How commercial legal packs differ from residential
A residential legal pack typically contains: title register, title plan, searches, special conditions of sale, and (if leasehold) a lease and management information. A commercial legal pack often contains all of that plus:
- Leases — full commercial leases, licences to occupy, side letters, rent review memoranda
- VAT election — whether the seller has opted to tax the property for VAT, making the purchase subject to 20% VAT on top of the hammer price
- Asbestos reports — commercial property built pre-2000 may contain asbestos; management surveys are often included
- Energy Performance Certificate (EPC) — commercial properties with an EPC below E cannot legally be let (MEES regulations)
- Planning permissions and conditions — change of use history, outstanding planning obligations
- Environmental reports — Phase 1 desktop study, sometimes Phase 2 intrusive surveys for industrial sites
- Business rates information — rateable value, any reliefs, empty property rates implications
If the seller has opted to tax the property, the purchase price is subject to 20% VAT. On a £300,000 commercial property, that is an additional £60,000. This will not appear in the guide price or auction catalogue — it is buried in the special conditions. If you cannot recover VAT (because your business is not VAT-registered or the use is exempt), this is a real additional cost. Always check for the option to tax before bidding.
Key things to check in a commercial legal pack
Tenancy details
If the property is tenanted, the lease is the most important document. Check:
- Lease term and expiry date — how much income is contracted?
- Break clauses — can the tenant exit early, and when?
- Rent review provisions — upward only? Open market or indexed?
- Repairing obligations — full repairing and insuring (FRI) lease means tenant maintains the building; internal repairing only (IRI) means landlord bears external costs
- Permitted use — if the tenant's use is restricted and they vacate, can you let to another tenant without a change of use application?
- Rent arrears — is the current tenant in arrears? Check the management pack for payment history
Planning and permitted use
Check the existing planning permission use class. A property marketed as a café (Use Class E) may have planning conditions restricting hours or uses that limit its value. A former industrial unit being sold for residential conversion may not yet have planning permission for that use — meaning the conversion value is speculative, not secured.
Environmental liability
Commercial and industrial sites can carry contamination liability that transfers to the buyer. Phase 1 reports identify potential pathways for contamination; Phase 2 reports (invasive surveys) confirm whether contamination is present. Remediation of a contaminated site can cost tens of thousands to millions of pounds.
MEES and EPC rating
Since April 2023, it is unlawful to grant a new commercial lease for a property with an EPC rating below E. Properties rated F or G cannot be legally let until they are improved. If you are buying a commercial property for rental income, an EPC below E means you cannot let it without spending on energy improvements first — factor this into your bid.
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Commercial property due diligence typically takes 4–8 weeks. Auction legal packs are often published just 2–4 weeks before the sale. This creates genuine time pressure. The key documents to prioritise when time is short are: the special conditions (for VAT, buyer costs, and unusual obligations), the tenancy schedule and any existing lease, and the title register.
Frequently asked questions
Do I need a commercial solicitor to review a commercial auction legal pack?
Yes — commercial property law is a specialist area. A residential conveyancer is not qualified to advise on commercial leases, option to tax, MEES compliance, or environmental liability. Instruct a commercial property solicitor before bidding.
How do I check if a commercial property has the option to tax?
The seller's solicitor should confirm it in the special conditions of sale. You can also check with HMRC (if you know the seller's VAT number) or ask your own solicitor to raise a pre-auction enquiry. LegalPack AI flags option to tax clauses in special conditions automatically.
What is TOGC and how does it affect commercial auction purchases?
A Transfer of Going Concern (TOGC) is a VAT relief that can disapply the 20% VAT charge if the commercial property is transferred as a going concern — broadly, the buyer continues the same business. This requires meeting specific HMRC conditions and is complex. Take specialist VAT advice before relying on TOGC.
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