The myriad of questions we get asked during the process of purchasing a commercial property is vast but there are a few which regularly crop up and so we have taken this opportunity to share those here. We hope these help anyone or any business who finds themselves in this situation and more importantly, be forewarned with the knowledge to be able to avoid any negative pitfalls.
Which party bares the risk if something happens to the property in the period between exchange and completion?
This depends on the terms of the sale and the purchase agreement. At common law (i.e. if the contract is silent on the matter) the buyer takes on the risks of something happening from the moment of exchange. However if the contract incorporates the Standard Commercial Property Condition 7 provides that the risk is to pass to the buyer on exchange. Please ascertain which contract you are tied to in order to avoid any unwanted surprises.
Who is responsible for maintaining and repairing the property during the period between exchange and completion?
On exchange of contracts the beneficial interest of the property passes to the buyer although the seller remains the legal owner. The seller is therefore holding a legal estate on trust for the buyer and has various duties towards the buyer including a duty to manage and preserve the property. It won’t run to decoration but it means that the seller must not wilfully damage the property and must take reasonable care of it.
What happens if the property does get damaged in this period?
Normally the buyer will be obliged to complete even if the property is damaged and must complete at the full purchase price. If it has insurance then you can claim through the insurer.
Which party should take out buildings insurance during this period?
Check the terms of the sale and purchase agreement. The conditions often allow either party to insure noting the other side’s interest. More often than not it is the seller that is responsible for insurance but do take care and check.