPV purposes
- Overlooking SDLT obligations on lease variations or renewals
Taking professional advice early can help avoid these issues.
When we represent you in a lease transaction, we prepare and submit the SDLT return on your behalf and ensure that any SDLT due is calculated correctly and paid on time.
Conclusion
Understanding your Stamp Duty Land Tax obligations is crucial when taking a lease of commercial property. SDLT can represent a significant cost and is subject to strict deadlines and penalties for non-compliance. This is one of many reasons why tenants should consider appointing an experienced commercial property solicitor when entering into a lease.
If you are considering a commercial property transaction, we are here to guide you through the process and ensure that your SDLT and other legal obligations are dealt with efficiently and correctly.
The content of this blog post is for information only and does not constitute formal legal advice and should not be relied upon as advice. Thornton Jones Solicitors Limited accepts no liability for any such reliance upon this content. Where the post includes links to external websites, Thornton Jones Solicitors Limited accepts no responsibility for the content of such sites. Any link to a third-party website should not be construed as endorsement by Thornton Jones Solicitors Limited of any content, products or services which are outside our direct control.
Contact our Commercial Property Solicitors in Garforth, Leeds
Thornton Jones Solicitors
Westbourne House
99 Lidgett Lane
Garforth
Leeds
LS25 1LJ
Tel: 0113 246 4423
Fax: 0113 831 4929
Email: enquiries@thorntonjones.co.uk
Contact our Commercial Property Solicitors in Wakefield
Thornton Jones Solicitors
Bank House
1 Burton Street
Wakefield
WF1 2GF
Tel: 01924 290029
Fax: 01924 290240
Email: enquiries@thorntonjones.co.uk
Contact our Commercial Property Solicitors in Ossett, Wakefield
Thornton Jones Solicitors
25 Bank Street
Ossett
WF5 8PS
Tel: 01924 586466
Fax: 01924 290240
Email: enquiries@thorntonjones.co.uk
Contact our Commercial Property Solicitors in Sherburn in Elmet, Leeds
Thornton Jones Solicitors
6 Finkle Hill
Sherburn in Elmet
Leeds
LS25 6EA
Tel: 01977 350500
Fax: 0113 831 4929
Email: enquiries@thorntonjones.co.uk
What To Expect When Completing on a Property Purchase
It’s National Conveyancing Week this week, a week long campaign designed to help people better understand the conveyancing process. Today, in collaboration with Mike Dobson Estate Agency, we help you understand a little better what to expect when you are completing on a property purchase.
So, you’ve exchanged contracts and completion day has finally arrived! But what is completion and what should you expect?
What is Completion?
Completion is arguably one of the most important stages of the conveyancing process after exchange of contracts. Legally, it is the final part of the buying process, when the property ownership is transferred from the seller to the buyer.
This is the day that the seller must vacate the property. The contract which both the seller and buyer sign, has certain provisions called “special conditions”. These conditions contain information such as what time the property has to be empty by. Your solicitor will make you aware when sending documents for signing, what time you need to vacate by.
Practically, completion is the day you receive your keys to your new home and move in to the property.
When is Completion Day?
When exchange of contracts takes place, the contract is dated with the completion date agreed by the chain. Your solicitor will have discussed this date with you in advance and you will have agreed that date is suitable for you. Completion is always on a weekday, so the money is transferred and the transaction confirmed on the same day.
Friday is usually a popular option, giving the buyers enough time to move in and unpack over the weekend. You can usually find us lawyers having a very busy Friday!
One Week Count Down To Completion!
Mike Dobson Estate Agent recommends that if you choose them as your agent for your move, you can be assured of top quality service. A week before your move, we will send you a handy check list with tips and things to remember, such as:
- Who you need to notify that you have moved home (banks, doctors, post office etc);
- Ensuring you have arranged a mail redirect;
- Paying all outstanding home bills, including milk, window cleaner and gardener;
- Making arrangements for young children for the day of completion – no one wants an overly tired toddler whilst trying to juggle boxes;
- Look after your pets by using proper pet carriers for them to travel in.
Mike Dobson also advise to touch base with the seller a few days before completion to discuss the keys and when to hand them over. Similarly, they also speak with the buyer to advise them that on completion day, they will let them know once they have heard from the sellers solicitors releasing the keys.
What Happens on Completion Day?
Step 1 – Funds are sent from the buyers solicitor to the sellers solicitor. We are in the hands of the banking system, so unfortunately we cant provide a time completion will take place.
If you have just a purchase, then funds are sent to the sellers solicitors early morning, as we already have your mortgage funds. Where we can, we ask for the lender to send the mortgage funds to us the day before. So we can send the purchase monies out as early as possible on completion day.
Step 2 – Once the Funds are received it is the sellers solicitors job to then call the buyers solicitor and advise them that money has landed. They also then call their client to let them know and check how they are getting on with vacating the property. The sellers solicitor will then call the agent to advise that keys can be released.
Step 3 – Key collection & paperwork. Mike Dobson Estate Agency advises that on completion, once we get the call from the sellers solicitors, that’s when we give the buyers a call and advise either that we have the keys and they can collect or that the seller is still packing up and the keys will be dropped off shortly.
So, we’ve advised you that completion has taken place. In the background, we will also be dealing with repaying your existing mortgage lender and paying agents fees. If you are buying, submitting your stamp duty form and putting in place any indemnity polices.
What Happens After Completion?
After completion takes place, your solicitor is then tasked with updating the Land Registry. This is when the property register changes from seller to buyer. This can take a significant amount of time depending on the transaction type, as we have to wait for Land Registry to process the application.
Contact us
☎️ Call our Wakefield office on 01924 290 029
☎️ Call our Garforth office on 0113 246 4423
☎️ Call our Sherburn in Elmet office on 01977 350 500
☎️ Call our Mapplewell office on 01226 339 009
☎️ Call our Ossett office on 01924 586 466
The content of this blog post is for information only and does not constitute formal legal advice and should not be relied upon as advice. Thornton Jones Solicitors Limited accepts no liability for any such reliance upon this content. Where the post includes links to external websites, Thornton Jones Solicitors Limited accepts no responsibility for the content of such sites. Any link to a third-party website should not be construed as endorsement by Thornton Jones Solicitors Limited of any content, products or services which are outside our direct control.
My Mortgage Offer Has Been Issued – What Are The Next Steps?
It’s National Conveyancing Week this week, a week long campaign designed to help people better understand the conveyancing process. Today, with the help of Luke Senior of Just Mortgages, we explain what the next steps are once your mortgage offer has been issued.
A Mortgage Offer is the final step of the application process and is processed once the Lender has carried out their final checks and is happy to proceed. The offer is official confirmation that the bank will lend you the monies which have been applied for to purchase a property.
The mortgage offer, once finalised, will be issued to you and ourselves as your acting solicitor. As your Conveyancing Solicitor we will carry out a review of the offer which will include:
- We’ll check the accuracy of the mortgage offer – We will check the correct full names are noted on the offer as per your ID documentation and that the property address is correct as per the Title Information Document from Land Registry.
- We’ll check the advance we are to receive from the lender on completion – We will check this is the amount you were expecting to borrow and that we have source of funds for the remainder of the purchase price you are to contribute.
- We’ll check any special conditions of the lender that we as solicitors are to adhere to – For example, if there is an occupier who is to reside at the property the lender will usually require them to sign a waiver to waive any rights over the property prior to completion. The offer may also have conditions referring to repayment of other mortgages/debts that we are to ensure have been repaid by you either before or at the time of completion. We will make you aware of any special conditions upon review of the offer.
- We’ll check the expiry date of the mortgage offer – the offer will have a date it is valid until, which is usually either three or six months dependant on the lender. We will note the expiry date as a guideline for the latest possible date when completion needs to take place by. Hopefully completion can take place well before this, but in some circumstances for example if the matter is complicated and additional legal work needs to be done, there is a long chain or if the property is still being built the mortgage offer may expire.
What if my Mortgage Offer is Due to Expire?
If your mortgage offer is due to expire then it’s important that you meet with your mortgage advisor to discuss our options. Luke Senior from Just Mortgages in his best practise states:
I will communicate with your solicitor during the buying process, and if there are any concerns around being able to complete prior to the expiry of your mortgage offer, the acting solicitor will make me aware . Some mortgage lenders allow you to extend the offer by a month, others will require you to make a new application – which may lead to a change in interest rate and monthly payments”
Luke Senior of Just Mortgages
Can I Make Changes to the Mortgage Offer After it Has Been Issued?
Administrative changes can readily be made before we complete. However, some changes regarding the rate and product would need to be reviewed depending on whether you have time. Luke Senior from Just Mortgages says the rates of interest and products that lenders offer change frequently, especially at the moment and the interest rate each lender is charging can increase or decrease week by week. He keeps an eye on the interest rate your Lender is currently offering, and if the rate decreases from the rate in your current mortgage offer will make you aware, or other preferential alternatives on the market place.
If you intend to apply for more beneficial products or a lower interest rate you will need to check with the solicitor to ascertain the position of the conveyancing transaction and whether there is time to secure the new offer. We will require the mortgage offer you intend to proceed with to be in place prior to exchange of contracts.
How is the Money From the Lender Received?
Once a completion date is agreed we will submit a request to the lender for the mortgage advance which will be released directly to our solicitor’s account.
Most lenders require five working days’ notice as a minimum to release the funds, but we will check this at the outset when the offer is received so we are aware of your lender’s requirements.
The mortgage advance is generally requested for the day before completion, as the lender cannot guarantee the time the funds will be released. If the monies are requested the day before we can ensure all funds are with us in readiness for completion the following day to avoid any issues or waiting time.
Contact us
☎️ Call our Wakefield office on 01924 290 029
☎️ Call our Garforth office on 0113 246 4423
☎️ Call our Sherburn in Elmet office on 01977 350 500
☎️ Call our Mapplewell office on 01226 339 009
☎️ Call our Ossett office on 01924 586 466
The content of this blog post is for information only and does not constitute formal legal advice and should not be relied upon as advice. Thornton Jones Solicitors Limited accepts no liability for any such reliance upon this content. Where the post includes links to external websites, Thornton Jones Solicitors Limited accepts no responsibility for the content of such sites. Any link to a third-party website should not be construed as endorsement by Thornton Jones Solicitors Limited of any content, products or services which are outside our direct control.
When Can Contracts be Exchanged?
This week is National Conveyancing Week, a week long campaign designed to help people better understand the conveyancing process. Today, with the help of Phoebe Chapman at Parkrow Properties in Sherburn in Elmet we answer a commonly asked question of when can contracts be exchanged.
To start with, we should explain what is the exchange of contracts. The exchange of contracts is where both seller and buyer become legally bound to sell and buy the property. Before contracts are exchanged, either seller or buyer can pull out for any reason without penalty.
Before contracts can be exchanged, a completion date (the day funds and keys are handed over) must be agreed but before this can happen, the buyer’s conveyancer must be satisfied that the legal title to the property is satisfactory which usually includes being in receipt of any searches, mortgage offer, and replies to all enquiries which have been raised with the seller’s conveyancer.
When the buyer’s conveyancer has received the Contract Pack from the seller’s conveyancer, searches are then requested which usually include a local authority search, drainage and water search and coal mining search. Additional searches such as environmental and flooding searches can also be requested if required and any others which are specific to the property area.
The buyer’s conveyancer will usually raise any enquiries relating to the property once they are in receipt of the searches as they can then be raised in one go rather than in piecemeal so not to complicate the enquiries.
The enquiries seek additional details about the property, its history, any ongoing legal matters, and any other relevant information. By raising these enquiries, any concerns or potential issues can be highlighted.
What is the Principle of Buyer Beware?
Caveat Emptor applies to conveyancing and is a Latin phrase meaning “let the buyer beware”. Put simply, it is the buyer’s responsibility to ensure that the house they are purchasing is suitable for them and is in good condition. The buyer is purchasing the property “sold as seen” and it is the buyer’s responsibility to arrange a survey of the property (including arranging an inspection of the services at the property by a qualified person). This is important because we do not carry out a physical inspection of the property and the buyer will inherit any problems (structural or otherwise) following exchange of contracts.
Phoebe Chapman from Park Row Properties recommends that any surveys and inspections are carried out early in the buying process to give time for any remedial works and/or price negotiations to take place.
If anything is agreed with an estate agent, it is important that this information is also passed on to the conveyancer acting for the seller and the buyer. The estate agent will usually let them both know but the seller and buyer should also confirm the information with their conveyancer direct.
Phoebe also recommends that you arrange a further viewing of the property before exchange of contracts to ensure that you are satisfied with its state and condition. This is particularly important if the property is currently empty or if any tenants have recently vacated.
How is a Completion Date Agreed?
When all the steps leading up to exchange of contracts have been concluded and the buyer’s conveyancer and the buyer are happy to proceed, a completion date can be agreed. This involves both seller and buyer putting convenient dates forward to their conveyancer and the respective conveyancer agreeing one with the seller and buyer.
The estate agent can also be involved in negotiating dates, but the seller and buyer must have confirmation of the completion date from their conveyancer as dates can be mistaken when there is a chain involved – all parties in the chain must usually agree the same date unless someone decides to break the chain.
You can find out more about the process of selling and buying your home by reading our online guides.
Contact us
☎️ Call our Wakefield office on 01924 290 029
☎️ Call our Garforth office on 0113 246 4423
☎️ Call our Sherburn in Elmet office on 01977 350 500
☎️ Call our Mapplewell office on 01226 339 009
☎️ Call our Ossett office on 01924 586 466
The content of this blog post is for information only and does not constitute formal legal advice and should not be relied upon as advice. Thornton Jones Solicitors Limited accepts no liability for any such reliance upon this content. Where the post includes links to external websites, Thornton Jones Solicitors Limited accepts no responsibility for the content of such sites. Any link to a third-party website should not be construed as endorsement by Thornton Jones Solicitors Limited of any content, products or services which are outside our direct control.
What’s the Best Way to Secure the Sale or Purchase of a Property?
This week is National Conveyancing Week, a week long campaign designed to help people better understand the conveyancing process. Today, with the help of Chris Tudor of Tudor Financial Solutions Ltd we look at the best way for you to sell or buy a property.
Once you have decided to get on the property ladder or make a move from your current home, it is really important to get organised at the outset. There is a lot of work that goes on in the background with Estate Agents, Financial Advisors and Solicitors, so the key is to gear up with everything you need at the start, so you are good to go!
You Should Speak with a Financial Advisor First
Before you make an offer on a property, or if you need to sell and buy a property with the aid of a mortgage, you should consult with a Financial Advisor. Chris Tudor of Tudor Financial Solutions Ltd recommends getting a decision in principle. This is an illustration, after a review of your circumstances, of what ‘in principle’ you may be able to borrow from a mortgage provider.
Having a decision in principle at the outset will help you understand the budget you may have available to you and therefore which properties will be affordable. A decision in principle will also be used as proof of funding to illustrate to the estate agent how much you can borrow. You should also have a full financial assessment to consider not only your mortgage needs but also a review of any life, illness, or income protection policies together with a review of your savings and investments.
Ensure that you source all of your paperwork, including bank statements, pay slips/P60, accounts etc so that a full review can take place. Chris Tudor also recommends at this stage to review your credit file so your Financial Advisor can determine how much lenders will lend to you based on your credit rating and circumstances.
At This Early Stage You Should Also Find a Solicitor
At this early stage it is also important you find a Solicitor to oversee this process from the start. Don’t leave it until your offer has been accepted to start shopping around for a Solicitor or you may only add to the delays of the conveyancing process getting up and running. Here at Thornton Jones Solicitors, when you are thinking of selling your property, or buying a new home, we can advise on how the legal process works, what will be required of you, the timeframes involved, and the likely costs you will incur.
Make sure you do your research, use a Solicitor that has been recommended to you or you can see has had lots of good feedback and reviews. Cost should not be the sole deciding factor here as often the cheapest can end up being the most expensive with all of the hidden add-ons or time delays.
Ensure you have a Solicitor that meets your needs to allow your conveyancing transaction to progress as smoothly as possible. Here at Thornton Jones Solicitors we offer our clients various platforms to cater for their needs – you can visit our offices, contact us by phone or email, or use our online portals to complete paperwork and review progress of your transaction via our app. Using a trusted Solicitor that is accessible to you will help you navigate the process and save more time in the long run.
Be Sure You Have Proof of Funds if You Are Paying a Deposit on Your Property Purchase
If you are putting a deposit down on a purchase, Estate Agents, Financial Advisors, and Solicitors will all want to see proof of these funds to check your viability to proceed. Be ready to provide at least 6 months’ worth of bank statements to show the originating source of your deposit and how it has accrued. There may be other questions raised so be ready to explain your funding arrangements.
If you are selling your property, ensure that you have all the necessary paperwork such as Guarantees or Certificates for any work that has been done to your home. If you have any deeds or papers from when you bought your property you should let your Solicitor have these. They may contain key legal documents for matters that may need to be looked at again when you sell your property.
What Should You Do When You Accept an Offer on Your Property?
Once your offer is accepted on a new property, ensure you let your Solicitor know so they can request the contract papers from the seller’s legal representative. It is also important to let your Financial Advisor know you have secured a purchase. Chris Tudor advises that a Financial Advisor needs to check that the product and rate you had considered previously are still available or reassess other options that are now available on the marketplace that may be more preferential to you before submitting a formal mortgage application.
Mortgage applications can take around two to three weeks to process with a mortgage lender. Once approved, a valuation of the property for the mortgage lender takes place. This valuation determines the value of the property and whether the property is suitable for a mortgage. Only once these steps have been concluded and approved by a mortgage lender is a mortgage offer formally issued by a Lender, enabling you to proceed with confirmed funding in place for your purchase.
Make sure you keep your Solicitor, Financial Advisor and Estate Agent aware of any changes. If you need any guidance on what to do, we are always available to help or can often provide you with recommendations of who to use for your needs rather than just Googling!
Contact us
☎️ Call our Wakefield office on 01924 290 029
☎️ Call our Garforth office on 0113 246 4423
☎️ Call our Sherburn in Elmet office on 01977 350 500
☎️ Call our Mapplewell office on 01226 339 009
☎️ Call our Ossett office on 01924 586 466
The content of this blog post is for information only and does not constitute formal legal advice and should not be relied upon as advice. Thornton Jones Solicitors Limited accepts no liability for any such reliance upon this content. Where the post includes links to external websites, Thornton Jones Solicitors Limited accepts no responsibility for the content of such sites. Any link to a third-party website should not be construed as endorsement by Thornton Jones Solicitors Limited of any content, products or services which are outside our direct control.
