David Charles Property Consultants were instructed on a commercial conveyancing project to market a former school. On visiting and evaluating the site, it became clear that it was an undeniable development opportunity.
Without wasting any time, David Charles Property Consultants conducted a Pre-AP survey for the local authority. This is a confidential report and is the first step in attaining planning consent. The resulting report was encouraging with just a few planning issues to consider, such as parking, social housing and other sufficient D1 use*. Once all of these issues had been investigated and clarified, David Charles Property Consultants were then able to market the property.
Challenges
Marketing this type of property attracts two types of purchaser:
- Residential developers
- Owner-occupier purchasers, falling under one ‘use class’ (D1), e.g. school, medical facility, etc.
Commercial conveyancing experience has taught David Charles Property Consultants that both types of purchaser come with their own set of risks and challenges. Residential developers are typically quick to show a keen interest and will put forward high offers without demonstrating that they actually have the sufficient capital to invest. They do this to win contracts, but have a high tendency to pull out later. Owner-occupiers purchase property for business use and therefore need to make the purchase a worthwhile investment. Consequently, with owner-occupier purchasers, processes can take a lot longer whilst all planning and build scenarios are considered.
Being one step ahead
Typically with all property sales and commercial conveyancing, the element that slows down the process and delays the signing of contracts, is the work undertaken by solicitors. David Charles decided to be one step ahead and prepared a solicitors pack, entailing that all searches were already completed and that all pre-contract enquiries (CPSE’s) undertaken. The upshot of this was that David Charles Property Consultants were already in a position to sign the contract, preventing unnecessary delays.
Considering the offers
David Charles approached the top three developer offers to establish whether they were serious and had the capital available. With papers ready to exchange, they would expect a fast decision, however it soon became apparent that these potential purchasers were not committed. Residential developers often tell you what they want you to hear in order to win the contract, then afterwards make the decision.
Whilst all this delaying process takes place, under Law Society rules, a solicitor cannot send out another contract without informing the other party and jeopardising the sale.
The decision to re-market
David Charles Property Consultants felt that too much time was being wasted dealing with non-committal offers from property developers, and decided to re-market the property. This time, David Charles received interest from some ‘owner-occupier’ purchasers. Whilst the offers weren’t as high, they were much more trust-worthy and robust purchasers. However, since they are buying the property for a business purpose, David Charles were keen to get a commitment of offers nearer the asking price.
‘Option To Purchase’ deal
Eventually, the property had interest from a nursery operator who fitted the bill. However, there was a planning issue associated with the type of development which required a planning application. David Charles were not prepared to do a ‘subject to planning’ deal so instead offered an ‘option to purchase’ over a period of 12 months. This stipulated that the nursery would be subject to a fee on completion, which would relate to the time taken to get planning consent. If the planning consent wasn’t granted, the nursery would still be required to pay the fee, which was sufficient enough to ensure the nursery group was serious about committing. To ensure the planning consent was pushed through as quickly as possible, David Charles arranged it so the option to purchase price went up every quarter.
Summary
David Charles were able to add considerable value to this sale by using their commercial conveyancing expertise to ensure a robust commercial arrangement that both parties respected and benefited from. Although the option to purchase deal was a lengthy process, it suited both parties and provided vital insurance of commitment to the vendor, ultimately getting a competitive price for the commercial property.
*D1 Use Property
The Town and Country Planning (Use Classes) Order 1987 (as amended) was developed (from a previous order dated 1972) in order to categorise property into use types so that planning authorities could keep a degree of control on how the public use property. Over the years the planning landscape has become ever more complex. The D1 class includes use types institutional in character such as those relating to educational, religious and medical with the key element being that these should be non-residential. If a residential element exists such as a boarding school, convent or hospital then the use and property will fall into a C2 use class.