Buying Commercial Property in the UK: What You Need to Know

Buying commercial property is a significant step, whether you are acquiring premises for your own business, adding to an investment portfolio, or moving from renting to owning. It is also more involved than a residential purchase, with extra layers of tax, due diligence and risk.

This guide walks through what is involved in buying commercial property in the UK, the costs to plan for, and how an experienced commercial property solicitor helps protect your position.

How buying commercial property differs from residential

Residential conveyancing is relatively standardised, and commercial purchases are not. Every property, lease and business situation is different, which means the legal work is more bespoke and usually takes longer.

Key differences include:

• More detailed due diligence on title, planning, environmental and tenancy matters

• Different stamp duty rates and, often, VAT to consider

• A greater focus on how the property will be used and whether it is fit for that purpose

• Negotiated, property-specific contract terms rather than standard ones

Because there are more moving parts, early legal advice is genuinely valuable. The right questions asked at the outset can save a great deal of cost and delay later.

The commercial property purchase process, step by step

1. Agreeing heads of terms

Most commercial deals start with heads of terms: a short document setting out the agreed price and the main commercial points. It is not usually binding, but it shapes everything that follows, so it is worth getting right.

2. Due diligence and searches

This is the heart of a commercial purchase. Your solicitor investigates the legal title and raises searches and enquiries to uncover anything that could affect value or use, including:

• Local authority and planning searches

• Environmental and contaminated land checks

• Drainage and water searches

• Title issues such as rights of way, covenants and boundaries

• Any existing tenancies and the terms of those leases

3. Reviewing the contract

Once due diligence is underway, the contract is negotiated. Commercial contracts often include clauses you would not see in a residential deal, such as overage (a future payment if the buyer later develops or profits from the property), conditions around planning, and detailed provisions on title guarantees.

4. Exchange and completion

On exchange, the deal becomes binding and a deposit is paid. On completion, the balance is paid, the property transfers to you, and your solicitor deals with registration and tax.

Stamp Duty Land Tax on commercial property

Stamp Duty Land Tax (SDLT) applies to commercial property in England and Northern Ireland, and the rates are different from, and generally lower than, residential rates.

For non-residential freehold purchases, SDLT is charged in bands on the portion of the price within each band:

• 0% on the first £150,000

• 2% on the portion from £150,001 to £250,000

• 5% on the portion above £250,000

There is no additional-property surcharge on commercial purchases. SDLT must be reported and paid to HMRC within 14 days of completion, and your solicitor will normally handle this for you. Where you take a new lease rather than buy the freehold, SDLT may also be due on the rent, based on its net present value. You can check the current figures on the non-residential SDLT rates page on GOV.UK.

VAT on commercial property

VAT is one of the trickier areas of a commercial purchase. Some commercial property is sold subject to VAT, usually because the seller has opted to tax the property. If VAT applies, it is charged on top of the purchase price and also affects the SDLT calculation, because SDLT is charged on the VAT-inclusive figure.

In some cases a purchase can be treated as a transfer of a going concern, which can remove the VAT charge if specific conditions are met. This is exactly the kind of point where early advice pays for itself, because getting the VAT position wrong can be expensive.

Due diligence: what to check before you commit

The purpose of due diligence is to make sure you know exactly what you are buying. Before exchange, you and your solicitor should be satisfied on:

• Planning and permitted use: is the property authorised for your intended use?

• Condition and repair: a survey is strongly advised, as you generally buy commercial property as it stands

• Tenancies: if the property is let, what do the leases say about rent, term and repairs?

• Title: are there any rights, restrictions or disputes affecting the property?

• Environmental risk: is there any history of contamination that could create future liability?

Common pitfalls and how a solicitor protects you

The most common problems on commercial purchases tend to be avoidable: buying a property that cannot lawfully be used as intended, inheriting a tenant on poor terms, underestimating the VAT or SDLT cost, or missing a title issue that affects resale.

A solicitor's role is to find these issues early, explain what they mean for you commercially, and either resolve them or renegotiate before you are committed.

If you also lease premises, our guide to break clauses in commercial leases explains another area where the detail really matters.

Your commercial property solicitors

Buying commercial property should strengthen your business or investment, not expose you to avoidable risk.

At Salehs Solicitors, our commercial property team acts for business owners and investors across Manchester and the North West, guiding them through purchases of every size with clear, commercial advice.

If you are considering a commercial purchase, speak to us early. The sooner we are involved, the more we can do to protect your position and keep the transaction on track. Please get in touch to discuss your plans.