Commercial Property FAQs

Below are some of the questions we're asked most frequently by our Real Estate and Commercial Property clients:

Is VAT payable on commercial property?

Commercial properties are exempt from VAT but the owner has an option to elect to charge VAT on any supplies made (including renting or selling).  As part of our due diligence we will investigate the VAT position and advise accordingly.

What additional costs are there when purchasing a commercial property?

In addition to the legal fees, you should also budget for SDLT (Stamp Duty Land Tax) and Land Registry fees, together with the fees for any surveyors that you appoint to provide advice on the condition of the building. In most cases they can give you an estimate of costs so that you know where you stand.

I have heard of leases that expect the tenant to cover all maintenance costs - can I negotiate with the landlord about these?

It’s always open to any prospective tenant to negotiate terms such as this before taking out a new lease.  If the property is not in a good state of repair then you should request that your repairing obligations are limited. If you are concerned about the condition of the property, you should always instruct a building surveyor to provide a survey.

There are some repairs needed on the building of the property I rent - but they were there when I took on the lease - surely the landlord should be responsible?

It very much depends upon what it says in the relevant clause of the lease. It may be that your repairing obligations are limited in some way, but if not, then you will generally be obliged to bring the property up to a good state of repair even if it was in a poor state of repair when you took it over. We will advise on your repairing liabilities before you take on the lease.

What is a break clause and do I need one in my lease?

A break clause allows either or both parties to bring the lease to an end earlier than the lease expiry date.  Usually a period of notice must be given to exercise the break (typically 6 months ) and sometimes a tenant exercising a break option will have to pay a penalty for doing so. Any new business taking on a lease should consider negotiating a break option with the landlord to provide flexibility to get out of the lease obligations earlier if the new business does not work out as anticipated.

What are commercial property standard enquiries?

The Commercial Property Standard Enquiries (CPSEs) are a set of standard pre-contract enquiries responses of which are provided to the buyer (or tenant, if leasing) to ask a seller (or landlord) about the property which will help a buyer (or tenant) decide the value of the property and whether they want to purchase (or lease) the property.

The CPSEs are just an additional way to find out more about the property, and should be used alongside all other relevant property searches, which includes obtaining a surveyor’s report.

Also bear in mind that the seller (or landlord) is not under a duty to answer the CPSEs but does have to provide truthful responses, which the buyer (or tenant) can rely on.

Commercial property surveys: do I need one?

You should always consider a survey whether you are buying or leasing the property. A survey allows you to ensure the interest you’re buying (or leasing) matches the price you’re paying.

We recommend clients considering purchasing a commercial property (or leasing a commercial property) to obtain a survey. A survey ensures you’re aware of all the issues that affect the property, including hidden structural problems or any unseen costs.

Although it seems expensive, failing to check for these details could lead to you spending more money to remedy these issues later when they become apparent after the purchase of the freehold or entering into the lease.