What a Property Deal Is

1.1A property purchase in one paragraph

In a commercial property purchase, a business buys a building and the land it stands on. This workbook follows one purchase of one empty factory in Leeds, known as Beckside Works, from the accepted offer to the day the buyer is registered as owner. You are a trainee solicitor at Harland Weir LLP, and you act for the buyer.

1.2Why a business buys instead of renting

A growing business can rent more space or buy a building of its own. Buying gives it three things that renting does not:

• It can alter the building to suit its work, without asking a landlord.
• It can stay as long as it likes, because a freehold (outright ownership) has no end date.
• Its money goes into a building it owns, not into rent.

The cost is cash. Money tied up in a building is money not spent on stock, staff or new products. So most buyers borrow part of the price from a bank. The bank takes a charge (a mortgage) over the building, and sets conditions to meet before it pays out the loan.

1.3The deal in this workbook

The buyer is Fellgate Cycles Limited, which designs and assembles electric bicycles. It has outgrown the two units it rents in Leeds. It wants one site with room to assemble, store, run its offices and grow.

Fellgate's two directors weighed renting against buying. Its founder wanted a building she could lay out for bicycles and keep for thirty years. Its finance director did not want too much of the company's cash tied up in bricks. They agreed to buy, with Fellgate's bank lending most of the price.

The seller is Holmfield Printers Limited, a commercial printer. It has moved its printing to its other site, in Bradford, and left its Leeds factory empty. Beckside Works has a single-storey factory building, a two-storey office block, a yard and a car park.

Holmfield's selling agents report that Holmfield accepts Fellgate's offer of £4,200,000. The acceptance is subject to contract, so nobody is bound yet. Either side may still walk away or change the price, and owe the other nothing. Chapter 2 explains why, and the one early promise that does bind.

These are the parties and your own team:

1.4A building, not the company that owns it

Holmfield is selling one of its buildings, not itself. After the sale Holmfield still has its staff, its Bradford site, its customers and its debts, and Fellgate takes none of them. The one debt tied to the building is Holmfield's bank loan, secured on it. That loan is paid off out of the price on the day the building changes hands.

A buyer could instead buy the company that owns a building. It would then take on the company's whole past as well. That is a corporate deal, and not this one.

Clause 2.1 of the contract says what Fellgate buys:

“Shall sell” and “shall buy” are two promises, and they bind only once contracts are exchanged. “The fixed installations” keeps the heating, the lights and the pipes with the building. A “movable item” is anything Holmfield can carry away, and clause 2.4 makes Holmfield remove it before completion.

Burdens recorded against the land are different. A restriction on how the land may be used binds whoever owns it, so it passes to Fellgate. That is why the title, the official record of who owns the land and what burdens it, is checked before anyone is bound.

1.5Vacant possession: an empty building on the day

Fellgate needs to move in on the day it pays. So Holmfield sells with vacant possession, which means the building is empty and nobody has a right to be there. Clause 2.3 puts the promise in two sentences:

The promise is tested on Completion. “No one shall be in occupation” is the physical test: nobody inside. “Or have any right granted by the Seller to occupy it” is the legal test. It catches anyone Holmfield has allowed to come back later.

That matters because a person in occupation can bind a buyer even when the register says nothing, as Chapter 3 shows.

1.6Each firm acts for one client

Every firm of solicitors on the file acts for one client only. Harland Weir act for Fellgate. Denby Holt act for Holmfield: they send the draft contract, answer Harland Weir's questions and receive the money at completion.

Fellgate's bank has its own solicitors, who act for it on the loan and on its charge over the building. Harland Weir do not act for the bank, however often the two firms write to each other.

Others play a part too:

• the selling agents, who hold the keys;
• a building surveyor and environmental consultants, who report to Fellgate;
• Holmfield's bank, which is paid off from the price;
• HM Land Registry, which keeps the register of who owns land;
• HM Revenue & Customs (HMRC), which collects tax on the purchase.

The money never goes to Holmfield direct. It passes through each firm's client account, kept for clients' money, and ends with Denby Holt.

1.7From accepted offer to registered owner

Every freehold purchase follows the same steps. It starts with the heads of terms, a short paper from the selling agents that records the price and the main terms. The heads are subject to contract, but they tell the solicitors what to draft.

Two moments change everything. At exchange of contracts, the two firms swap their clients' signed copies of the agreed contract. They usually do it by telephone: each agrees on the call that it now holds its copy for the other side. From then both sides are bound, and a side that backs out must pay for it.

Completion comes some weeks later. Fellgate pays the rest of the price, Holmfield hands over the signed transfer, the deed that passes the land, and the agents hand over the keys. From then Fellgate has the building, but the register still names Holmfield.

Registration is the last step. The Land Registry writes Fellgate's name into the register in place of Holmfield's, and that makes Fellgate the legal owner. Everyone else relies on the register.

In this deal the investigation finds three problems before anyone is bound: an old restriction on how the land may be used, a worn-out roof and a buried fuel tank.

1.8Your job

Your job is to keep the file in order. That is the deal's machinery, not admin: a wrong reference or a missed date can stop a purchase. Nobody expects you to know conveyancing, the work of transferring land, on your first day. Everyone expects you to know where the deal stands.

• Open a one-page deal sheet: the parties, their solicitors, the property, the price and the stage.
• Enter the price as £4,200,000, “subject to contract”.
• Copy the title number, the Land Registry's reference for the property, and check every character.
• List each firm, your contact there and the one client it acts for.
• Under “Not included”, list Holmfield's company, staff, debts and other site.
• Put every date in the diary as soon as it is fixed.