FAQ – Buying a commercial property in England and Wales

If you want to invest in the commercial property market in England and Wales (the two countries share the same jurisdiction), it is important to understand that the process differs significantly from buying a property in France. The key distinction lies in the legal principle of caveat emptor (“buyer beware”): it is responsibility of the buyer to discover all defects in the property they wish to purchase, to ensure that all required rights exist, and to check that there are no restrictions that could affect its use.

English law offers great flexibility and does not protect buyers against a bad deal: it is therefore critical to be advised on a transaction by a surveyor and a solicitor.

Below are some frequently asked questions from our investor clients:

What is the difference between leasehold and freehold?

In England, property is usually owned on a leasehold or a freehold basis.

A freehold interest gives the owner complete ownership of a building and the land it sits on outright. The owner has complete control over their property, with no time limits on ownership. However, it is possible that the land is subject to certain rights, such as a right of way granted to a neighbour.

A leasehold interest is created by a lease, in which the leaseholder obtains the right to occupy and use a property for a fixed period. Unlike a French long lease (bail emphytéotique or bail à construction (construction lease)), the period is not capped at a maximum of 99 years: a lease term in England can range from 1 to 999 years and the rules on the duration of a lease are more flexible than in France. Typically, a commercial lease in England has a short term, lasting between 5 and 10 years, with rent set at the market value and reviewed periodically and linked to inflation or other factors. There are also long-term commercial leases, which are sold for a premium and include an annual ground rent (granted to the owner of the freehold). The lease will contain terms and restrictions, obligations of both the landlord and the tenant regarding repairs, shared expenses for the maintenance and insurance of the building, taxes, etc.

English commercial leases can vary considerably depending on the negotiations between the landlord and tenant and the type of property involved. Leases can often tend to favour the landlord and so the role of the solicitor is to redress the balance as much as possible.

How can I acquire a leasehold interest?

You can acquire a leasehold interest either by entering into a new lease or by taking over an existing lease from the current tenant – this is called assignment. Depending on the remaining lease term and the value of the interest, the incoming tenant may be required to pay a premium. For most short-term leases, the landlord’s consent will be needed for an assignment of the lease.

Will I have to pay a deposit?

It depends entirely on the type of transaction. Typically, it is standard practice to pay a deposit when buying a property (usually 10% of the purchase price). In the case of a new lease, the landlord often requires a deposit equivalent to three or six months’ rent, which is held by the landlord for the duration of the lease term, under a rent deposit deed.

Does the seller have to disclose any problems with the property?

No. In England, a property owner, or landlord, is under no obligation to disclose any defects or potential issues that could affect the buyer or tenant’s intended use of the property – this is based on the caveat emptor principle.

It is therefore essential to conduct thorough due diligence and check the condition of the property, including the structure, electrical and heating systems and to hire a surveyor to obtain a survey.

Legal Support

If you need help with the purchase of a commercial property, or advice on a commercial lease, in England or Wales, please do not hesitate to contact us: we have a highly experienced team that regularly works with investors, investment funds, restaurants, tradesmen, luxury brands or companies, for example.