Your solicitor will need to undertake a number of investigations and searches on the property before you go ahead with any purchase. This page lists and explains the key investigations and searches:
Investigation of title
If you are buying a freehold property or long lease, you will need to get a full report on the title
of the property prepared. This will be particularly important if a lender or funder is involved and providing significant funds.
An investigation of title is a check on the legal interest in the land being acquired. This is to make sure that it is legally considered to be suitable for the purpose that you wish to use it for.
Freehold investigation of title
If a freehold is being acquired then the title will need to be investigated to make sure that:
- the property has the benefit of all necessary rights and easements, such as rights of access over any private land
- there are no problematic ‘restrictive covenants’ on the title, which limit unduly who the property can be sold to or how it can be used. For example, a homeless charity would be ill-advised to buy a building to develop as hostel accommodation if there was a covenant against residential use. Even if a particular covenant does not affect your ability to use the property it might have an adverse impact on your ability to raise finance (for example, if it would impact on the value of the property in the open market)
Leasehold investigation of title
If a long lease
is being acquired, then the solicitor will check the lease to make sure that:
- the term (length) and rent are in accordance with the Heads of Terms
- there are no unduly onerous obligations on the tenant, particularly with regard to assignment or underletting
- the purpose for which the tenant wants to use the property will not breach the terms of the lease
- the landlord cannot unduly interfere in the way the tenant uses the property
Where a new lease is being agreed, these matters can be negotiated with the landlord. Where an existing lease is being assigned, the lease will usually be taken by the new tenant in its current form unless the landlord can be persuaded to vary any problematic terms.
Even if it is leasehold property that is being acquired, the freehold title will also need to be investigated, as there the lease will invariably include a covenant requiring the tenant to observe and perform all the covenants, restrictions and obligations contained in the freehold title.
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There are a number of searches that can be carried out as part of the buying process. Which searches are done will depend on the nature of the property being bought and (to some extent) its location. Some of the key searches are:
Local Authority Search
This is usually the most important search that will be carried out for all freehold or long leasehold property purchases. It will allow the solicitors to check:
- the planning history of the property, to see whether it has permission for the proposed use
- whether the property adjoins the public highway
- whether permission has been granted for any significant construction projects in the immediate vicinity
- whether there are any notices affecting the property (for example, relating to past breaches of planning control or environmental protection legislation)
Commercial Drainage Search
This search checks whether the property is connected to mains, water and sewerage or whether any private drains or water pipes are used.
This search checks the historical use of the site to identify any risk of the land being contaminated. Such a risk might create a liability for the owner or occupier under the Environmental Protection Act 1990. The initial search is generally desk-based. If potential contamination issues are identified, then professional advice should be taken with on-site investigations and possible remediation work before buying.
If the property is located in certain areas of the country (for example, Yorkshire and Nottinghamshire for coal; Cornwall for tin), then a mining search should be carried out to see if underground workings put the property at risk of subsidence.
Planning and highway searches
If the Local Authority Search
throws up any issues, you may need to make more detailed checks of the planning history of the property and the precise location of the public highway with the Local Authority.
Chancel repair search
This search will check whether the property is an area where you may be required to contribute to the upkeep and maintenance of the local parish church. It relates to an historic liability for church repairs and from 13th October 2013 will only be enforceable against the owner of property title to which is registered if that liability has been noted at the Land Registry. Where a risk of liability remains, for instance where title to the property is unregistered, indemnity insurance can be obtained.
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Replies to Enquiries
Your solicitor will ask the vendor/landlord about their knowledge of the property and how it has been/will continue to be managed.
The British Property Federation produces a set of enquiries (the Commercial Property Standard Enquiries), which have rapidly become regarded as the industry standard. These will be used in the vast majority of cases. The buyer will generally want to rely on their own investigations and enquiries, but this process might provide some useful information and will give you the chance to ask further questions about anything which concerns you.
A key step in the journey is obtaining a professional Commercial building (or condition) Survey which will give you a full picture about the condition of the building and whether I could prove more of a liability transfer than an asset transfer.
Condition surveys do not follow a standard format and therefore you must discuss the contents of the report with the ‘building’ surveyor and then this set out by the building surveyor in writing before the survey is carried out. For a small building expect to pay a minimum of £850.
The principal considerations in the report may include:
- the nature of the property, its construction age and design
- the adequacy of the structural framework and fabric;
- the adequacy of services – such as sewage or access to water and power
- a comparison of the condition of the property with others of similar age and style
- Conformity with modern requirements, including
o statute, civil and lease obligations;
o special client requirements;
o main areas of concern;
o reference to any repairs, further investigations or statutory inspection
o estimated costs of remedial works or recommended actions.
Your Survey Report should contain Risks and response to them can be classified as follows:
o Extreme: immediate action required
o High: senior management attention needed
o Moderate: management responsibility must be specified
o Low: management by routine procedures.
The summary should highlight any further tests or inspections to be undertaken before legal commitment is made by the client.
What is not included and needs to be budgeted for separately if there are known problems:
o Specialist reports relating to the structure and services (drainage, mechanical & electrical, asbestos.
o Material testing,
o Full fire assessment etc
o Reinstatement cost assessment for insurance purposes.
Any other valuations are not included and need to be separately commissioned.
Links: Find a local building surveyor: http://www.ricsfirms.com/
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