The process of acquiring commercial property should involve an extensive due diligence process. When evaluating a commercial property asset, your commercial property lawyer should endeavour to find all relevant information that may be available - and information that is not so readily available. In this article, we provide a brief introduction to why legal due diligence is important and what your lawyer will look for during the process.
Why is due diligence so important in commercial property transactions?
Due diligence is the process of gathering information about a proposed purchase which is then assessed by a commercial property solicitor (and in many cases, other advisors) to help you make an informed decision about buying the property. Due diligence, when conducted properly, will reveal any risks involved in buying the property as well as any restrictions you may face. The result of due diligence investigations may mean that you still wish to proceed with the purchase, but you can still take steps to protect yourself, such as:
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- Adjusting the price to reflect your findings
- Obtaining warranties from the seller
- Taking title indemnity insurance to cover any risk
- Applying to the Lands Tribunal to remove or vary any restrictive title conditions
Seasoned commercial property investors understand that the more you can find out about a property before you buy, the more you protect yourself from costly mistakes. A thorough examination of a potential investment during the due diligence process can make all the difference to the success of the transaction and your future return on your investment. Whilst the seller of the property must not knowingly mislead you as a buyer, the rule of “caveat emptor” or buyer beware, still applies.
The commercial property due diligence process
The seller must show that they have the right to sell the property and that there are no legal inhibitions that prevent them from selling. Various searches which can confirm details of the property and title and the seller’s solicitor will instruct a Property Enquiry Certificate, which will disclose any planning applications, building warrants and statutory notices.
Your solicitor will investigate the information provided by the seller’s solicitor, examining the title to the property. If the property is a leasehold, the terms of occupancy must be examined carefully to ensure that they do not interfere with your intentions for the property.
There will also be many other practical matters that your solicitor may raise with the seller’s solicitor as part of the pre-contractual due diligence process. Before you conclude missives , your solicitor will report their due diligence findings to you and highlight any areas of concern.
All commercial property matters involve a degree of complexity and risk. The best way of ensuring your personal and business interests are protected at every stage is to instruct a firm of specialist commercial property lawyers.
Specialist Commercial Property Lawyers, Edinburgh
Murray Beith Murray Partner Bill Meldrum is Head of Commercial Property and is a specialist in commercial property law. If this article has raised any questions, or if you require assistance with any Commercial Property matter, please complete our contact form or call 0131 225 1200 to speak to one of our commercial property specialist solicitors.
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