CPSE.1 (version 3.2) General pre-contract enquiries for all commercial property transactions

Use of this document is free, subject to the Conditions in GN/CPSE (version 3.1).

This document is part of the Commercial Property Standard Enquiries (CPSE) suite of documents, prepared by members of the London Property Support Lawyers Group and endorsed by the British Property Federation.

For more information about the CPSE see GN/CPSE (version 3.1).

This document is available in three formats:

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  • The PDF format can be accessed from the link below.

If you have any comments, please e-mail cpse@practicallaw.com

For details of changes made between this document and its previous version, see Legal update, New edition of CPSE.1 has been issued.

For the PDF version of this document click here.

PLC Property
Contents

Commercial Property Standard Enquiries

CPSE.1 (version 3.2) General pre-contract enquiries for all property transactions

 

Conditions

This document may be used free of charge subject to the Conditions set out in GN/CPSE (version 3.1) Guidance notes on the Commercial Property Standard Enquiries (www.practicallaw.com/2-503-3853).

Particulars

Seller:

Buyer:

Property:

Development (if appropriate):

Transaction:

Seller's solicitors:

Buyer's solicitors:

Date:

Interpretation

1. In interpreting these enquiries, the terms set out in the Particulars have the meanings given to them in the Particulars and the following interpretation also applies:

  • Buyer: includes tenant and prospective tenant.

  • Conduits: means the pipes, wires and cables through which utilities and other services are carried.

  • Property: includes any part of it and all buildings and other structures on it.

  • Seller: includes landlord and prospective landlord.

2. The replies to the enquiries will be given by the Seller and addressed to the Buyer. Unless otherwise agreed in writing, only the Buyer and those acting for it may rely on them.

  • References in these enquiries to "you" mean the Seller and to "we" and "us" mean the Buyer.

  • In replies to the enquiries, references to "you" will be taken to mean the Buyer and to "we" and "us" will be taken to mean the Seller.

3. The replies are given without liability on the part of the Seller's solicitors.

4. The Buyer acknowledges that even though the Seller will be giving replies to the enquiries, the Buyer should still inspect the Property, have the Property surveyed, investigate title and make all appropriate searches and enquiries of third parties.

5. In replying to each of these enquiries and any supplemental enquiries, the Seller acknowledges that it is required to provide the Buyer with copies of all documents and correspondence and to supply all details relevant to the replies, whether or not specifically requested to do so.

6. The Seller confirms that pending exchange of contracts or, where there is no prior contract, pending completion of the Transaction, it will notify the Buyer on becoming aware of anything which may cause any reply that it has given to these or any supplemental enquiries to be incorrect.

ENQUIRIES

1. BOUNDARIES AND EXTENT

Hide Note: Boundaries and extentNote: Boundaries and extent
1. Boundaries and extent
Boundaries and extent

Verifying extent

This enquiry is concerned with verifying the extent of the Property. The questions are aimed at matching the title description of the Property with what appears on the ground as the physical extent of the Property, often marked by features such as walls, trees, ditches and hedges.

The Property will be defined in the title deeds and, if title is registered, the extent of the Property will be shown on the title plan. However, the Land Register is not conclusive as to boundaries and the boundary features may not correspond exactly with the title description. They may lie:

  • Either wholly within the legal boundaries of the Property in which case the Buyer will need to establish that nobody else has been using the land which lies between the legal boundaries and the boundary features;

  • Or outside the legal boundaries in which case the Buyer will wish to establish whether the Seller has acquired additional land by "adverse possession" or long usage.

    To do this, the Buyer needs to know the following:

    • For how long any land beyond the legal boundaries has been used as part of the Property;

    • Whether there has been any objection to this use; and

    • Who has maintained the boundary features.

Responsibility for boundary features

The Buyer also needs to know who is responsible for maintaining boundary features. The title deeds may not contain information about the ownership of the boundary features or their maintenance, and in the absence of any clear indication the Buyer must find out what the Seller and others have regarded as their responsibilities. If available, the Seller should include details of:

  • What works to boundary features have been carried out.

  • What costs have been incurred.

  • Who contributed and in what proportions.

Plans

Although it is up to the Buyer to obtain suitable plans, the Seller should supply copies of whatever plans it has in the interests of speeding up the Transaction. It would be helpful if the Seller were to mark all the boundaries on a plan and indicate which belong to the Property using "T" marks along the inside of the boundary line.

If there is any boundary dispute, the Seller should give details here or in response to enquiry 28.

Enquiry 1.5

Examples of what may be included in the reply to this enquiry include:

  • Vaults beneath a pavement.

  • Overhanging eaves.

  • Projecting signs.

  • Canopies.

  • Flying freeholds.

Enquiry 1.6

Examples of what might be included in the reply to this enquiry include:

  • Storehouses.

  • Car parking areas.

  • Plant and equipment rooms.

  • Strips of land alongside boundaries which are used although they fall outside the legal title.

Enquiry 1.7

The Buyer needs to establish whether there is any issue of adverse possession by the Seller. Enquiry 1.7 is, therefore, concerned with land or premises which do not actually form part of the Property to which the Seller has paper title, but which the Seller is nevertheless still using or enjoying.

The reply to enquiry 1.7 will help identify whether the Buyer will acquire title to additional land by reason of the Seller's adverse possession, as well as whether use or occupation of other property will be needed by the Buyer to enjoy the Property once acquired.

 

1.1 In respect of all walls, fences, ditches, hedges or other features (Boundary Features) that form the physical boundaries of the Property:

(a) are you aware of any discrepancies between the boundaries shown on or referred to in the title deeds and the Boundary Features; and

(b) have any alterations been made to the position of any Boundary Features during your ownership or, to your knowledge, earlier?

1.2 To whom do the Boundary Features belong if they do not lie wholly within the Property?

1.3 In relation to each of the Boundary Features:

(a) have you maintained it or regarded it as your responsibility;

(b) has someone else maintained it or regarded it as their responsibility; or

(c) have you treated it as a party structure or jointly repaired or maintained it with someone else?

1.4 Please supply a copy of any agreement for the maintenance of any of the Boundary Features.

1.5 Please supply a plan showing any parts of the Property that are situated beneath or above adjoining premises, roads or footpaths and supply copies of any relevant licences for projections.

1.6 Are there any adjoining or nearby premises or land which you use or occupy in connection with the Property?

1.7 If the answer to enquiry 1.6 is "yes", please:

(a) provide a plan showing the area occupied;

(b) provide evidence of the basis of such occupation; and

(c) state when such occupation commenced.

2. PARTY WALLS

Hide Note: Party wallsNote: Party walls
2. Party walls
Party walls

Where a boundary structure is jointly owned by the owners of the properties on either side of it, the structure may be a party structure.

The joint owners of a party structure are given some statutory protection to prevent one owner carrying out work to the structure unilaterally without regard to the needs and wishes of the other. The statutory protection is in the Party Wall etc. Act 1996. Prior to the 1996 Act, party walls were governed by the London Building Acts if they were in London; outside London they were usually subject to the common law.

Under the 1996 Act, certain notice procedures must be followed for the following:

  • The construction of a new wall (including the wall of a building) over or up to the boundary.

  • Works affecting existing party structures.

  • Excavations within certain distances of neighbouring buildings.

Non-compliance with the legislation may mean that the construction has to be dismantled and the land reinstated if an injunction is granted, or the building owner may have to pay damages.

The London Building Acts contained similar notice requirements.

The Seller should give the Buyer copies of all notices, awards and agreements, whether made under the 1996 Act, the London Building Acts or by private agreement, and including any which are the subject of negotiation and settlement.

The Buyer should check all the terms, particularly those relating to payment of compensation, costs, or security.

To speed up the Transaction, the Seller could anticipate further questions about outstanding payments and arrangements for securing payments.

 

In respect of any party structures which form part of the Property and also in respect of any works of the kind which require notices to be served under the Party Wall etc. Act 1996 (1996 Act) please:

(a) confirm that there have been no breaches of the 1996 Act or any earlier legislation governing party structures;

(b) supply copies of any notices, counternotices, awards and agreements relating to party structures, whether made under the 1996 Act or otherwise; and

(c) confirm that there have been no breaches of any of the terms, notices, counternotices, awards or agreements.

3. RIGHTS BENEFITING THE PROPERTY

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3. Rights benefiting the Property
Rights benefiting the Property

Generally rights benefiting the Property will pass to the Buyer. Examples of rights benefiting the Property are rights of way (including those over emergency escape routes), rights of support, rights to light and rights to use Conduits serving the Property (e.g. water, drainage and gas pipes, electricity and telephone cables).

Rights may have been granted:

  • Formally by deed.
  • Informally by agreement but not documented, or
  • Informally through long use, with or without the knowledge or consent of the person over whose property the right is exercised.

If the title deeds do not show that the Seller has good title to exercise a right, the Buyer may be able to establish that the right has been granted informally or is in the course of being acquired. To do this the Buyer needs to establish:

  • For how long and to what extent the right or purported right has been exercised (and this includes the frequency of exercise and whether the exercise has been over the whole or part of the relevant land or Conduits).
  • Whether this has been with the knowledge or consent of the person over whose land the right has been exercised.
  • Who owns and occupies the Property and the nature of that ownership.
  • Whether there has been any objection to the exercise. Whether there are any maintenance obligations associated with the rights or whether anyone has assumed any responsibility for maintenance (for example, in relation to drains or footpaths).
  • What costs have been incurred in exercising the rights, how costs are dealt with and the amount of any recent expenditure.

The Seller should supply details of all rights and arrangements benefiting the Property, even where these would be evident to the Buyer from an inspection. What is legally required may be different from what happens in practice, which may not be apparent. The Seller should supply copies of all relevant documents and correspondence.

Enquiry 3.2(b)

Express reference is made to plans because if the Right is an easement that is not formally documented, the Buyer will need to know the exact position, line or route of the easement. This is necessary to enable the Buyer to check the title to the servient tenement to ascertain whether the burden of the easement has been properly noted on it (without which the easement may not be binding on the owner of the servient tenement).

Enquiry 3.3

If for some reason an easement has been protected by a Unilateral Notice, the Buyer will need to change the identity of the beneficiary of the Unilateral Notice. Where the servient tenement is unregistered and a caution against first registration has been registered to protect the easement, the Buyer may need to change the name and address on the cautions register or, if this is not possible, lodge a new caution in the Buyer's own name. Failure to change the beneficiary's name and address will result in any warning-off notice not being received.

 

3.1 Unless apparent from the copy documents supplied, are there any covenants, agreements, rights or informal arrangements of any kind (including any which you may be in the course of acquiring) which benefit the Property (Rights)?

3.2 In respect of any Rights benefiting the Property, and unless apparent from the copy documents supplied, please:

(a) if the Right is formally documented, show title and supply copies of all relevant documents, plans and consents;

(b) if the Right is not formally documented, supply evidence as to entitlement together with a plan showing the area over which the Right is exercised;

(c) state to what extent any Rights are exercised, whether they are shared and if so by whom;

(d) state whether they can be terminated and, if so, by whom;

(e) state who owns and/or occupies the land over which any Rights are exercisable;

(f) give details of the maintenance (including costs) of any land, Conduits or equipment used in connection with any Rights;

(g) give details of any interference with any Rights, whether past, current or threatened; and

(h) confirm that all terms and conditions relating to the exercise of any Rights have been complied with or, if they have not, give details.

3.3 Have you (or, to your knowledge, has any predecessor in title):

(a) registered against any other titles at the Land Registry any unilateral notices to protect the priority of any of the Rights revealed in response to enquiry 3.1; or

(b) registered any cautions against first registration in respect of any of the Rights revealed in response to enquiry 3.1?

4. ADVERSE RIGHTS AFFECTING THE PROPERTY

Hide Note: Adverse rights affecting the Property Note: Adverse rights affecting the Property
4. Adverse rights affecting the Property
Adverse rights affecting the Property

Generally the burden of adverse rights to which the Property is subject will pass to the Buyer.

Examples of adverse rights affecting the Property are rights of way (including emergency escape routes), rights of support, rights to light and rights to use Conduits serving the neighbouring premises (e.g. water, drainage and gas pipes, electricity and telephone cables).

Adverse rights may have been granted:

  • Formally by deed.
  • Informally by agreement but not documented, or
  • Informally through long use, with or without the knowledge or consent of the owner of the property.

Please see note, Enquiry 3: Rights benefiting the Property, as similar considerations apply.

Public rights may be acquired over property where, for example, an open forecourt forming part of the property is regularly crossed by members of the public. Car parks and private passageways between buildings are similarly vulnerable. It is possible to negative dedication as part of the highway by the display of a notice to that effect. If there are or have been any such signs erected, further enquiry should be made as to the extent of public use, its duration and as to how long the sign has been displayed.

Even if the title deeds are silent on third party rights affecting the Property, the Buyer will still need to establish that no such rights have been created informally or are in the course of being created. This is not confined to the acquisition of rights by private landowners. Public rights may also be in the course of acquisition, as explained in the preceding paragraph.

Enquiry 4.5

This enquiry concerns registered title and overriding interests. The Property may be subject to third party rights and interests, which will not necessarily be apparent from the title deeds or from any inspection of the Property, but which will still bind the Buyer whether or not the Buyer knows of them. LR Practice Guide 15 - Overriding interests and their disclosure (www.practicallaw.com/4-106-6724) describes the law relating to overriding interests and how it has changed under the Land Registration Act 2002.

Enquiry 4.6

Part I of the Countryside and Rights of Way Act 2000 gives a public right of access to land that comes within the definition of "access land" in section 1(1) of that Act.

The countryside bodies, Natural England and the Countryside Council for Wales, are charged with producing conclusive maps showing access land. Access land is any land which is shown on the conclusive map as:

  • Open country (open country is land which "appears ... to consist wholly or predominantly of mountain, moor, heath or down"); or

  • Registered common land.

For areas where a conclusive map has not yet been produced, access land is any land which is:

  • Registered common land (in an area outside inner London); or

  • More than 600 metres above sea level.

Access land is also land which:

  • Is coastal margin which has been specified as such in an order made by the Secretary of State; or

  • Has been irrevocably dedicated by the landowner as access land under the Countryside and Rights of Way Act 2000.

The definition of "access land" excludes the 13 categories of land listed in Schedule 1 to the Act, defined as "excepted". This includes cultivated land, land covered by buildings and land within 20 metres of a dwelling. In particular cases, landowners are entitled to exclude or restrict the public's right to enter access land. The principal exclusion is a right to exclude the public for up to 28 days in any calendar year, on terms prescribed by the Access to the Countryside (Exclusions and Restrictions) (England) Regulations 2003.

The Seller may not know whether the Property has been designated as access land because the designation procedure does not include any requirement for service of a notice on the landowner. The Buyer will, therefore, also need to make its own inspection of the public maps that indicate the extent of access land. These can be inspected at The Countryside Agency (www.practicallaw.com/0-106-5514) for England and Countryside Council for Wales (www.practicallaw.com/8-501-2715) for Wales.

Enquiry 4.7

The purpose of this enquiry is to determine whether there is a possibility that an application may be made to register the Property as a town or village green. Where land has been registered as a town or village green, interference with it or encroachment on it is a criminal offence under section 12 of the Inclosure Act 1857 and section 29 of the Commons Act 1876.

Enquiry 22 on form CON 29O (Optional Enquiries of Local Authority) will reveal whether the Property, or any land which abuts the property, is registered as a town or village green under the Commons Registration Act 1965 or the Commons Act 2006, but will not reveal whether an application for such registration has been made but not yet determined by the registration authority, nor whether an application is likely to be made in the future.

It is not possible for a landowner to protect itself in any way against such an application being made, and additional enquiries are therefore needed. These may include making enquiries of the registration authority (to enquire whether there is a pending application for registration) and of the Seller.

In outline, section 15 of the Commons Act 2006 provides that anyone can apply to register land as a town or village green where "a significant number of the inhabitants of any locality, or of any neighbourhood within a locality, have indulged as of right in lawful sports and pastimes on the land for a period of at least 20 years" and either

  • The use is continuing up to the date of the application: or

  • The use ceased after 6 April 2007 for land in England or after 6 September 2007 for land in Wales, but not more than two years before the application is made.

(A transitional period, which allowed an application to be made in certain circumstances up to five years after the use ceased, ended in April 2012 for land in England and in September 2012 for land in Wales.)

Because an application may still be made up to two years after the use ceased, Enquiry 4.7 asks whether the Seller has any knowledge of recreational use of the Property by local people within the preceding period of ten years. This is a much longer period to enquire about than is necessary but, by erring on the side of caution, it is more likely that relevant information will be elicited where memories may be uncertain.

 

4.1 Unless apparent from the copy documents supplied, are there any covenants, restrictions, agreements, rights or informal arrangements of any kind to which the Property is subject (whether public or private and whether existing or in the course of acquisition) (Adverse Rights)?

4.2 In respect of any Adverse Rights to which the Property is subject, and unless apparent from the copy documents supplied, please:

(a) give full details and supply copies of all relevant documents, plans and consents;

(b) state to what extent any Adverse Rights have been exercised;

(c) state who has the benefit of any Adverse Rights;

(d) state whether any Adverse Rights can be terminated and, if so, by whom;

(e) give details of the maintenance (including costs) of any land, Conduits or equipment used in connection with any Adverse Rights; and

(f) confirm that all terms and conditions relating to the exercise of any Adverse Rights have been complied with or, if they have not, give details.

4.3 Unless apparent from the copy documents supplied, does any person use any part of the Property with or without your permission?

4.4 Have you, or to your knowledge has anyone else, applied to have any restrictive covenant affecting the Property modified or discharged?

4.5 Unless full details appear from the copy documents already supplied, please supply details of any interests to which the Property is subject under Schedules 1, 3 or 12 to the Land Registration Act 2002.

4.6 For the purposes of Part I of the Countryside and Rights of Way Act 2000:

(a) is the Property "access land" within the meaning of section 1(1) of that Act;

(b) if the answer to 4.6(a) is "no", are you aware of anything that might result in the Property becoming "access land"; and

(c) if the answer to enquiry 4.6(a) is "yes", are there any exclusions or restrictions in force under Chapter II of Part I of the Countryside and Rights of Way Act 2000?

4.7 Does the Property, or any property over which Rights are enjoyed, include any land that is currently used or has in the past ten years been used by members of the public for recreational purposes, whether with or without your permission?

5. TITLE POLICIES

Hide Note: Title policiesNote: Title policies
5. Title policies
Title policies

Insurance may be available to cover:

  • Restrictive covenants where, for example, the nature of the covenant or the identity of the person having the benefit of the covenant is unknown, or

  • Lost title deeds (for example, in relation to rights benefiting the Property) or defects in title where the title to the land is unregistered.

Title insurance policies may benefit subsequent owners and mortgagees of the Property as well as the person who originally took out the insurance. The Buyer needs to be satisfied that the level of cover is still adequate. Any increase in the market value of the Property may make the level of cover inadequate, irrespective of any index-linking of the sum insured.

Enquiry 5.2(a)

"Policy documents" generally comprise the policy and schedule showing the level of cover. Copies of any other documents referred to in the policy documents should also be produced (e.g. any opinion of counsel).

Enquiry 5.3

The Seller should include details of any application for insurance that has been refused as this is relevant information that must be disclosed on a future insurance application and may also be useful in making any subsequent re-application.

 

5.1 Has anyone obtained or been refused insurance cover in respect of any defect in title to the Property, including any restrictive covenant or any lost title deed?

5.2 If insurance cover has been obtained, please:

(a) supply copies of all policy documents including the proposal form;

(b) confirm that the conditions of all such policies have been complied with; and

(c) give details of any claims made and supply copies of all relevant correspondence and documents.

5.3 If insurance cover has been refused, please give details and supply copies of all relevant correspondence and documents.

6. ACCESS TO NEIGHBOURING LAND

Hide Note: Access to neighbouring landNote: Access to neighbouring land
6. Access to neighbouring land
Access to neighbouring land

It is often difficult or impossible for an owner or occupier to carry out repairs, alterations or other works to its own premises without going onto neighbouring land. If access is necessary but neighbours cannot agree arrangements, an application may be made to the court for an order giving access for work considered reasonably necessary for the preservation of the dominant land under the Access to Neighbouring Land Act 1992.

The Buyer will want details of all requests for access made and permissions given, whether made informally or by the court, including any applications and permissions relating to Conduits (e.g. for unblocking drains or laying cables) so that it is aware of any potential difficulties that are likely to arise.

 

6.1 Has the owner or occupier of any neighbouring premises ever requested or been allowed or been refused access to the Property to carry out repairs, alterations or other works to any neighbouring premises or the Conduits serving them? If so, please give details, including copies of any access orders granted under the Access to Neighbouring Land Act 1992 (1992 Act).

6.2 Have you or, to your knowledge, has any previous owner or occupier of the Property ever requested or been allowed or been refused access to neighbouring premises to carry out repairs, alterations or other works to the Property or the Conduits serving it? If so, please give details, including copies of any access orders granted under the 1992 Act.

7. ACCESS TO AND FROM THE PROPERTY

Hide Note: Access to and from the PropertyNote: Access to and from the Property
7. Access to and from the Property
Access to and from the Property

Enquiry 7.1

The Buyer needs to be satisfied that there are adequate rights of access to the Property. If access is direct to a public highway, no additional rights of way will be necessary and the Buyer will need to check only that there are no outstanding maintenance charges in respect of the highway (see enquiry 13).

Local authority enquiries should reveal whether roadways and footpaths are public highways, and therefore maintainable at public expense. These enquiries are unlikely, however, to reveal whether the boundary of the property searched directly abuts the public highway for its full length. Supplementary enquiries at the relevant highway authority and/or the Highways Agency should disclose the extent of the area adopted as public highway. The quality of the plans provided by these agencies can vary, however, and may be different, or differently scaled, from Land Registry plans. In some cases, especially purchases of development land, it may be prudent to verify the results with a physical inspection and further enquiries of, for example, adjoining landowners. Gooden v Northamptonshire County Council [2002] 1 EGLR 137 CA highlights the limitations, not least in terms of recourse, in relying solely on information proving to be unreliable obtained from local authority searches and enquiries.

Enquiry 7.2

Access may be controlled by a third party (e.g. by means of a locked gate). Enquiries should be made as to availability of keys, times when the barrier is attended by an operator and access arrangements when the barrier is not attended.

 

7.1 Does the boundary of the Property (or, if applicable, the Development) immediately adjoin a highway maintainable at public expense at, and for the full width of, each point of access?

7.2 Are there any barriers to access to the Property that are controlled by a third party? If so, please give details.

8. PHYSICAL CONDITION

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8. Physical condition
Physical condition

Enquiry 8 relates to the physical condition of the Property.

A survey or inspection may not reveal past or intermittent defects and not everything can be inspected, for example, hidden structure and Conduits. For this reason, the Seller is asked about the condition of the Property and, in answering, may be willing to give full details even where it considers that a defect or problem would be apparent on an inspection or would be revealed by a survey or has been treated or resolved.

The Seller may of course (as with any enquiry) decline to give an answer. The Buyer can deduce what it wishes from any such refusal. If, however, the Seller does provide an answer, it may be liable for misrepresentation if the answer is not complete or is misleading in some way.

Enquiry 8.1

Enquiry 8.1(a)

An inherent defect (sometimes referred to as a latent defect) is one that exists because of some fault or limitation in the construction or design of the building or the materials used to construct it. It may not be apparent on completion of the construction of the building, but may become apparent with time or because an intervening event triggers symptoms of the defect.

Enquiry 8.1(c)

The Seller should include in any reply information about all defective Conduits affecting the Property, whether or not they form part of the Property.

Enquiry 8.2

Until the dangers from exposure to asbestos became known, asbestos was used extensively in building materials to provide protection from heat, fire and sound. It was found in, for example, floor tiles, pipe insulation, wall and ceiling panels, roofing and in decorative plasterwork. Regulations controlling the use of asbestos in buildings culminated in a total ban on the use of asbestos and asbestos containing materials in 1999. Nevertheless, much of what was used in the past is still in place, constituting a significant health risk to those involved in building, renovation or maintenance work.

The management of asbestos in buildings is highly regulated, and since 2004 regulations have included duties in relation to asbestos on those who control non-domestic premises.

Enquiry 8.2 (asking whether or not there is asbestos and whether any has been removed) is a starting point for the Buyer's information-gathering exercise relating to asbestos. The reply, whether positive or negative, does not absolve the Buyer of the duties it may have under the Regulations.

Enquiries 8.3 and 8.4

The duties on those who control non-domestic premises are now found in Regulation 4 of the Control of Asbestos Regulations 2012. Failure to comply with these duties is a criminal offence and penalties can be severe.

Non-domestic premises are not defined in the Regulations, but the Health and Safety Executive takes a broad approach and considers that they include certain parts of blocks of flats, houses that have been converted into flats, and flats over shops.

Regulation 4 requires the dutyholder to assess whether asbestos is present or liable to be present and, if so, to determine the risk from that asbestos and to manage that risk. The dutyholder must also prepare a written plan for managing the risk and ensure that all measures specified in the written plan are implemented and recorded. The assessment and the plan must be reviewed at regular intervals and at any time when there has been a significant change in the premises to which they relate.

A dutyholder is a person who has some contractual responsibility (for example under a tenancy) for the maintenance or repair of the premises, or, in the absence of contractual responsibility, can exercise some control over access to and from the premises.

There may be more than one dutyholder in relation to particular premises, in which case each dutyholder's duties are determined by the nature and extent of the maintenance and repair obligations that it has. There is also a duty to co-operate with each dutyholder so far as necessary to enable a dutyholder to comply with its duties.

The Buyer will not be liable for any failure of the Seller to comply with its duties under Regulation 4, but, equally, the Buyer cannot rely on the risk assessments, written plans or any steps taken by the Seller. If the Buyer becomes a dutyholder following completion (and in many cases it will), it will have to carry out its own assessment after completion and otherwise comply with the duties in Regulation 4.

The information and documents requested by Enquires 8.3 and 8.4 should therefore be regarded as no more than a starting point for the Buyer. The value and use of the information and documents will depend on the nature of the Transaction (freehold or leasehold, investment or vacant possession) and on the Buyer's plans for the Property (in particular whether it plans to carry out any works at the Property).

There is more information on asbestos and the duties under Regulation 4 on the Health and Safety Executive's website.

Enquiry 8.5

A particular substance on its own or used in a particular manner in a building may present no risk and no problems, but used in a different way, or in conjunction with another material, may be or become unstable or hazardous. In recognition of this, Good Practice in the Selection of Construction Materials was published in 1997 by Ove Arup & Partners, the British Council of Offices and the British Property Federation; an updated edition was published by the British Council for Offices in 2011. Enquiry 8.5 adopts the approach taken in this guide and does not, therefore, ask whether any of a long list of particular substances has been used at the Property but is, instead, concerned with the presence of substances (other than asbestos) which may potentially cause problems. Whether there is an actual problem will be a matter for appropriately qualified consultants, having regard to relevant legislation and codes of practice.

Enquiry 8.6

This enquiry is concerned with materials (other than asbestos) that have been removed from the Property. The Buyer's concern is that any removal of potentially hazardous or dangerous substances has been done in accordance with relevant legislation and codes of practice.

Enquiry 8.7

If the reply to this enquiry indicates that buildings have been erected on the Property or that any extensions or major alterations have been carried out within the previous 12 years, the Buyer may wish to raise further specific enquiries. To avoid delay the Seller may consider volunteering details and any relevant information without specifically being asked to do so.

Enquiry 8.9

"Plant and equipment" may include security, access and alarm systems, lifts, escalators, CCTV, building management systems, air conditioning and heating systems.

A maintenance report may take the form of answers to a formal questionnaire and, as well as maintenance, may cover repair, replacement, treatment or improvements. It may be the only practical source of information on these matters.

Enquiry 8.10

The Buyer will be interested in all guarantees, warranties and insurance policies under which it may be able to claim in the event of a defect.

 

8.1 If the Property has been affected by any of the following, please supply details:

(a) structural or inherent defects;

(b) subsidence, settlement, landslip or heave;

(c) defective Conduits, fixtures, plant or equipment;

(d) rising damp, rot, any fungal or other infection or any infestation; or

(e) flooding.

8.2 Has asbestos been used in the present structures forming part of the Property or of any premises of which the Property forms part, including Conduits, fixtures, plant and equipment?

8.3 Please supply a copy of the most recent survey or assessment carried out in relation to the Property (whether by the Seller or by any other person) for the purposes of complying with regulation 4 of the Control of Asbestos Regulations 2012 (or any previous Control of Asbestos Regulations) or advise us when and where it can be inspected.

8.4 Please supply a copy of the written plan and any other records prepared for managing asbestos in the Property or in any premises of which the Property forms part, or advise us when and where they can be inspected.

8.5 Has any substance (other than asbestos) known or suspected to be unsuitable for its purpose, unstable or hazardous, been used in the present structures forming part of the Property, including Conduits, fixtures, plant and equipment?

8.6 Has any asbestos, or any other substance known or suspected to be unsuitable for its purpose, unstable or hazardous, been removed from the Property in the past?

8.7 Please identify:

(a) any buildings

(b) any extensions or major alterations to existing buildings, and

(c) any other major engineering works

which have been erected, made or carried out at the Property within the last 12 years.

8.8 In respect of anything identified in reply to enquiry 8.7, please supply copies of any subsisting guarantees, warranties and insurance policies.

8.9 In respect of all Conduits, fixtures, plant or equipment which will remain part of the Property or which will serve the Property after completion of the Transaction:

(a) please confirm that they have been regularly tested and maintained;

(b) please confirm that, so far as you are aware, there are no items requiring significant expenditure within the next three years;

(c) please supply a copy of the most recent maintenance report relating to each of them;

(d) please supply copies of any subsisting guarantees, warranties and insurance policies.

8.10 In relation to the guarantees, warranties and insurance policies identified in reply to enquiries 8.8 and 8.9, please confirm that:

(a) all the terms have been complied with;

(b) there have been no claims made under any of them, whether or not those claims are current or have been settled; and

(c) there are no apparent defects in respect of which a claim might arise under them.

9. CONTENTS

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9. Contents
Contents

The Buyer and the Seller need to agree what items will be left at the Property on completion of the Transaction and what items will be removed, and any effect this may have on the price. This enquiry is to clarify what the Buyer expects to receive and what the Seller must do to give vacant possession of the Property.

The general rule, unless the parties agree otherwise, is that:

  • Fixtures remain in the Property and pass to the Buyer.

  • Chattels do not pass and the Seller is legally obliged to remove them prior to completion.

The distinction between fixtures and chattels can be difficult to determine, which is why the enquiries avoid these terms in favour of "item". The courts have evolved tests by reference to the degree and purpose of annexation to the property. Generally if something has been fixed to a property so that it is difficult to remove without causing damage and was fixed to improve that property permanently, it will be a fixture.

Rather than rely on this imprecise test, however, it is prudent for the parties to come to a clear agreement. In the case of telecommunications links and equipment, replies should clearly set out what will be removed, what will remain, and what is the undertaker's property.

Enquiries 9.1 and 9.2

It is particularly important that the parties agree whether fixed plant is to be removed on completion or is to remain in the Property. Fixed plant tends to be heavy, difficult to move and expensive and generally will play a significant part in the business or use of the Property. It may not be clear whether it should be treated as a fixture or a chattel, and any misunderstanding between the parties as to whether it stays in the Property on completion or is removed may have serious consequences.

Enquiry 9.3(b)

Examples of third party claims which may affect items that the Seller is proposing to leave at the Property following completion include credit or conditional sale agreements, hire and hire purchase agreements, finance and leasing agreements. Some of these may contain title retention clauses, which would mean that the Seller does not own the item in question. In relation to such items there may be some overlap with enquiry 9.4.

Enquiry 9.4

Items which will remain in the Property but which will belong to a third party include telecommunication masts, advertising hoardings, metering equipment and street signs fixed to exterior walls.

 

9.1 Please list any items which are currently attached to the structure of the Property in some way (e.g. wired, plumbed, bolted) and which you propose removing from the Property prior to completion of the Transaction.

9.2 Please list any items (other than those belonging to an occupational tenant) that are not attached to the structure of the Property, and which you propose leaving at the Property after completion of the Transaction.

9.3 In respect of each item listed in reply to enquiry 9.2, please:

(a) confirm that the item is included in the purchase price agreed for the Transaction;

(b) confirm that the item belongs to you free from any claim by any other party; and

(c) supply copies of any subsisting certificates, guarantees and warranties relating to it.

9.4 Please list any item that will remain at the Property after completion but which belongs to any third party other than an occupational tenant (e.g. meters).

10. UTILITIES AND SERVICES

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10. Utilities and services
Utilities and services

Enquiry 10.1

Utilities and services may include:

  • Water.
  • Drainage of foul and surface water.
  • Gas.
  • Oil.
  • Electricity.
  • District heating schemes.
  • Telecommunications.
  • Cable and satellite communications systems.

Enquiries 10.1(b) and (c)

These enquiries enable the Buyer to obtain information about the implementation of the Carbon Reduction Commitment Energy Efficiency Scheme (CRC) in relation to the Property directly from the relevant person. This may be the Seller or a third party such as a managing agent. In the case of leasehold property, depending upon who takes responsibility for the supply of energy to the Property, it may be the landlord's implementation of the CRC that is relevant, rather than the Seller's implementation. For further guidance on how the CRC applies between landlords and tenants, "CRC: a guide for landlords and tenants"  (www.practicallaw.com/0-503-2406)issued by the British Property Federation on behalf of the member organisations of the Green Property Alliance, is a useful starting point.

Sale contracts and agreements for lease commonly exclude liability on the part of the seller/landlord for any representations except those made in writing by the seller's solicitors in response to pre-contract enquiries. If information about the CRC is passed directly to the Buyer following these enquiries, the Buyer's solicitor must make sure that either the information is confirmed in writing by the Seller's solicitors, or that the contract is amended appropriately so that the Buyer can rely on the information in the same way as if it had been obtained through the solicitors.

More detailed enquiries on CRC issues are available at Additional enquiries on CRC issues - which to select (www.practicallaw.com/1-503-1699). These incorporate detailed drafting notes, explaining the purpose of each of the enquiries. They should be helpful where, for example

  • the Buyer wants to know what sort of questions it should ask whoever the Seller has nominated in reply to Enquiry 10.1(a), and why;

  • The Buyer prefers its lawyer to raise the enquiries because the Buyer does not have the internal expertise to do so direct and does not have any external CRC adviser, such as a surveyor or carbon consultant; or

  • The Seller fails to nominate anyone suitable for direct discussions.

Enquiry 10.2

Although usual for a property to be connected to mains utilities (such as water, drainage, gas and electricity), this is not always so. Also, there may be more than one source of the utility supply.

Water may come from a mains supply and a well or be drawn directly from a river or lake.

Electricity may come from a private generator instead of or in addition to the mains supply.

If Conduits do not run directly from a highway maintainable at public expense, details of the rights to use the Conduits should be given in reply to enquiry 3.

Enquiry 10.3

Qualification for the CRC depends on both the amount of electricity consumed in the qualification year and the type of meter used to measure it. It is not always possible to tell what type a meter is merely by looking at it. The Seller may be able to provide this information from paperwork in its possession.

Enquiries 10.4 and 10.5

Although the Buyer will not generally be concerned to see supply contracts for mains utilities, it will need to see copies of all supply contracts and consents which either will continue to affect the Property after completion or which it may wish to take over. An example would be a water abstraction licence. Details of all contracts and licences are requested so that the Buyer can decide what may be of interest.

 

10.1 Please provide

(a) details of the utilities and other services connected to or serving the Property;

(b) the name and contact details of the individual within the Seller who deals with energy supplies in relation to the Property; and

(c) confirmation that we may make contact with the person referred to in (b) above in order to obtain information about the implementation of the Carbon Reduction Commitment Energy Efficiency Scheme in relation to the Property.

10.2 In respect of each utility or service listed in reply to enquiry 10.1(a), please state:

(a) whether the connection is direct to a mains supply;

(b) whether the connection is metered and if so whether the meter is on the Property and relates only to your use in relation to the Property;

(c) who makes the supply; and

(d) whether the Conduits run directly from a highway maintainable at public expense to the Property without passing through, under or over any other land.

10.3 In the case of the electricity supply to the Property, is any meter a half hourly meter settled on the half-hourly market?

10.4 Please provide details of any supply contracts and any other relevant documents.

10.5 Please provide details of any contracts for the supply of services carried out at the Property (e.g. security or cleaning).

11. FIRE SAFETY AND MEANS OF ESCAPE

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11. Fire safety and means of escape
Fire safety and means of escape

With effect from 1 October 2006, fire safety for most non-domestic premises is dealt with primarily under the Regulatory Reform (Fire Safety) Order 2005 (the Fire Safety Order 2005).

The burden of compliance with the requirements of the Fire Safety Order 2005 lies with the "responsible person", who is defined in article 3 of the Fire Safety Order 2005 to be:

  • In relation to a workplace, the employer, to the extent that the workplace is under the employer's control; or

  • If there is no employer, the person who has control of the premises for the purposes of a trade, business or undertaking (whether or not for profit).

  • Otherwise, the owner, which would be the case in relation to a newly constructed building that has yet to be occupied.

There may be more than one "responsible person" in respect of the same premises (for example, if the Property forms part of a building in multiple occupation). Where there is more than one responsible person in respect of a single property, each has a duty to co-operate, to co-ordinate fire safety measures and to give the others information on fire safety risks.

Fire safety duties are also imposed on any person who has, to any extent, control of the premises, insofar as the fire safety duties relate to matters within that person's control (article 5(3), Fire Safety Order 2005).

A person with obligations under a lease or any other contractual agreement for the maintenance or safety of the premises is considered to have control of the premises (article 5(4), Fire Safety Order 2005).

The duties include the following:

  • A duty to take whatever fire precautions are reasonably practicable to ensure that employees at or in the vicinity of, the premises are safe, and to take whatever fire precautions are reasonably required to ensure that the premises are safe for "relevant persons" (employees and non-employees who are lawfully at or in the vicinity of the premises and at risk from a fire at the premises).

  • A duty to carry out an assessment of the fire risks at the property, with a view to identifying what fire precautions are needed to ensure that the premises are safe for "relevant persons".

  • A duty to keep the fire risk assessment under review.

  • A duty to keep a record of significant findings of any fire risk assessment, of any precautions that have or will be put in place to address findings and of any group of people identified in the risk assessment as being particularly at risk. Note that certain people are exempt from this requirement, for example, employers with fewer than five employees.

  • A duty to maintain fire-fighting equipment, ensure that the premises are maintained to ensure the safety of "relevant persons" in the event of fire, and to keep fire exits clear.

The fact that the obligations rest with people who are currently responsible in some way for the property and what is going on in it, means that a buyer is going to be under a duty to comply with the Fire Safety Order 2005 as from the moment of purchase. There is no lead-in period, so in theory at least, a buyer can be liable for breach at the point of completion. It follows from this that:

  • The Buyer needs to collect as much information as possible before completion to be as prepared as possible.

  • Whatever information the Seller has may be of limited use. The Buyer cannot produce the Seller's risk assessment in satisfaction of the Buyer's obligations and many of the factors affecting the risk assessment are likely to have changed with the Buyer's ownership.

Note also, that breaches and notices served by enforcing authorities that relate to fire safety may also be disclosed in response to Enquiry 14 (Statutory and other requirements) or Enquiry 27 (Notices).

Enquiry 11.1

The Buyer may find the records useful, although they will not absolve the Buyer of its responsibilities under the Fire Safety Order 2005. The enquiry is phrased to refer to "any records" because:

  • The duty to keep records goes beyond the duty to carry out a fire risk assessment.

  • The records may not have been made by the Seller itself.

Note that a fire risk assessment may not be a single document, but a collection of documents.

The solicitors acting for the Buyer are unlikely to want the documents themselves, particularly as the bundle is likely to be bulky. The enquiry has therefore been phrased to ask where the papers may be inspected.

Enquiry 11.2

This enquiry is aimed at establishing information about fire risk assessments and other information required to be recorded that relates to premises of which the Property forms a part. The information will be relevant for the Buyer who may, on completion, be responsible for co-ordinating fire precautions with others in any building that includes the Property.

Enquiry 11.3

It is possible that there are a number of "responsible persons" in respect of the Property. The Buyer may find that on completion it must co-operate and co-ordinate with others and may need to give others information. This enquiry is aimed at eliciting information as to what co-ordination and co-operation there is currently.

Enquiries 11.4 and 11.5

This information may be disclosed as part of the response to Enquiry 11.1, but it is worth asking the question directly as in practical terms the means of fire escape is one of the most significant issues for the Buyer and for the Buyer's compliance with its duties under the Fire Safety Order 2005.

Particular attention will need to be given by the Buyer to any agreements that authorise use of the fire escapes:

  • There may be conditions of use.

  • The right to use may be personal to the Seller

  • There may be contractual obligations to maintain the fire escapes, that may be in addition to or go beyond the obligations that the Buyer will be under by virtue of the Fire Safety Order 2005.

  • There may be conflicts between the contractual obligations and contractual restrictions on the use of fire escapes and the statutory duties.

 

In this Enquiry, Fire Safety Order 2005 means the Regulatory Reform (Fire Safety) Order 2005 and any regulations made under it.

11.1 Please advise us where we may inspect any records in relation to the Property, made for the purposes of complying with the Fire Safety Order 2005, including any records of findings following a fire risk assessment of the Property.

11.2 Please advise us where we may inspect any records in relation to any premises within any building of which the Property comprises part, made for the purposes of complying with the Fire Safety Order 2005, including any records of findings following a fire risk assessment of any such premises.

11.3 Please provide details of any steps taken in relation to the Property to co-operate with any other people and to co-ordinate measures to comply with the Fire Safety Order 2005.

11.4 What are the current means of escape from the Property in case of emergency?

11.5 If any current means of emergency escape from the Property passes over any land other than the Property or a public highway please:

(a) provide copies of any agreements that authorise such use;

(b) confirm that all conditions in any such agreements have been complied with; and

(c) provide details of anything that has occurred that may lead to any agreement for means of escape being revoked, terminated or not renewed.

12. PLANNING AND BUILDING REGULATIONS

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12. Planning and building regulations
Planning and building regulations

Planning law is contained in a number of statutes and subordinate legislation, principally the Town and Country Planning Act 1990, the Planning (Listed Buildings and Conservation Areas) Act 1990, the Planning (Hazardous Substances) Act 1990 and the Planning (Consequential Provisions) Act 1990.

Planning permission is required for "development", which encompasses either of two elements:

  • Building works on the land or to buildings (which includes building, engineering, mining, demolition and other operations on, in, over or under a property), or

  • A material change of use of the land or buildings.

A planning permission authorising the construction of a building will at the same time authorise its use.

Enquiry 12.1

The importance of establishing that building regulation consent was obtained, where required, and that works were carried out in accordance with the approved plans, was illustrated in Cottingham v Attey Bower & Jones [2000] EGCS 48 (ChD).

Building Regulations completion certificates were introduced into the Buildings Regulations in 1991. The production by the Seller of a completion certificate will be evidence (but not conclusive evidence) that works were carried out in accordance with Building Regulations. Building regulations approval or completion certificates are not necessary where the work can be self-certified as complying with the regulations.

Self-certification can be carried out by someone who is a member of a competent person scheme under the Building Act 1984. For information on the Competent Person Scheme, see DCLG: Competent Person Schemes (www.practicallaw.com/0-381-7744)

Enquiry 12.2

A planning permission must generally be implemented within three years from the date of its grant.

Enquiries 12.3, 12.4, 12.5

Established use certificates are no longer granted. Since 27 July, 1992, the equivalent is a certificate of lawfulness of existing use or development (CLEUD) or a certificate of lawfulness of proposed use or development (CLOPUD) (sections 191 and 192, Town and Country Planning Act 1990).

Existing established use certificates are still valid and can be relied upon, however, and so their existence is still relevant for the Buyer. There is a procedure for converting an established use certificate into a CLEUD. A CLEUD or a CLOPUD will establish that:

  • An existing use is or a proposed use would be lawful.

  • Any operations that have been carried out or which are proposed, in, on, over or under the land are, or will be, lawful.

  • Any other matter that constitutes a breach of condition or limitation subject to which planning permission has been granted, is lawful.

A use, an operation or a breach of condition or limitation will be lawful if:

  • No enforcement action can be taken in respect of it, and

  • The use or development or the breach does not contravene any of the requirements of any enforcement notice in force.

The power to issue enforcement notices is subject to time limits (section 171B, Town and Country Planning Act 1990).

  • Four years: No enforcement action can be taken after four years where the breach of planning control relates to building, engineering, mining or other operations in, on or over land.

  • Four years: No enforcement action can be taken after four years where the breach of planning control relates to the change of use of any building to use as a single dwelling-house.

  • Ten years: No enforcement action can be taken after ten years where the breach of planning control relates to anything else.

Enquiry 12.4

The existing buildings on the Property may be authorised by means of an express planning permission, or by a CLEUD or by virtue of the Town and Country Planning (Use Classes) Order 1987 (as amended) or the Town and Country Planning (General Permitted Development) Order 1995 (as amended).

Enquiries 12.5 and 12.6

The existing use of the Property may be authorised by means of an express planning permission, under a CLEUD or under the Town and Country Planning (Use Classes) Order 1987 (as amended) or the Town and Country Planning (General Permitted Development) Order 1995 (as amended).

The Property may have a single use or a single use with an ancillary use. Where one use is ancillary to another (for example, storage associated with a shop) a separate permission for the ancillary use will not generally be required.

It is possible for the Property to have more than one use where the further uses are not ancillary but are main uses in their own right as, for example, a shop at ground level with a flat above. Separate permissions are required for each main use but each main use may still have its own ancillary uses.

Enquiries 12.7, 12.8 and 12.9

Where planning consent is required for a development (whether building works or a change of use), the local planning authority can take enforcement action if the development is carried out without planning consent.

There are time limits for enforcement action.

  • No enforcement action can be brought in relation to building works after four years have passed following substantial completion of the building works.

  • Where the development is a change of use (other than a change of use to a single dwelling house), no enforcement action can be brought after ten years from the date of the breach.

  • Where, however, a building is listed under the Planning (Listed Buildings and Conservation Areas) Act 1990, there is no time limit for enforcement action in respect of a breach.

A breach of listed building control can be enforced against an owner no matter when or by whom the breach was committed.

A practical problem may arise because when a property is listed, the listing may fail to record the state and extent of the listing, making it difficult for buyers, sellers and local authorities to establish whether any breach has occurred. Works that need to be considered include both internal and external works to any buildings, and also works within the curtilage of the building.

Enquiry 12.10

Third parties may challenge the grant of a consent or a certificate either by judicial review or by appeal in the courts under procedures provided in the Planning Acts.

Enquiry 12.12

Outline planning permissions are permissions for the construction of a building that are granted in principle, subject to certain "reserved matters". The outline planning permission cannot be implemented until the reserved matters have been approved.

Enquiry 12.14

Section 171BA of the Town and Country Planning Act 1990 (inserted by the Localism Act 2011) enables local planning authorities in England to apply to the magistrates’ court for a planning enforcement order within six months of the date of the authority becoming aware of evidence of an apparent breach of planning control. This will enable the authority to enforce certain breaches of planning control outside the normal planning enforcement periods. The order will only be made if the court is satisfied, on the balance of probabilities, that the breach of planning control has to any extent been deliberately concealed, and that it is just in the circumstances to make the order. Once the order is made, the order establishes a twelve month enforcement period.

The purpose of this enquiry is to create an “audit trail” that might help persuade a court, should a concealed breach be discovered that occurred in the past, that the current owner was innocent of it and, therefore, ought not to be the subject of a planning enforcement order.

Enquiry 12.15

Part 5 of the Localism Act 2011 contains provisions relating to 'assets of community value'. They enable local authorities to list buildings and land as assets of community value, and give community groups a window of opportunity to bid for such assets when they come up for sale. The Assets of Community Value (England) Regulations 2012 brought these provisions into force on 21 September 2012 for properties in England only. They are not yet in force in Wales (as at 21 January 2013).

Local authorities must maintain a 'list of assets of community value'. A building or other land will be land of community value if the local authority decides in its absolute discretion that

  • Its actual current (non-ancillary) use ‘furthers the social wellbeing or social interests of the local community’, and

  • It is realistic to think that such use (whether or not in the same way) can continue.

Buildings or other land that ‘in the recent past’ had a use that furthered the social wellbeing or social interest of the local community will also qualify if it is realistic to think that this kind of use could be resumed in the next five years.

The very wide definition gives local authorities a broad discretion to list buildings with a wide range of uses. Examples may include village shops, local pubs, community centres, old town halls, libraries, swimming pools and markets. Certain types of land may be exempted by regulations.

A listing is triggered by a community nomination. A community nomination can be made by a parish council (in England), community council (in Wales) and ‘a person that is a voluntary or community body with a local connection’ .

If the local authority decides the nominated asset meets the criteria it must accept the nomination and add it to the list. It must also give notice of land’s inclusion in the list to the owner, occupier and person who made the nomination. There will be an eight week period after listing for owners to challenge the decision by way of a review by the Local Authority and then by way of appeal to a First-tier tribunal.

Land is automatically removed five years after it was first listed . Community groups wishing to protect land can make a fresh nomination after the expiry of the five year period. Unless they do so the owner of the asset can sell free of the restrictions.

The rules affect a ‘relevant disposal’ which is:

  • The sale of the freehold, or

  • The grant or assignment of a lease that was originally granted for 25 years or more.

However such a disposal will only be a 'relevant disposal' where it gives the buyer vacant possession. A relevant disposal occurs when it takes place but if it is pursuant to a binding agreement to dispose it will be when the parties become contractually bound. The Act exempts certain transactions, such as gifts, disposals to family members or by personal representatives, business transfers as a going concern or disposals between connected companies. The regulations also exempt disposals in pursuance of a planning obligation, an option or pre-emption right made before the land was listed, and disposals by a mortgagee under a power of sale.

An owner wishing to enter into a relevant disposal must:

  • Notify the local authority of their intention to do so; and

  • Wait for an initial six week period to see if any community interest groups ask (in writing) to be treated as potential bidders (this is known as the 'Interim Moratorium Period’). The local authority will inform an owner if a group asks to be treated as a bidder. If no expressions of interest are made, the owner may proceed with the disposal; and

  • Wait a full six months after giving notice (this is known as the ‘Full Moratorium Period’), if a community interest group does ask to be treated as a potential bidder: s95(3), Localism Act 2011.

During the Full Moratorium Period a disposal may take place only to the community interest group (at a price agreed between the parties). However the owner is not obliged to accept the bid.

If a bid has not been received during the Full Moratorium Period, or if it is not accepted, then for the remainder of an 18 month period starting with the initial notice given by the owner (the Protected Period), the owner can dispose of the listed asset on the open market. The owner will therefore have 12 months in which to dispose of the asset freely, before the moratorium process restarts.

After the Protected Period has passed, the moratorium process will need to be repeated and each of the relevant conditions satisfied before a sale to a third party can take place.

The moratorium periods and the protected period run from the date the local authority receives notice of the intended disposal.

 

12.1 Please supply a copy of any planning permission, approval of reserved matters, building regulations approval, building regulations completion certificate, self-certification, listed building consent and conservation area consent which relates to the Property, and of any consent for the display of advertisements at or from the Property (each a Consent).

12.2 In respect of any Consents disclosed, please identify:

(a) those which have been implemented and if so, indicate whether fully or partially;

(b) those which authorise existing uses and buildings; and

(c) those which have not yet been implemented but are still capable of implementation.

12.3 Please supply a copy of any of the following certificates (each a Certificate) which relate to the Property:

(a) established use certificate;

(b) certificate of lawfulness of existing use or development; and

(c) certificate of lawfulness of proposed use or development.

12.4 How are the existing buildings on the Property authorised if not by a Consent or a Certificate?

12.5 How is the existing use of the Property authorised if not by a Consent or a Certificate?

12.6 What is the existing use of the Property, when did it start and has it been continuous since? If there is more than one existing use please specify each use and indicate which are main and which are ancillary, and when each use started.

12.7 Where the Property is not listed under the Planning (Listed Buildings and Conservation Areas) Act 1990, please provide details of any building works, demolition, mining or other engineering works that have taken place at the Property within the past ten years and confirm that all necessary Consents were obtained for them.

12.8 Where the Property is listed under the Planning (Listed Buildings and Conservation Areas) Act 1990, please provide:

(a) a copy of the listing particulars where available; and

(b) details of any alterations, extensions, other building works, demolition, mining or other engineering works that have taken place at the Property since the date when the Property was listed, and confirm that all necessary Consents were obtained for them.

12.9 Have there been any actual or alleged breaches of the conditions and limitations and other terms in any Consents or Certificates?

12.10 Is any Consent or Certificate the subject of a challenge in the courts either by way of judicial review or statutory proceedings? If not, is a challenge expected?

12.11 Please provide details of any application for a Consent or a Certificate which:

(a) has been made but not yet decided;

(b) has been refused or withdrawn; or

(c) is the subject of an outstanding appeal.

12.12 If there is any existing outline planning permission relating to the Property or other planning permission with conditions which need to be satisfied in order for development to proceed, what has been done to obtain approval of reserved matters and/or satisfaction of those conditions?

12.13 Please supply a copy of any letters or notices under planning legislation which have been given or received in relation to the Property.

12.14 Please confirm that you are not aware of any circumstances by reason of which a planning enforcement order might be made as a result of an apparent breach of planning control that has been deliberately concealed by you or (to your knowledge) any other person.

12.15 Have you notice of any matter, fact or thing that would lead you to believe that the Property or any part of it is to be listed in the local authority's list of assets of community value?

13. STATUTORY AGREEMENTS AND INFRASTRUCTURE

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13. Statutory agreements and infrastructure
Statutory agreements and infrastructure

The Buyer will make a local authority and local land charges search. The results should disclose agreements and notices relating to roads, drains, public health matters and repair obligations. The following are examples of the types of agreement and notice about which the Buyer will need information:

  • Agreements under section 38 of the Highways Act 1980.

    These impose obligations on a developer to make up roads and footpaths to a standard required by the local highway authority and to maintain them for a specified period. The road or footpath is then adopted by the highway authority and maintained at public expense. Normally the agreement is supported by a bond to pay for completion of the works if the developer fails to carry them out.

    Section 38 agreements do not run with the land so, if the Seller is party to one where any obligations remain outstanding, the Buyer may need to take an assignment of it so as to ensure that the remaining obligations are performed and so prevent the closure of the road by the highway authority. A local highway authority may agree or resolve to make up roadways or footpaths at the cost of owners of premises fronting the roadway. Full details will be required so that the Buyer is aware of potential liabilities.

  • Agreements under section 104 of the Water Industry Act 1991.

    These impose obligations in relation to sewers comparable to those relating to roads under section 38 above.

  • Planning obligations under section 106 of the Town and Country Planning Act 1990.

    These may require a landowner to carry out specified works or impose restrictions on the development or use of land or require money to be paid to a local planning authority.

    Such obligations are normally entered into as part of negotiations for planning permission and may provide for the making up and adoption of roads and footpaths.

    The local authority search may not always disclose all relevant agreements and notices, which is why the detailed questions in Enquiry 13 are worth raising with the Seller.

Enquiry 13.1

Examples of the types of agreement to which this enquiry relates include:

  • Agreements relating to the construction and adoption of roads, footpaths, drains and sewers as mentioned above.

  • Agreements relating to the laying of gas pipes, electricity and telecommunications cables, wires and other equipment including transformer substations.

  • Water abstraction licences.

Enquiry 13.2

This enquiry covers, for example, obligations on the Seller to enter into any highway, water or sewerage agreements or a section 106 planning agreement. For matters relating to the community infrastructure levy, see Enquiry 32.

Enquiry 13.3

Examples of what might be included in the reply to this enquiry include a road closure order, a diversion order, a traffic flow order which, if implemented, might affect access to the Property or the ability to park near or deliver to the Property or a food hygiene order, of particular relevance if the Property is a restaurant or hotel.

Enquiry 13.4

If the Seller is aware of anything which is not yet, but will be, registered it should be disclosed here, unless already mentioned in reply to enquiry 13.1.

There are some matters which are not required to be registered as a local land charge, for example, planning contravention notices and notices of intention to adopt a highway.

Enquiry 13.6

The local authority or other public or private bodies, such as the Homes and Communities Agency, can make financial grants. These are generally made to promote development and improvement and may be subject to repayment obligations in certain circumstances.

The Buyer needs to know what grants have been made, by whom, for how much and the terms of the grant and in particular will need to know about repayment obligations so that appropriate provisions can be made in the contract.

Enquiry 13.7

The Seller may have received compensation for such matters as:

  • Compulsory purchase of part of the Property under section 226 of the Town and Country Planning Act 1990;

  • Extinguishment of easements or covenants under section 237 of the Town and Country Planning Act 1990; or

  • Compulsory purchase to facilitate the construction of Crossrail or the HS2 railway line under the legislation governing those projects.

 

13.1 In relation to any agreements affecting the Property that have been entered into with any planning, highway or other public authority or utilities provider:

(a) please supply details;

(b) confirm that there are no breaches of any of their terms; and

(c) confirm that there are no outstanding obligations under them.

13.2 Are you required to enter into any agreement or obligation with any planning, highway or other public authority or utilities provider?

13.3 Are there any proposals relating to planning, compulsory purchase powers, infrastructure (including parking, public transport schemes, road schemes and traffic regulation) or environmental health which, if implemented, would affect the continued use of the Property for its present purposes?

13.4 Is there anything affecting the Property that is capable of being registered on the local land charges register but that is not registered?

13.5 Please confirm that the Property is not subject to any charge or notice remaining to be complied with.

13.6 Please supply details of any grant made or claimed in respect of the Property, including any circumstances in which any grant may have to be repaid.

13.7 Please supply details of any compensation paid or claimed in respect of the Property under any planning legislation or following the exercise of compulsory purchase powers.

14. STATUTORY AND OTHER REQUIREMENTS

Hide Note: Statutory and other requirementsNote: Statutory and other requirements
14. Statutory and other requirements
Statutory and other requirements

Enquiry 14 addresses potential liabilities in connection with the Property and concentrates mainly on statutory liabilities.

Liability under statute may be strict, which means that the person responsible for the breach will be liable regardless of the state of their knowledge about the breach. This is often the case with health and safety legislation, which is designed to protect the welfare of employees and occupiers of premises.

Liability may, in other cases, depend on the state of knowledge of the person responsible for the breach. Statute will provide who is responsible for compliance.

Liability may rest with the occupier and/or the owner. The owner may be defined to include the landlord, any superior landlord and/or the freeholder. Some legislation, such as fire regulations, extends the meaning of owner to include anyone in receipt of rents and so may include a trustee of the landlord or a managing agent.

Enquiry 14.1

The enquiry is wide and addresses all legislation that may affect the Property. Depending on the nature of the Property and its use, particular consideration should be given to the Occupiers' Liability Acts 1957 and 1984, the Defective Premises Act 1972, health and safety legislation (including the Shops Act 1950, the Factories Acts, the Offices, Shops and Railway Premises Act 1963 and the Health and Safety at Work etc. Act 1974), and liquor and gambling licensing.

To the extent not covered elsewhere, the reply should cover breaches of building regulations, breaches of fire regulations, gas safety legislation, highway and drainage obligations, section 106 agreements, planning control, waste storage and management, hazardous substances, advertising control, bye-laws relating to trading and advertisement control.

Enquiry 14.2

This enquiry is not limited to statutory matters. It does not cover works to be carried out to anything other than the Property and so will not include section 38 highway agreements or section 106 agreements unless the land over which the works are to be carried out is included within the definition of the Property.

Enquiry 14.3

This enquiry is designed to catch such things as liquor licences, betting and gaming licences, water abstraction licences and any other activity controlled by law.

Enquiry 14.4

Replies to this enquiry may be affected by both the Construction (Design and Management) Regulations 1994 (CDM 1994) and the Construction (Design and Management) Regulations 2007 (CDM 2007).

The CDM 2007 replaced the CDM 1994 with effect from 6 April 2007. The objective of the CDM 2007 is to build on the improvements made by the CDM 1994 and further improve management, information and co-ordination of work on site. "Construction work" has a similar meaning in both the CDM 1994 and the CDM 2007 but under the CDM 2007 "construction work" includes:

"construction, alteration, conversion, fitting out, commissioning, renovation, repair, upkeep, redecoration or other maintenance (including cleaning which involves the use of water or an abrasive at high pressure or the use of corrosive or toxic substances), de-commissioning, demolition or dismantling".

Construction work also includes installing or removing, for example, mechanical and electrical equipment or telecommunications equipment (regulation 2(1), CDM 2007).

Subject to specific exceptions, the CDM 1994 applied to all construction work carried out between 31 March 1995 and 5 April 2007. The CDM 1994 did not apply to small projects where the number of people working on the project at any one time was not expected to exceed four and the project was not expected to last longer than 30 days.

On 6 April 2007, the CDM 2007 came into force, and apply to all construction work, including small projects. There are limited exceptions relating to mineral extraction works. The CDM 2007 include transitional provisions for construction projects that were started under the CDM 1994 and continued under the CDM 2007. The last of these transitional provisions came to an end on 5 April 2012.

A complete Health and Safety file for the Property should contain all health and safety related information necessary for the proper maintenance, repair, alteration, decoration and demolition of the Property. The Buyer needs the information requested as it could have an impact on the Buyer's ability to carry out works or method of doing works or on the value of the Property and its marketability.

If the Health and Safety file will not be handed over at completion, that may be appropriate, so long as the original file is available to the Buyer. Under CDM 1994, a Health and Safety file was required for each "structure" forming part of a project. The CDM 2007 allow a single Health and Safety file to relate to more than one building, so developments which have been procured entirely under the CDM 2007 may have a single Health and Safety file for many structures.

Enquiry 14.5

This enquiry requests confirmation that any Health and Safety file has been compiled and maintained in accordance with the CDM 2007 or the CDM 1994. This is because the Health and Safety file may have been compiled before 6 April 2007 when the CDM 2007 came into force.

If no new works have been carried out since 6 April 2007, then the Health and Safety file would not have needed to have been updated under the CDM 2007.

Any new works carried out on or after 6 April 2007 would have required the Health and Safety file to have been amended in compliance with the CDM 2007.

The Buyer should be aware of the broad definition of construction work under the CDM 2007 (see note, Enquiry 14.4).

Enquiries 14.6 and 14.7

An Energy Performance Certificate (EPC) is a certificate containing information about the energy efficiency of a building. The EPC is produced by the seller or landlord or developer and must be accompanied by a recommendation report containing suggestions for the improvement of the energy performance of the building.

The obligation to produce EPCs is contained in the Energy Performance of Buildings (England and Wales) Regulations 2012 (EPB Regulations 2012).

EPCs are required when a building is constructed, sold or rented out. There are several types of building and transaction (for example, lease renewals or extensions, lease surrenders) which are exempt from the need to provide an EPC.

The seller or landlord is required to provide the prospective buyer or tenant with a valid EPC and a recommendation report, free of charge, at the "earliest opportunity" and by no later than whichever of the following actions first takes place:

  • The seller or landlord provides written information about the building to a person who has requested that information.

  • A prospective buyer or tenant views the building.

The seller or landlord must ensure that the ultimate buyer or tenant has received a valid EPC. A copy of a valid EPC is sufficient, and an electronic copy is permissible if the recipient consents to receiving the certificate electronically.

The obligation to provide an EPC does not apply if the seller or landlord has reasonable grounds to believe that a prospective buyer or tenant:

  • Is unlikely to have sufficient funds to buy or rent the building.

  • Is not genuinely interested in buying or renting that type of property.

  • Is not someone to whom the seller or landlord would be prepared to sell or rent out the building.

In addition, before marketing a property, the seller or landlord must ensure that it either has an EPC or has commissioned an EPC for the property. The seller or landlord must use all reasonable endeavours to ensure that an EPC is obtained within 7 days of marketing (although there is an additional 21 day period during which the EPC can be obtained, if it is not obtained during the initial 7 day period).

A developer is required to produce an EPC when a new building is erected or where an existing building is converted into fewer or more units and the services (for example, the heating, hot water or air-conditioning systems) in the building are modified. Unless an EPC and recommendation report have been given to the owner of the building by the developer, the building control inspector cannot issue a completion certificate for the works.

Certain buildings are not subject to the Building Regulations 2010, but are still within the scope of the EPB Regulations 2007. In such cases, the person who carries out the construction work must give the owner of the building an EPC and recommendation report within five days of completing the construction work.

The general rule is that an EPC is valid for ten years from the date on which it was issued. It will be revoked if a new EPC is issued for the same building. Where there is a valid EPC of the whole building , a later EPC of part will not invalidate the existing EPC of whole and vice versa.

For example, on a sale of the whole building the original EPC remains valid, but on a letting of the part for which a new EPC has been produced, the new EPC is the relevant document.

EPCs and recommendations reports must be lodged by the energy assessor who produced them on the central EPC Register operated by Landmark Information Group on behalf of the government. Subject to certain exceptions, data which is legally required to be included in an EPC can be accessed, free of charge, via this register. This will include a property's energy efficiency rating and recommendations made by the energy assessor.

Enquiry 14.8

The EPB Regulations 2012 require 5-yearly air-conditioning inspections, which are intended to promote the improvement of the energy performance of buildings in England and Wales. This requirement was first introduced in the 2007 version of the EPB Regulations 2012.

Where a system was in service before 1 January 2008, then if the system has an output of over 250kW, the first inspection must take place by 4 January 2009, and if the system has an output of over 12kW by 4 January 2011. Where a system was first brought into service on or after 1 January 2008, the inspection must be carried out within five years of when it was first put into service. After the first inspection, systems must be inspected at five yearly intervals.

From 6 April 2012, the energy assessor who carries out the inspection must lodge a report of the inspection on the central EPC Register which is operated by Landmark Information Group for the Government.

The Department for Communities and Local Government has published guidance on the duty to have air-conditioning systems inspected: DCLG: A guide to air conditioning inspections for buildings (December 2012) (www.practicallaw.com/1-523-4178) This guidance is aimed at anyone who manages or controls air-conditioning plant and includes information on:

  • What an air-conditioning inspection covers.
  • Obtaining an air-conditioning inspection.
  • Applying the regulations in practice, including determining the size of an air-conditioning system.
 

14.1 Are you aware of any breach of, alleged breach of or any claim under any statutory requirements or byelaws affecting the Property, its current use, the storage of any substance in it or the use of any fixtures, machinery or chattels in it?

14.2 Please give details of any notices that require works to be carried out to the Property under any statute, covenant, agreement or otherwise and state to what extent these notices have been complied with.

14.3 Other than any already supplied, please provide details of any licences or consents required to authorise any activities currently carried out at the Property, including any required under local legislation (e.g. London Building Act).

14.4 Are you aware, in relation to the Property, of any breach or alleged breach of either the Construction (Design and Management) Regulations 1994 or of the Construction (Design and Management) Regulations 2007?

14.5 Has a Health and Safety file been prepared for the Property? If so, please:

(a) confirm that it has been compiled and kept up to date in accordance with the Construction (Design and Management) Regulations 2007 or with the Construction (Design and Management) Regulations 1994;

(b) advise when and where it can be inspected; and

(c) confirm that the original will be handed over on completion.

14.6 Have you supplied a valid Energy Performance Certificate (EPC) for the Property, or a copy of it, in relation to the Transaction and, if so, to whom?

14.7 If you have not supplied a valid EPC for the Property, please:

(a) tell us where a valid EPC for the Property can be inspected; or

(b) explain why no EPC is needed.

14.8 If the Property contains any air-conditioning, please:

(a) state when and where the latest inspection report for that air-conditioning system can be inspected; and

(b) confirm that the original of that inspection report will be handed over on completion.

15. ENVIRONMENTAL

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15. Environmental
Environmental

The primary objectives of the environmental legislation are:

  • Protection of the environment from pollution.

  • Remediation of existing contamination.

  • Prevention of future contamination.

  • Better management of natural resources and promotion of sustainable development.

Enquiry 15 is a general enquiry about environmental issues, aimed at sites with no known environmental problems. More specific questions can be raised if the Buyer's requirements, or the state of the Property, demand.

A fundamental principle of the environmental legislation is that "the polluter pays". The definition of polluter is wide so that it can include parties who have not been directly responsible for the contamination, including a subsequent owner of the land. Legislative requirements for undertaking remedial action of a site are in Part IIA of the Environmental Protection Act 1990 and the Environmental Damage (Prevention and Remediation) (Wales) Regulations 2009. In many instances the preferred method of enforcing clean-up will be through conditions on a planning permission for a redevelopment.

These enquiries are intended to alert the Buyer to any matter which may need further investigation so the Buyer can be fully aware of what environmental liabilities it may inherit as a result of the Transaction.

The cost of remedying damage caused by contamination may be significantly more than the value of the Property and this can make it difficult to identify any arbitrary value below which it can be said that any form of environmental investigation is unnecessary.

The following are examples of the types of hazard with which these enquiries are concerned:

  • Pollution and protection of the environment.
  • Health and safety.
  • Emissions and releases.
  • Disposal of industrial, commercial or household waste.
  • Discharges of radioactive waste or chemical or other pollutants or contaminants or toxic or hazardous substances.
  • Manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of any discharges or waste materials.
  • Control of noise and noise emissions.
  • Water pollution, including pollution by trade and sewage effluent.
  • Water abstraction and discharges into controlled waters.

Enquiry 15.2

If any authorisations are disclosed then the Buyer should consider asking for confirmation that:

  • The authorisations have not been breached.

  • No upgrade of plant or equipment and no capital expenditure is needed before authorisations can be complied with.

  • No notice or other communication has been received from an enforcement authority which may materially affect the terms of such authorisations or their continued validity.

It is for the Buyer to satisfy itself that any authorisations will be sufficient for the Buyer's proposed use of the Property.

Enquiry 15.4

This enquiry focuses on whether the Property has been subject to potentially contaminative uses or whether there is any hazardous material in the Property. It has been deliberately framed widely to avoid the Seller having to form a view on whether or not information given is indicative of a contaminative use.

Enquiry 15.5

The reply should cover both statutory notices and complaints from neighbours.

Enquiry 15.6

The enquiry does not expressly ask for sight of waste transfer notes (which have to be provided to anyone disposing of waste and which might be numerous) but if there were a concern as to whether waste was being disposed of properly, these could be requested.

Enquiry 15.7

The reply to this should reveal matters such as migrating contamination both from and to the Property, dust, noise and other forms of nuisance

 

15.1 Please supply a copy of all environmental reports that have been prepared in relation to the Property or indicate where such reports may be inspected.

15.2 Please supply:

(a) a copy of all licences and authorisations given in relation to the Property under environmental law and confirm that the terms of all such licences and authorisations have been complied with; and

(b) details of any licences and authorisations for which application has been made but that have not yet been given.

15.3 What (if any) authorisations are required under environmental law for activities currently carried out or processes occurring at the Property, including storage of materials, water abstraction, discharges to sewers or controlled waters, emissions to air and the management of waste?

15.4 Please give details (so far as the Seller is aware) of:

(a) past and present uses of the Property and of activities carried out there; and

(b) the existence of any hazardous substances or contaminative or potentially contaminative material in, on or under the Property, including asbestos or asbestos-containing materials, any known deposits of waste, existing or past storage areas for hazardous or radioactive substances, existing or former storage tanks (whether below or above ground) and any parts of the Property that are or were landfill.

15.5 Please provide full details of any notices, correspondence, legal proceedings, disputes or complaints under environmental law or otherwise relating to real or perceived environmental problems that affect the Property, or which have affected the Property within the last ten years, including any communications relating to the actual or possible presence of contamination at or near the Property.

15.6 Please provide full details of how any forms of waste or effluent from the Property (including surface water) are disposed of, including copies of any relevant consents, agreements and correspondence.

15.7 Please give details of any actual, alleged or potential breaches of environmental law or licences or authorisations and any other environmental problems (including actual or suspected contamination) relating to:

(a) the Property; or

(b) land in the vicinity of the Property that may adversely affect the Property, its use or enjoyment or give rise to any material liability or expenditure on the part of the owner or occupier of the Property.

15.8 Please provide copies of any insurance policies that specifically provide cover in relation to contamination or other environmental problems affecting the Property. If such insurance cover has at any time been applied for and refused, please provide full details.

16. OCCUPIERS AND EMPLOYEES

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16. Occupiers and employees
Occupiers and employees

Enquiry 16 is concerned with the rights, statutory or otherwise, of anyone who will, following completion of the Transaction, either remain in occupation of the Property or who will be employed to work at the Property.

Occupiers may have specific rights of occupation which need to be addressed as part of the Transaction and where there are leases and licences conferring these occupational rights, the Buyer may need to raise additional enquiries (e.g. CPSE.2, CPSE.3 and CPSE.4).

Occupiers may have rights which go beyond those set out in a formal lease or licence and these rights may be protected as overriding interests, information about which should have been included in reply to enquiry 4.

There may be people in occupation who are employed to work at the Property and they may have rights as employees under the Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE") (see enquiries 16.4 and 16.5).

Enquiry 16.1

Where the Seller is a company, firm or partnership or some other corporate body, the Seller is not required to give the names of all shareholders, partners or employees but should give details of any other body in occupation including a company in the same group.

The Seller should explain whether occupation is by virtue of lease or licence or whether there is no formal right to occupy, in which case the Seller should give details of the length of occupation, any payments received in respect of it and any objections made to it.

Enquiry 16.3

Whether the Property is vacant, and the period during which it has been vacant, may be relevant for a number of reasons. For example, it may have an impact on the validity of insurance cover, affect liability to pay business rates and may put the Buyer on notice that squatters may be in occupation.

Enquiries 16.4 and 16.5

The purpose of TUPE is to protect the jobs and terms and conditions of employment of employees where the undertaking by, or in respect of which, they are employed is transferred. TUPE applies to any transaction considered to be the transfer of an economic entity and can include the transfer of premises as part of a business sale and transfers of investment properties such as shopping centres or office buildings.

TUPE also applies to where a client engages a contractor to do work on the client's behalf, and the client then reassigns the contract or brings the work "in-house" (a "service provision change").

For TUPE to apply to service provision changes, there must have been an organised grouping of employees before the change whose principal purpose was to carry on services for the client. It is expressly stated that the grouping of employees may be only one employee.

TUPE applies to staff employed in respect of the business or property which is being sold or the service which is to be provided by a new supplier. It extends to managers, managing agents, caretakers, cleaners, maintenance staff and security guards employed in respect of buildings which may otherwise be empty.

All employees employed in the undertaking or service automatically transfer to the Buyer on their existing terms and conditions (save for pension schemes) and their employment is treated as being continuous for purposes of all statutory claims including redundancy and unfair dismissal. Any dismissals connected with the transfer are considered to be automatically unfair.

Under TUPE, the Buyer takes on all rights, liabilities and responsibilities for anything done by the Seller in respect of the transferring employees and may therefore inherit liability for unfair dismissals, claims in relation to any form of discrimination and any failure to pay wages or bonuses which arise before the time of the transfer.

TUPE imposes obligations on both the seller and the buyer to inform and consult with appropriate representatives of any affected employees.

TUPE also requires the seller to provide the buyer with certain information (the "Employee Liability Information", see regulation 11 of TUPE) about the transferring employees, including their identity. If the seller provides any further information about the transferring employees it should omit names and other identifying details such as job titles. This is to ensure compliance with the Employment Practices Code issued by the Information Commissioner to take account of the obligations under the Data Protection Act 1998 (see Information Commissioner: Employment Practices Code (www.practicallaw.com/8-200-9113)).

 

16.1 Please give the names of anyone in actual occupation of the Property or receiving income from it. Except where apparent from the title deeds, please explain what rights or interests they have in the Property.

16.2 Except where apparent from the title deeds or revealed in reply to enquiry 16.1, please state whether any person, apart from you, has or claims to have any right (actual or contingent) to use or occupy the Property or any right to possession of the Property or to any interest in it.

16.3 If the Property is vacant, when did it become vacant?

16.4 Is there anyone to whom the Transfer of Undertakings (Protection of Employment) Regulations 2006 will or might apply, who is:

(a) employed at the Property by you; or

(b) employed at the Property by someone other than you; or

(c) is otherwise working at or is providing services at or to the Property?

16.5 In respect of each person identified in reply to enquiry 16.4, please provide copies of the current contract of employment, any other contractual documentation and (if applicable) any service occupancy agreement for resident employees.

17. INSURANCE

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17. Insurance
Insurance

Enquiry 17 concerns buildings insurance as opposed to contents insurance or title insurance. The convention is that once contracts are exchanged, the Buyer takes over the risk in the Property and must therefore insure from that date. In transactions where there is no contract, the Buyer will usually assume the risk on completion.

The information which will be given in reply to this enquiry is likely, therefore, to be of interest where the Buyer is to rely on the Seller's insurance between exchange of contracts and completion or where the existing insurance arrangements will remain in place following completion of the Transaction. This might be so where, for example:

  • The sale is between related companies and the insurance is dealt with under a group company policy.

  • Where the Property is leasehold and the landlord insures.

  • Where the Property is investment property subject to leases.

Where the Buyer is to rely on the Seller's insurance between exchange of contracts and completion, the contract may need to cover noting the Buyer's interest on the policy and the Buyer will need to be clear as to exactly what the cover includes (e.g. loss of rent).

Where the insurance arrangements will remain in place following completion of the Transaction, the Buyer will need full details of the insurance cover effected to check that cover is satisfactory, particularly in relation to the adequacy of the sum insured and whether this is index-linked, the adequacy of insured risks and acceptability of any exclusions. It will also be concerned to check that the policy complies with the requirements of any relevant lease or mortgage, whether the policy is and will continue in force and that the proposed use of the Property will not render the policy void or voidable.

The Buyer will need to check who has the benefit of the insurance policy and ensure that its own interest is adequately protected.

Enquiry 17.3

The types of insurance referred to here may include public liability and employers' liability insurance and insurance for specific items of machinery or equipment.

Enquiry 17.6

Circumstances which may make the policy void or voidable include non-payment of premiums and failure to give all relevant information to the insurance company.

 

17.1 Have you experienced any difficulty in obtaining insurance cover (including cover for public liability and, where relevant, for loss of rent) for the Property at normal rates and subject only to normal exclusions and excesses?

17.2 Please give details of the claims history and any outstanding claims.

17.3 Is there any insurance benefiting the Property, other than buildings insurance and any policy disclosed in reply to enquiry 5.1 (defect in title) or 15.8 (environmental insurance)?

17.4 If an existing buildings insurance policy will remain in place after completion of the Transaction, or is to be relied on by the Buyer until completion, please supply a copy of the policy including the proposal form (if available) and schedule of insurance cover and (where not shown on the schedule) provide the following information:

(a) the insurer's name and address;

(b) the policy number;

(c) the risks covered and the exclusions and the excesses payable;

(d) the sums insured (showing separately, where applicable, the sums for buildings, plant and machinery, professionals' fees, loss of rent and public liability);

(e) the name(s) of the insured(s) and of all other persons whose interests are (or will be) noted on the policy;

(f) the current premium;

(g) the next renewal date;

(h) the name and address of the brokers; and

(i) details of any separate terrorism insurance arrangements.

17.5 Please confirm that all premiums have been paid that are required to maintain the cover referred to in enquiry 17.4 up to the next renewal date following the date of the Seller's replies to these enquiries.

17.6 Please provide details of any circumstances that may make the policy referred to in the reply to enquiry 17.4 void or voidable.

18. RATES AND OTHER OUTGOINGS

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18. Rates and other outgoings
Rates and other outgoings

The Buyer will need to know its liability for periodic payments following completion of the Transaction. The main liabilities are likely to be business rates and water and sewerage charges, but there may be others.

Enquiry 18.1

The rateable value of the Property is the open market rental value attributed to it for the purpose of calculating business rates payable on it. This information will be on the rating assessment of the Property and on the rate demands received from the local authority but can also be obtained from the local authority.

Enquiry 18.2

Whether or not the Property is separately assessed is important because if it is assessed as part of other premises that are not included in the Transaction, it may have to be reassessed following completion of the Transaction.

Enquiry 18.3

Rateable values on local rating lists are revised every five years, most recently on 1 April 2010 (using 1 April 2008 as the revaluation date).

Valuation officers may serve notice on an occupier or owner of a property requiring information about that property. Any correspondence passing between the owner or occupiers of the property and the valuation officer regarding a revaluation should be disclosed in response to this enquiry, including copies of all relevant proposals, notices, returns and appeals.

Enquiry 18.4

The rateable value of a property may be revised at any time due to a material change in circumstances. An owner or occupier of a property can at any time apply to the valuation officer requesting an alteration to the rateable value shown in the rating list or an alteration to any other statement made in the rating list about the property.

The valuation officer may also propose an alteration if there have been any alterations or improvement works, works to extend or enlarge the property or a change of use of the property. Copies of all relevant correspondence and documentation should be produced including all proposals, notices, returns and appeals.

Enquiry 18.5

The amount payable for business rates, water rates, sewerage and drainage charges can be obtained from the local authority and the water company.

If the Property forms part of other premises for which there is only one assessment for business rates and for water, sewerage and drainage rates, that fact should be disclosed in this reply.

Local authorities and water companies have a financial year that runs from 1 April each year. Accordingly, reference to the current year in this enquiry will mean the financial year that started on the most recent 1 April.

Enquiry 18.6

If a property is vacant, the owner or occupier may be entitled to 100% empty rate relief for a period of three months (or six months if industrial or warehouse property) following the date on which the property becomes vacant. Subject to various exceptions, full rates again become payable at the end of that period.

If the property has been left vacant for any period and empty rate relief has been claimed, full details should be provided.

If the property is currently vacant, the date on which the property was vacated should also be provided.

Exemptions from business rates include agricultural land, places of worship and parks. There are several others.

Enquiry 18.7

Transitional charging arrangements are concerned with phasing in new rates bills when they are significantly above or below the previous year's bills.

Enquiry 18.8

Examples of the types of periodic charges envisaged by this enquiry include payments in respect of private water supplies, private access routes to the Property and rentcharges. The reply is not expected to include details of rent and service charges payable under a lease of the Property.

Enquiries 18.9 - 18.11

Rateable occupiers of businesses in an area (which could be a business or retail district, a particular street, centre, arcade or other clearly defined area), can choose to have their area defined as a Business Improvement District (BID).

Where an area has been designated as a BID, the local authority and the business occupiers work together to provide additional services for the area, principally funded by an additional levy on the rates bill.

In addition, property owners who are not rateable occupiers can contribute on a voluntary or contractual basis to the funding of the BID. Most BIDs will be established through a separate BID organisation formed by the rateable occupiers. This will usually be a company limited by guarantee. If there is a BID organisation, the Seller may be a member of that organisation. Even if the Seller is not a rateable occupier, it may have participated in the process of creating the BID and become a member of the BID organisation.

The Buyer will need details of the BID organisation for management purposes and the Buyer may want to become a member of that organisation so that it can participate actively in the improvements to the area covered by the BID. The Buyer will want to know the amount of the BID levy payable in respect of the property. Even if the Buyer is not the rateable occupier, it would become responsible for the levy if the Property becomes vacant.

Owners of property who are not the rateable occupiers may have been involved in the BID process and agreed on a voluntary or contractual basis to provide additional funding for the BID. Where the contributions are made on a contractual basis, the Seller may have agreed to ensure that its successors in title enter into new arrangements with the BID organisation to continue to fund the BID.

Where the Seller is a landlord it may have agreed with its tenants to be liable for the whole or part of the BID levy payable by the tenants (who will be the rateable occupiers) as an incentive for the tenants to support the BID proposal. If the Property is not currently in a BID area, the Buyer will want to know if there are any proposals for the area to become a BID.

 

18.1 What is the rateable value of the Property?

18.2 Please confirm that the Property is not assessed together with other premises or, if it is, please give details.

18.3 Please provide copies of any communications received in connection with:

(a) the latest rating revaluation and any returns made; and

(b) any proposal or pending appeal.

18.4 Please give details of:

(a) any works carried out to, or any change of use of, the Property that may cause the rateable value to be revised; and

(b) any application made for the rateable value to be revised.

18.5 In the current year what is payable in respect of the Property for:

(a) uniform business rates; and

(b) water rates, sewerage and drainage rates?

18.6 Have you made any claim for void period allowance or for exemption from liability for business rates? If so, please give details.

18.7 Is the Property the subject of transitional charging arrangements? If so, please give details.

18.8 Except where apparent from the title deeds, please give details of all outgoings (other than business, water, sewerage and drainage rates) payable by the owner or occupier of the Property, and confirm that all payments due to date have been made.

18.9 Is the Property situated within an area subject to a Business Improvement District (BID) arrangement?

18.10 If the Property is within an area subject to a BID arrangement, please provide the following:

(a) the name and address of the BID body;

(b) the amount of the levy payable in respect of the Property; and

(c) details of any arrangements under which you may be liable to contribute to the funding of the BID even if you are not the rateable occupier.

18.11 If the Property is not within an area subject to a BID arrangement, are you aware of any proposal to create a BID that will include the Property?

19. CAPITAL ALLOWANCES

Hide Note: Capital allowancesNote: Capital allowances
19. Capital allowances
Capital allowances

A deduction from profits can be claimed for certain types of capital expenditure under the Capital Allowances Act 2001 (CAA 2001). The deduction is called a capital allowance. Some expenditure may be written off in full in the year in which it is incurred. Most capital expenditure, however, is written off over a number of years.

The most common capital allowances are those in respect of plant and machinery.

In the context of real estate transactions, plant and machinery included in the Property will usually be "fixtures". "Fixture" is defined in section 173 of the CAA 2001 as "plant or machinery that is so installed or otherwise fixed in or to a building or other description of land as to become, in law, part of that building or other land, and includes any boiler or water-filled radiator in a building as part of a space or water heating system".

On basic capital allowances principles, where a property that includes Fixtures is purchased or acquired under a lease for a premium, the amount of the price or premium that can be treated as attributable to the Fixtures must be ascertained by a "just and reasonable apportionment" of the price or premium to the Fixtures, which is a matter of appropriate valuation.

However:

  • certain provisions of the CAA 2001 can operate to restrict the attributable amount or even deny the Buyer capital allowances on Fixtures altogether; and

  • it is sometimes possible for the Seller and Buyer to "elect" for a specific amount to be "fixed" as the attributable amount.

The principal purpose of these enquiries is to enable the Buyer to find out if such restrictions or denial of capital allowances might apply, and whether the circumstances permit or require an election, in the case of the specific Transaction.

Note that where the Transaction involves the Seller (or landlord) paying for or carrying out works to the Property for the Buyer (or tenant) as an inducement, the Buyer's capital allowances entitlement may be affected.

Enquiry 19.1

If the Seller is holding the Property as a trader as part of trading stock, because, for example, the Seller is a developer or dealer, it will not have been able to claim capital allowances as any expenditure incurred will not have been on capital account.

However the remaining enquiries in enquiry 19 should still be answered as there may be relevant information relating to an earlier owner of the Property.

Enquiry 19.2

Where a lease is granted for a premium, the tenant may be entitled to treat an appropriate part of the premium as capital expenditure incurred on Fixtures in the Property. But where the lessor would itself have been entitled to capital allowances on the Fixtures, the entitlement will only pass to the tenant if they jointly elect under section 183 of the CAA 2001 for that to happen.

Enquiry 19.3

The Buyer may be entitled to claim capital allowances on any Fixtures within the Property. The amount on which such a claim may be based may be an apportionment of the total consideration, but in many cases there are limiting factors. In particular, the amount of the claim may be limited where the Seller, or a former owner of the property (see Enquiry 19.4 below), is or has been required to bring a "disposal value" into account in its own capital allowances computations.

If the answer to enquiry 19.3 is "no", enquiry 19.4 must be answered.

The original qualifying expenditure will generally be the maximum allowable amount upon which the Buyer can claim allowances on those Fixtures the expenditure on which has not previously been recognised by any previous owner for capital allowances purposes. There may, however, be Fixtures within the Property which had not previously been recognised for these purposes.

Where Fixtures are subject to anti-avoidance provisions under Part 2, Chapter 17 of the CAA 2001 (such as sale and leasebacks, connected parties, etc.), the amount of the Buyer's claim may be restricted.

Allowances on plant and machinery are generally given at a rate set out in section 56 of the CAA 2001, unless in relation to expenditure on integral features as defined in section 33A of the CAA 2001, whereby allowances are given at a generally lower rate as set out in section 104D of the CAA 2001.

Note that with the introduction of the special regime for integral features under section 33A of the CAA 2001 from April 2008, it is necessary to identify such items separately from other Fixtures, so that the Seller and Buyer can, where required, prepare their tax computations for disposal values and claims for capital allowances appropriately.

Enquiry 19.3 (f)

Sections 198 (in the case of sales) and 199 (in the case of leases for premiums where an election under section 183 of the CAA 2001 has been made) of the CAA 2001 may allow both parties to fix the amount of the price or premium to be attributed to the Fixtures by way of a joint election.

Enquiry 19.3 (g)

Section 187A of the CAA 2001 was introduced by Finance Act 2012 with effect from 1 April 2012 (for corporation tax) or 6 April 2012 (for income tax), and imposes a set of onerous conditions on the Buyer, compliance with which is necessary to ensure that the Buyer is entitled to capital allowances itself, and/or to "pass on" such entitlement to subsequent owners.

Section 187A and its supplementary provisions in section 187B are complex, but broadly:

  • they apply where the Seller (including a landlord where there is an election under section 183) is itself required to bring a disposal value into account as a result of the Transaction;

  • where the Seller is entitled to enter into an election under sections 198 or 199, the Buyer must ensure that such an election is made, or otherwise refer the apportionment issue to a Tax Tribunal; and

  • if the Seller is not entitled to enter into an election under sections 198 or 199, the Seller must provide the Buyer with a statement recording the amount of the disposal value that the Seller is required to bring into account.

If section 187A applies to the Transaction but its requirements are not met, the Buyer is denied capital allowances altogether, and will not have obtained the information required by any subsequent owner to enable a subsequent owner itself to claim allowances, except in very limited circumstances.

Enquiry 19.4

If the Seller is not itself required to bring a disposal value into account, the Buyer's entitlement to allowances may still be restricted if allowances have been claimed by any former owner of the Property, provided that the former owner disposed of the Property on or after 24 July 1996.

It is therefore necessary for the Buyer to be aware of the history of ownership since 24 July 1996 and details of any transaction affecting the plant and machinery now included in the sale.

Further, where section 187A has applied to any transaction before the current Transaction, the Buyer must ensure that the requirements of that section were met, by obtaining copies of the documents by which the requirements were met at the time. Except in very limited circumstances, failure to obtain such documents will result in the Buyer being denied capital allowances altogether, and unable to pass on any entitlement to allowances to a subsequent owner.

Enquiry 19.5

Any plant and machinery items included in the Transaction that are subject to the long funding lease provisions set out in Part 2, Chapters 6 and 6A of the CAA 2001 could prevent the Buyer from claiming capital allowances on items which are not background plant. If the existence of a long funding lease is disclosed, it will be necessary to examine in detail the constitution of the long funding lease, the parties to it and the consequences of the Transaction on it.

Enquiry 19.6

Any Fixture included in the Transaction that is subject to a nil disposal value by virtue of section 63 of the CAA 2001 cannot be included in a claim for capital allowances by the Buyer.

Enquiry 19.7

Allowances are unlikely to be available to the Buyer in respect of any plant or machinery within the building upon which a tenant has incurred expenditure, or which is subject to an equipment lease where the obligations have not been discharged under section 182 of the CAA 2001.

Enquiry 19.8

Any loose (i.e. not fixed) plant or machinery included in the sale may be the subject of a claim by the Buyer, based on open market value. This may be restricted if sale and leasebacks or other similar arrangements are envisaged.

Enquiry 19.9

Allowances are given at a rate set out in section 104D of the CAA 2001 for plant and machinery that has a useful economic life, when new, in excess of 25 years. Various exemptions for Fixtures within a hotel, office, retail shop or showroom apply.

Enquiries 19.10 and 19.11

Original capital expenditure incurred on the provision of a Fixture within the Property may have qualified for industrial buildings allowances or business premises renovation allowances. A Buyer of the Property will not be entitled to either form of allowances itself, but may be able to claim normal Fixtures allowances on an appropriate amount of the price or premium now being paid.

However, sections 186 and 186A may apply to restrict the amount that the Buyer can treat as incurred by it on the Fixture.

Similarly, such original capital expenditure may have qualified for research and development or scientific research allowances. Unless the Buyer's expenditure itself qualifies for research and development allowances (which have replaced scientific research allowances), the amount that the Buyer can treat as expenditure by it on the provision of a Fixture which previously qualified for such allowances may be restricted by section 187.

Enquiry 19.12

Capital allowances are available for plant and machinery in respect of contributions towards another person's expenditure, and the written-down value of any such allowances will pass to the buyer of the contributor's interest.

 

19.1 Do you hold the Property as an investor/owner on capital account or as a trader as part of your trading stock? Please specify which.

19.2 If the Transaction is the grant of a new lease at a premium, please state:

(a) whether the Seller is entitled to enter into an election with the Buyer under section 183 of the CAA 2001; and

(b) if so, whether the Seller is prepared to do so.

19.3 If the Seller is an investor/owner, will the Seller be required to bring a disposal value into account in respect of any item of plant or machinery included in the Transaction that is a fixture (a Fixture) within the meaning of section 173 of the CAA 2001 as a result of the Transaction? If so, please state in respect of each Fixture:

(a) the date on which the Seller incurred the expenditure on the Fixture;

(b) whether the Fixture is an integral feature within the meaning of section 33A of the CAA 2001;

(c) whether the Fixture was first provided by the Seller or a previous owner;

(d) the amount of the qualifying expenditure incurred by the Seller on the provision of the Fixture;

(e) the amount of the disposal value to be brought into account by the Seller in respect of the Fixture as a result of the Transaction, subject to any such election as is referred to in (f) below;

(f) whether the Seller is entitled to enter into an election with the Buyer under section 198 or section 199 of the CAA 2001, and if so the amount(s) proposed by the Seller to be fixed by such election; and

(g) if the Seller is not entitled to enter into such an election, that the Seller will at or before completion of the Transaction provide to the Buyer a disposal value statement within section 187A(11) of the CAA 2001 and the amount(s) of the disposal value for each Fixture.

19.4 If the Seller is such an investor/owner but will not be required to bring a disposal value into account in respect of a Fixture as a result of the Transaction or the Seller is selling as a trader, please:

(a) state the amount (if any) of the disposal value last brought into account by any previous owner in relation to any Fixture now included in the Transaction that applies for the purposes of section 185 of the CAA 2001, and where that amount was fixed by an election under section 198 or section 199 of the CAA 2001 or section 59B of the Capital Allowances Act 1990, provide a copy of that election; and

(b) if any Fixture included in the transaction has previously been the subject of any change of ownership to which section 187A of the CAA 2001 has applied, provide the documents required by the Buyer to satisfy the "fixed value requirement" or, as the case may be, the "disposal value statement requirement" specified in that section in relation to the most recent change of ownership to which that section applied.

19.5 Are there any items of plant and machinery included in the Transaction that are subject to the long funding lease provisions set out in Part 2, Chapters 6 and 6A of the CAA 2001? If so, please provide details of such assets.

19.6 Please provide details of any Fixture included in the Transaction that is subject to a nil disposal value by virtue of section 63 of the CAA 2001.

19.7 Please provide details of any Fixtures upon which expenditure has been incurred by a tenant, or that are subject to an equipment lease within the meaning of section 174(1) of the CAA 2001.

19.8 Please provide details of any plant or machinery that is not a Fixture but is included in the Transaction.

19.9 Please confirm that none of the plant and machinery (whether or not a Fixture) included in the Transaction has been or is likely to be treated as a long-life asset in accordance with Part 2, Chapter 10 CAA 2001.

19.10 Have you or any other person claimed industrial buildings allowances or business premises renovation allowances (or, in the latter case, will you claim such allowances) in respect of expenditure that included expenditure on the provision of any Fixture included in the Transaction? If so, please provide the following details:

(a) the part of the consideration for the Transaction that is attributable to the Fixture; and

(b) the amount of "R" for the purposes of section 186(3) of the CAA 2001 (in the case of industrial buildings allowances) or section 186A(3) (in the case of business premises renovation allowances).

19.11 Have you or any other person claimed (or, in relation to any period prior to completion, will any person claim) research and development or scientific research allowances in respect of the Property or any other asset to be included in the Transaction? If so, please provide details.

19.12 Have you or any predecessor in title made a contribution to another person's expenditure which was expenditure on the provision of any Fixture or any other items of plant or machinery included in the Transaction? If so, please provide details.

20. VALUE ADDED TAX (VAT) REGISTRATION INFORMATION

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20. Value Added Tax (VAT) Registration information
Value Added Tax (VAT) Registration information

Most property transactions carried out in the course of a business are within the VAT regime, but this does not necessarily mean that VAT must be added to the price. The most common VAT classifications are standard-rated supplies, exempt supplies and transfers as a going concern. Transactions involving certain types of property may occasionally be zero-rated supplies.

Enquiries 20-26 will not elicit all necessary information about the VAT position but the replies should trigger a series of additional enquiries as appropriate, which can then be referred to VAT experts. To avoid delay, these notes suggest relevant additional enquiries and the Seller is encouraged to volunteer the replies before waiting to be asked.

It is essential to establish if the Seller is registered for VAT to ensure that any charge to VAT is valid. The information is also important in deciding whether an option to tax should be made. If the Seller is registered as part of a VAT group, the name of the group representative member is needed, as the Transaction will be deemed for the purposes of VAT to be made by that company.

 

20.1 Are you registered for VAT?

20.2 If so, please provide details of your VAT registration number.

20.3 If you are registered as part of a VAT group, please provide the name of the representative member.

21. TRANSFER OF A BUSINESS AS A GOING CONCERN (TOGC)

Hide Note: Transfer of a business as a going concern (TOGC)Note: Transfer of a business as a going concern (TOGC)
21. Transfer of a business as a going concern (TOGC)
Transfer of a business as a going concern (TOGC)

No VAT is payable where a transaction qualifies as a transfer of a business as a going concern (TOGC). The following transactions may qualify as a TOGC:

  • The sale of an investment property subject to one or more leases.

  • The grant of a long lease of an investment property, subject to one or more leases, so long as the reversionary interest is "small enough not to disturb the substance of the transaction".

  • A business asset sale, which includes property assets used in the trade.

Qualification for treatment as a TOGC requires all the following:

  • The asset or assets are intended to be used by the Buyer in carrying on the same kind of business (but not necessarily identical) as that carried on by the Seller.

  • Where the Seller is a taxable person (that is registered or liable to be registered for VAT), the Buyer must already be a taxable person or immediately become, as a result of the transfer, a taxable person.

  • In relation to a part transfer, that part is capable of separate operation.

  • The effect of the transfer must be to put the Buyer in possession of a business which can be operated as a business.

  • The business, or part, transferred must be a "going concern" at the time of transfer, which in essence means that it is a business, whether profit-making or not.

  • There should not be a series of immediately consecutive transfers of the business.

  • There should be no significant break in the normal trading pattern before or immediately after the transfer.

  • Where the Seller has opted to tax, or the supply is the freehold sale of new buildings or civil engineering works which are less than three years old, the Buyer must opt to tax the land and buildings concerned and notify HM Revenue & Customs (HMRC) of that option before the first occasion on which a supply of the Property is made. This may mean that the Buyer must opt to tax the Property before exchange, if, for example, it is to pay a deposit on exchange of contracts to the Seller's representative as agent for the Seller (as often happens in auction sales) rather than to a stakeholder (see Higher Education Statistics Agency v Customs and Excise Commissioners [2000] STC 332).

The position on VAT records will depend on whether the Buyer takes over the Seller's VAT registration number. To take over the Seller's VAT registration number, the Seller and the Buyer have to make a joint application to HMRC. Provided that certain conditions are fulfilled, HMRC may (but is not obliged to) agree to transfer the Seller's VAT registration number to the Buyer. It is rare, in practice, for a Buyer of a business to take over the Seller's VAT registration.

If the Buyer does not take over the Seller's VAT registration, the general VAT law will apply: the Seller will be obliged to retain the VAT records of the business for six years (paragraph 6, Schedule 11, VATA 1994 and regulation 31, Value Added Tax Regulations 1995).

Section 49 of the Value Added Tax Act 1994 should ensure that the Buyer can gain access to the VAT records of the business. Where there is a TOGC and the Seller is required to keep the records, the Buyer can require the Seller to do the following, so far as is necessary to enable the Buyer to comply with its own VAT obligations:

  • Give the Buyer whatever information is contained in the VAT records as the Buyer may reasonably specify, within the time and in the form that the Buyer may reasonably require.

  • Give the Buyer whatever copies of the documents comprising the VAT records as the Buyer may reasonably require, within the time and in the form that the Buyer may reasonably require.

  • Make the VAT records available for the Buyer's inspection at whatever time and place the Buyer may reasonably require, and allow the Buyer to make copies of or extracts from those documents.

The parties cannot contract out of or restrict the Buyer's rights.

If the Buyer takes over the Seller's VAT registration, regulation 6 of the Value Added Tax Regulations 1995 (as amended by the Value Added Tax (Amendment) (No 5) Regulations 2007) provides that the Seller must transfer the VAT records to the Buyer unless the Seller obtains a direction from HMRC requiring the Seller to retain the records.

Where the VAT records pass to the Buyer, the Seller will want to obtain an undertaking from the Buyer to provide access to the records. Where the Seller obtains a direction from HMRC to keep the records, the Seller will be under the same statutory obligation to provide access to the records as applies to a Seller on a TOGC where the Buyer does not take over the VAT registration.

Enquiry 21.2

Sufficient detail should be provided to enable the Buyer to satisfy itself on the treatment of the Transaction as a TOGC. This will include, for example, providing details of the following:

  • Any options to tax.

  • The precise use of the Property by the Seller.

  • On a freehold sale, the period that has elapsed since practical completion or occupation.

Enquiry 21.3

The availability of treatment as a TOGC can be affected by the Seller's circumstances or actions. For example TOGC treatment may not be available if:

  • The Property is entirely let to a company within the same VAT group as the Seller;

  • The Seller transfers the Property to another of its group companies which is not within the same VAT group registration and this transfer takes place immediately before the Transaction itself; or

  • The Seller opts to tax before the Transaction takes place and the Buyer does not opt to tax.

Enquiry 21.5

If the Transaction is a TOGC, it is important to determine if the Property is a capital item for VAT purposes and is within its adjustment period. The Capital Goods Scheme adjustments are designed to ensure that the VAT reclaimed on the original cost of development or acquisition is adjusted over a five or ten year period (dependent upon the length of the interest held or acquired). This is done through clawbacks and it will be important for the Buyer to be aware of any clawback liability.

 

21.1 Do you expect the Transaction to be treated as a TOGC and so to be outside the scope of VAT?

If you answered no, please go to enquiry 22 below; otherwise please answer enquiries 21.2–21.5 below.

21.2 Why do you think TOGC treatment will apply?

21.3 Are there any factors (other than those solely within our control) that may affect the availability of this treatment?

21.4 Is the Transaction partly within and partly outside the scope of VAT (being a TOGC)? If so, how do you propose to apportion the price between the two elements?

21.5 Is the Property a Capital Goods Scheme item? If so, and if the period of adjustment has not yet expired, please supply the following:

(a) the start date of the adjustment period and of any intervals that have started or will start before completion of the Transaction;

(b) the original deductible percentage;

(c) the total input tax attributable to the Property (whether or not recoverable) that is subject to adjustment in accordance with the Capital Goods Scheme and the amount of that input tax that has been recovered by you, or by anyone previously responsible for making adjustments during the current period of adjustment; and

(d) details of any adjustment of the input tax recovered in relation to the Property by you or anyone previously responsible for making adjustments.

22. OTHER VAT TREATMENT

Hide Note: Other VAT treatmentNote: Other VAT treatment
22. Other VAT treatment
Other VAT treatment

If the Transaction is not a TOGC, it is important to identify its correct VAT treatment, as certain actions may be required to validate that treatment.

This enquiry is intended to help the Buyer to verify the Seller's view of the correct VAT treatment of the Transaction. The legislation is extremely complex and specific expert advice should always be sought.

 

If and to the extent that the Transaction may not be a TOGC (however unlikely this may be) or TOGC status is not available, will the Transaction (or any part of it) be treated for VAT purposes as:

(a) standard-rated (if yes, please go to enquiry 23 below);

(b) exempt (if yes, please go to enquiry 24 below);

(c) zero-rated (if yes, please go to enquiry 25 below); or

(d) outside the scope of VAT (other than by reason of being a TOGC)? (if yes, please go to enquiry 26 below).

23. STANDARD-RATED SUPPLIES

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23. Standard-rated supplies
Standard-rated supplies

This enquiry is intended to help the Buyer to verify the Seller's view of the correct VAT treatment of the Transaction. The legislation is extremely complex and specific expert advice should always be sought.

From 1 June 2008 it is possible for a business to make a "real estate election". The effect of a real estate election is that all properties acquired by the business (or any members of its VAT group) after it has made the election are automatically subject to the option to tax. A business cannot revoke a real estate election although it can elect to revoke the election in relation to individual properties in certain circumstances. HMRC has the power to revoke a real estate election if the business fails to comply with certain notification requirements.

It is important that when answering this enquiry, the Seller takes into account any real estate election that it may have made.

 

23.1 Why do you think that the Transaction (or any part of it) is standard-rated?

23.2 If the Transaction (or any part of it) is compulsorily standard-rated (as the freehold sale of a new or uncompleted building or civil engineering work), please state:

(a) the date of the certificate of practical completion of the Property (or each relevant part);

(b) if different, the date on which it was first fully occupied; and

(c) whether the Property (or any part of it) is not yet completed.

23.3 Have you (or a relevant associate within the meaning of paragraph 3 of Schedule 10 to the Value Added Tax Act 1994) exercised a valid option to tax (within the meaning of Schedule 10 to the Value Added Tax Act 1994) that applies to the Property? If so, please:

(a) supply a copy of the option to tax and the notice of the option given to HMRC and any notices and correspondence received from HMRC in relation to the option;

(b) supply a copy of any permission required from HMRC for the option or, where relevant, details of any automatic permission relied upon, and provide confirmation that any conditions for such permission have been satisfied; and

(c) confirm that the option applies to the whole of the Property and has not been and cannot be disapplied or rendered ineffective for any reason and cannot and will not be revoked.

23.4 Where the Transaction is the assignment of a lease, has the landlord (or a relevant associate within the meaning of paragraph 3 of Schedule 10 to the Value Added Tax Act 1994) exercised a valid option to tax (within the meaning of Schedule 10 to the Value Added Tax Act 1994) that applies to the Lease?

Unless you also answered yes to enquiry 22(b), (c) or (d), please now go to enquiry 27.

24. EXEMPT SUPPLIES

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24. Exempt supplies
Exempt supplies

This enquiry is intended to help the Buyer to verify the Seller's view of the correct VAT treatment of the Transaction. The legislation is extremely complex and specific expert advice should always be sought

 

24.1 Why do you think the Transaction (or any part of it) will be exempt?

24.2 Does the Transaction involve both standard-rated and exempt supplies? If so, how do you propose to apportion the price between the two elements?

Unless you also answered yes to enquiry 22(c) or (d), please now go to enquiry 27.

25. ZERO-RATED SUPPLIES

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25. Zero-rated supplies
Zero-rated supplies

This enquiry is intended to help the Buyer to verify the Seller's view of the correct VAT treatment of the Transaction. The legislation is extremely complex and specific expert advice should always be sought.

 

25.1 Why do you think that the Transaction (or any part of it) is zero-rated?

25.2 Does the Transaction involve both standard-rated and zero-rated supplies? If so, how do you propose to apportion the price between the two elements?

Unless you also answered yes to enquiry 22(d), please now go to enquiry 27.

26. TRANSACTIONS OUTSIDE THE SCOPE OF VAT (OTHER THAN TOGCS)

Hide Note: Transactions outside the scope of VAT (other than TOGCs) Note: Transactions outside the scope of VAT (other than TOGCs)
26. Transactions outside the scope of VAT (other than TOGCs)
Transactions outside the scope of VAT (other than TOGCs)

Certain property transactions (other than TOGCs) may be outside the scope of VAT. This would apply if, for example, the Transaction is not made in the furtherance of a business. It is important to establish the reasoning to avoid any disputes if it is subsequently discovered that a VAT charge was appropriate. By way of example, the sale of a church by a religious movement which has no business activities is likely to be a transaction which is non-business and outside the scope of VAT.

 

26.1 Why do you think that the Transaction (or any part of it) is outside the scope of VAT?

26.2 Is the Transaction partly within and partly outside the scope of VAT (other than by reason of being a TOGC)? If so, how do you propose to apportion the price between the two elements?

27. NOTICES

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27. Notices
Notices

The Buyer needs details of every notice affecting the Property so that it:

  • Knows what may affect the Property;

  • Can take steps in the contract to ensure that the Seller deals with all notices as appropriate;

  • Is prepared to take appropriate action following completion of the Transaction; and

  • May negotiate an indemnity.

Examples of notices which may affect the Property include planning notices, compulsory purchase notices, public utilities' notices, repair notices, landlords' notices of intention to sell the freehold, tenants' notices of intention to buy the freehold or to enfranchise, notices about a change of landlord, or tenant, mortgages and rent review.

Notices about disputes should be included in the reply to enquiry 28.

If the Buyer raises supplemental enquiries in forms CPSE.2, CPSE.3, CPSE.4, CPSE.5 or CPSE.6, it may be more appropriate to give details of landlords' and tenants' notices in response to those supplemental enquiries. Alternatively the information can be given here and a cross-reference made in the replies to the supplemental enquiries.

 

27.1 Except where details have already been given elsewhere in replies to these enquiries, please supply copies of all notices and any subsequent correspondence that affect the Property or any neighbouring property and have been given or received by you or (to your knowledge) by any previous owner, tenant or occupier of the Property.

27.2 Are you expecting to give or to receive any notice affecting the Property or any neighbouring property?

28. DISPUTES

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28. Disputes
Disputes

The Buyer needs details of every dispute relating to the Property so that it may:

  • Appreciate what liabilities it may be taking on.
  • Be aware of potential obstacles to the use and enjoyment of the Property.
  • Take steps in the contract to ensure that the Seller deals with all disputes as may be appropriate.
  • Be prepared to take appropriate action following completion of the Transaction.
  • Negotiate an indemnity.

Disputes include those that have arisen in the past, whether or not they have been resolved. The existence of a dispute in the past may indicate a potential problem for the future and also may explain facts and circumstances about the Property. Information should be included on anticipated disputes, even where there is nothing formally on record.

 

Except where details have already been given elsewhere in replies to these enquiries, please give details of any disputes, claims, actions, demands or complaints that are currently outstanding, likely or have arisen in the past and that:

(a) relate to the Property or to any rights enjoyed with the Property or to which the Property is subject; or

(b) affect the Property but relate to property near the Property or any rights enjoyed by such neighbouring property or to which such neighbouring property is subject.

29. STAMP DUTY LAND TAX (SDLT) ON ASSIGNMENT OF A LEASE

Hide Note: Stamp Duty Land Tax (SDLT) on assignment of a leaseNote: Stamp Duty Land Tax (SDLT) on assignment of a lease
29. Stamp Duty Land Tax (SDLT) on assignment of a lease
Stamp Duty Land Tax (SDLT) on assignment of a lease

Enquiry 29.1

The grant of a lease on or after 1 December 2003 is a land transaction for SDLT purposes unless the lease was granted pursuant to an agreement for lease exchanged on or before 10 July 2003 which has not been subsequently assigned or varied.

The grant of a lease may be notifiable to HMRC for SDLT purposes.

Before 12 March 2008, the grant of a lease was notifiable to HMRC if:

(a) the term was for seven years or more and was granted for chargeable consideration, regardless of whether any SDLT was payable; or

(b) SDLT was payable on the grant of the lease or would have been payable but for any SDLT relief claimed by the tenant.

If the grant of a lease with an effective date before 12 March 2008 was not notifiable to HMRC, a self-certification certificate may have been produced to enable the registration at the Land Registry of any easements granted to the tenant under the lease.

Changes to the notification thresholds were announced in the 2007 Pre-Budget Report, confirmed in the 2008 Budget and provided for in section 94 of, and Schedule 30 to, the Finance Act 2008. The changes will have retrospective effect and mean that:

A. The grant of a lease for a term of seven years or more is not notifiable and does not require a land transaction return if:

  • The effective date of the grant is on or after 12 March 2008; and

  • The grant is for:

    • A chargeable consideration (other than rent) of less than £40,000; and

    • The "relevant" rent is less than £1,000.

B. The grant of a lease for a term of less than seven years is not notifiable and does not require a land transaction return if:

  • The effective date of the grant is on or after 12 March 2008; and

  • The chargeable consideration does not exceed the zero rate threshold (meaning that it does not consist of or include any amount in respect of which tax is chargeable at 1% or more or any amount in respect of which tax would be chargeable but for a relief).

C. The assignment of a lease that was granted for seven years or more is not notifiable and does not require a land transaction return if:

  • The effective date of the assignment is on or after 12 March 2008; and

  • The chargeable consideration for the assignment is less than £40,000.

D. The assignment of a lease that was granted for less than seven years is not notifiable and does not require a land transaction return if the chargeable consideration for the assignment or surrender does not exceed the zero rate threshold (meaning that it does not consist of or include any amount in respect of which tax is chargeable at 1% or more or any amount in respect of which tax would be chargeable but for a relief).

Subsequent events under the lease may give rise to a further obligation to notify HMRC of a land transaction. Examples include:

(a) the variation of the lease that creates a surrender and regrant or which increases the rent payable under the lease;

(b) the settlement or determination of a rent review during the first five years of the term (disregarding rent reviews by reference to the Retail Prices Index);

(c) any contingent, uncertain or unascertained rents payable during the first five years of the term becoming payable, certain or ascertained; and

(d) the first assignment of a lease that is not itself exempt from SDLT where certain SDLT reliefs were claimed on the grant of the lease (see the notes for Enquiry 29.4 below).

The Buyer will need to know the date of the grant of the lease for SDLT purposes. This is:

(a) the actual date of grant unless certain SDLT reliefs were claimed on the grant of the lease (see the notes for Enquiry 29.4 below);

(b) if the original grant was exempt under one of those reliefs, the date of the deemed grant of a lease where a non-exempt assignment has followed the original exempt grant.

The Buyer will need to ensure that all SDLT payable on the lease has been paid and retain evidence that shows the total amount that has been paid. This is because the Buyer will be responsible for the payment of any future SDLT due and, where that future transaction is linked to the grant of the original lease, the extent of the Buyer’s liability to SDLT (if any) may depend on the amount of SDLT already paid.

If SDLT was not payable on the grant of the lease or the grant of the lease was not notifiable, the Buyer will need to know this as subsequent events under the terms of the lease may bring the original grant of the lease within the requirements for notification and the payment of SDLT: for example, where the lease comes to an end and the Buyer remains in occupation of the Property.

For the purposes of any additional land transaction returns that need to be made, the Buyer will need to know the "effective date" of the lease. This will be the earlier of the date of actual completion of the lease and, if there was a preceding agreement for lease, the date of substantial performance of that agreement, for example the date the Buyer was given occupation of the premises.

Enquiry 29.2

This enquiry is relevant where a lease is assigned during the first five years of the term and the grant of the lease was a land transaction for the purposes of SDLT. It applies also on the assignment of a lease where a previous assignment of the lease has resulted in the deemed grant of a new lease (see the notes for Enquiry 29.4 below).

For the purposes of SDLT, the tenant of a lease may be under an obligation to make two land transaction returns where any of the following conditions apply:

(a) there is a rent review during the first five years of the term, excluding for these purposes any RPI rent reviews;

(b) there is any other mechanism in the lease to vary the rent payable under that lease; or

(c) there are contingent, uncertain or unascertained rents payable, for example where there is a turnover rent.

Where any of these conditions apply, the tenant makes an initial land transaction return on the grant of the lease based on a reasonable estimate of the sums that will become payable and, if additional SDLT is payable or the transaction becomes notifiable, a further land transaction return at the end of the fifth year of the term or, where a rent review is agreed or determined before the end of the fifth year of the term or the mechanism for varying the rent is operated, on completion of the rent review or variation.

If the lease is assigned during the first five years of the term, the potential obligation to make the additional land transaction return passes to the Buyer. In order to make any additional land transaction return, the Buyer will need to know the highest amount of rent paid by the Seller in any consecutive twelve-month period.

These provisions apply equally where the lease was granted for a term of less than five years; for example they would apply to a turnover rent lease for a term of four years.

Enquiry 29.3

Future rent reviews may be land transactions, requiring a return to HMRC, if the increase qualifies as an "abnormal rent review". The calculations for assessing this measure the increase in rent since the highest rent on which SDLT has already been paid and the period for which that rent was payable. In many cases this information will be apparent from the lease and the SDLT1 completed on its grant, but not if, for example, there has already been an abnormal rent review on which further SDLT has been paid. For further information on abnormal rent reviews, see the leases chapter of the Index Stamp Duty Land Tax Manual.

Enquiry 29.4

This enquiry is relevant where there has been the grant or assignment of a lease at a premium and the whole or any part of that premium is contingent, uncertain or unascertained. An adjustment to the Seller’s land transaction return may be required when the contingency occurs (or it is clear that it will not occur) or the amount of the premium becomes certain or ascertained.

On the assignment of a lease, the Buyer inherits the Seller’s obligation to make any additional land transaction return required once contingency occurs or the amount of the premium becomes certain or ascertained. The position is different if the Seller has made an application to defer payment as the obligation then remains with the Seller.

Enquiry 29.5

This enquiry is relevant where one of the following SDLT reliefs was claimed on the grant of the lease:

(a) sale and leaseback relief;

(b) group company, reconstruction or acquisition relief;

(c) transfers involving public bodies;

(d) charities relief; or

(e) any of the reliefs set out in The Stamp Duty Land Tax (Consequential Amendment of Enactments) Regulations 2003.

On the first assignment of the lease where one of these reliefs has been claimed on the grant of the lease, the assignment of the lease is treated as the deemed grant of a new lease from the Seller to the Buyer for the unexpired residue of the term of the original lease unless similar reliefs are claimed on the assignment.

If similar reliefs are claimed on the first assignment of the lease, the next assignment of the lease on which none of the relevant reliefs is claimed will be treated as the deemed grant of the new lease from the Seller to the Buyer.

Where the assignment of the lease is treated as the grant of a new lease, the Buyer will be under an obligation to pay SDLT based on the net present value of the deemed new lease.

HMRC has stated that these provisions do not apply if stamp duty, and not SDLT, applied on the grant of the lease and it was the corresponding stamp duty reliefs that were claimed on the grant of the lease.

 

In this enquiry, Lease has the same meaning as in CPSE.4 ("the lease under which the Property is held and which is to be assigned by the Seller to the Buyer").

29.1 If the grant of the Lease or any event since the grant of the Lease was a land transaction for SDLT purposes,

(a) what was the date of the grant of the lease (or later transaction) for SDLT purposes?

(b) was the transaction notifiable?

(c) if the transaction was notifiable, please provide a copy of each land transaction return made to HMRC and copy of each certificate issued by HMRC certifying that the transaction was notified to them;

(d) if the transaction was not notifiable, please specify why it was not and provide a copy of any self-certification certificate made on the grant of the lease (or later transaction) or otherwise certify the effective date of the grant of the lease.

29.2 Is there a potential or outstanding obligation to make an additional land transaction return to HMRC as a result of any of the following occurring during the first five years from the date given in the answer to Enquiry 29.1(a):

(a) the settlement or determination of any rent reviews or any other provision for varying the rent; or

(b) the settlement or determination of any contingent, uncertain or unascertained rents?

If there is, please provide a full schedule of the rents payable and paid in each quarter since the date given in the answer to Enquiry 29.1(a).

29.3 If there are any rent reviews during the remainder of the term of the Lease,

(a) what is the highest rent on which SDLT has already been paid?

(b) when did that rent first become payable?

29.4 If a premium was paid for the grant of the lease or any assignment of the lease to you

(a) was the whole or any part of that premium contingent, uncertain or unascertained;

(b) if it was, does the whole or any part of that premium remain contingent, uncertain or unascertained; and

(c) have you made any application to HMRC to defer payment of SDLT on that contingent, uncertain or unascertained consideration?

29.5 Were any SDLT reliefs claimed on the grant of the Lease and, if applicable, on the assignment of the Lease to you, that would result in the assignment of the Lease by you being deemed to be the grant of a new Lease?

30. DEFERRED PAYMENT OF SDLT

Hide Note: Deferred payment of SDLT Note: Deferred payment of SDLT
30. Deferred payment of SDLT
Deferred payment of SDLT

Where the whole or part of the consideration for a land transaction is contingent, uncertain or unascertained, the taxpayer is under an obligation to pay SDLT on completion of the transaction on its reasonable estimate of the amount of contingent, uncertain or unascertained consideration that will be payable. Where the payment of additional consideration is contingent, the taxpayer must assume that the additional consideration will become payable (regardless of the likely outcome of the contingent event).

If the contingent, uncertain or unascertained consideration will not be payable within the first six months of completion of the transaction, the taxpayer can make an application to HMRC to defer the payment of SDLT on the contingent or uncertain amount. The application for deferral must be made before the taxpayer makes its land transaction return in accordance with The Stamp Duty Land Tax (Administration) Regulations 2003.

If an application for deferral is successful, the taxpayer remains liable for any additional SDLT payable but the taxpayer may want an indemnity from any Buyer from him where that Buyer, and not the taxpayer, becomes liable for the payment of the additional consideration to the original Seller. The Buyer will therefore need to know the additional amount of SDLT that may be payable.

 

If you have made any application to defer the payment of SDLT on any contingent, uncertain or unascertained consideration and you are seeking an indemnity from the buyer in respect of the deferred payment:

(a) please provide a copy of the original land transaction return made to HMRC and a copy of the certificate issued by HMRC certifying that the transaction was notified to them;

(b) please provide a copy of all correspondence with HMRC regarding the application to defer the payment of SDLT;

(c) what is the amount of SDLT on which payment has been deferred;

(d) when does the period of deferral end; and

(e) has any event occurred that quantifies the amount of the contingent, uncertain or unascertained consideration that would impose an obligation on you to make a further land transaction return to HMRC?

31. COMMONHOLD

Hide Note: CommonholdNote: Commonhold
31. Commonhold
Commonhold

The Commonhold and Leasehold Reform Act 2002 came into force on 27 September 2004 and provides for the creation of "commonhold land" in England and Wales.

Commonhold combines freehold ownership of a single property within a larger development, with membership of a limited company that will own and manage the common parts of the development.

Application to register a commonhold can only be made in respect of registered freehold land. Any leases granted over land included within the application will be extinguished when the commonhold becomes operative. The creation of a commonhold also has implications for holders of charges over that land, which in many cases will also be extinguished when the commonhold becomes operative.

Before the Land Registry can register an estate as a freehold in commonhold land, consents are required from a number of categories of person, including freeholders, chargees and tenants. Once given, a consent can be withdrawn at any time before the date on which the application is submitted to the Registrar. Generally a consent will lapse if no application is made within a period of 12 months beginning with the date on which the consent is given.

If a consent to registration of land as a freehold estate in commonhold is given by a person, their successor in title is deemed to have given the requisite consent. This means that if the Seller has given consent to the registration and, before the application is lodged, the Seller transfers the title to the Buyer, the Buyer is deemed to have given the consent. The Buyer can then withdraw the deemed consent, provided that the application has not been lodged at the Land Registry.

Enquiry 31 is intended to reveal whether there are any intentions to register a commonhold that will affect the Property or whether an application has been made. Depending on the replies to the enquiry, the Buyer may want further information or may decide not to proceed with the transaction.

 

31.1 Does the Property include any land that is the subject of any application, or any proposed application, to the Land Registry for registration of a freehold estate in commonhold?

31.2 Have you consented or been asked to consent to the establishment of a freehold estate in commonhold that would include the Property or any part of the Property?

32. COMMUNITY INFRASTRUCTURE LEVY (CIL)

Hide Note: Community Infrastructure Levy (CIL)Note: Community Infrastructure Levy (CIL)
32. Community Infrastructure Levy (CIL)
Community Infrastructure Levy (CIL)

This enquiry is concerned with any outstanding or potential liability for the payment of the Community Infrastructure Levy (“CIL”) on any past, current or anticipated development of the property.

Liability for CIL can arise only where a relevant authority has a charging schedule in force for its particular area. The relevant authorities are district and unitary authorities, London boroughs, National Park Authorities, the Broads Authorities and the Mayor of London. As the Mayor of London has published his charging schedule, development in any London borough will be subject to CIL even if the London borough itself does not have its own charging schedule in force.

To determine if a relevant authority has a charging schedule in force, enquiries should be made of that authority.

Enquiry 32.1

Most planning permissions granted after a charging schedule has come into force will be subject to CIL when development commences pursuant to that planning permission. Where a planning permission granted before a charging schedule came into force is varied under section 73 Town and Country Planning Act 1990 after a charging schedule has come into force, the new planning permission will be subject to CIL.

Enquiry 32.2

Certain developments may be carried out without planning permission if carried out pursuant to a general or local development order, within an enterprise zone or a simplified planning zone or there is deemed planning permission under section 90 Town and Country Planning Act 1990 (development with Government authorisation). Such developments may be subject to CIL if commenced when a charging schedule is in force. For developments carried out pursuant to a general or local development order or within an enterprise zone, no liability to CIL will arise if the development commences before 6 April 2013.

Enquiry 32.3

Unless another person has assumed liability for the payment of CIL, any CIL liability will be apportioned among those persons having a material interest in the land at the commencement of the development. A material interest in land is either a freehold title or a leasehold title for a term that expires more than seven years following the date on which planning permission first permits development. It is thought that liability for CIL is intended to run with the land (although this point is not yet certain), so the buyer will need to know of any CIL liability that it may inherit.

Enquiry 32.4

A charging authority may accept payments of land (including existing buildings or structures) as an alternative to cash to meet a CIL liability where certain conditions are met.

Enquiry 32.5

If there are undetermined planning applications and there is no charging schedule in force, the buyer should also investigate whether there is any prospect of a charging schedule coming into force before the date on which any planning permission is granted pursuant to that application.

Enquiry 32.6

A person other than the land owner can assume liability for the payment of the CIL by the submission of an “assumption liability notice”.

Enquiry 32.7

Assumption of liability for CIL can be withdrawn at any time before development commences. If the development has commenced, the liability for CIL may be transferred to another person so long as the deadline for the final payment of CIL has not been reached. If liability is withdrawn before development commences, it reverts to those persons having a material interest in the land when the development commences.

Enquiry 32.8

The amount of CIL payable on the overall floor space of a development can be reduced if, on the date that planning permission first permits the chargeable development, there are existing buildings on the site that are to be demolished as part of the development. In order for this discount to apply, such buildings have to have been in continuous lawful use for six months within the period of twelve months before the planning permission to which the CIL liability attaches first permitted the development.

Enquiry 32.9

In order for the discount referred to in 32.8 above to apply, the buildings that are to be demolished prior to completion of the chargeable development must be existing on the relevant land at the date that planning permission first permits the chargeable development (which will normally be at the point when all pre-commencement conditions attached to the planning permission have been satisfied).

Enquiry 32.10

Where a relief has been claimed in respect of CIL liability, the relevant authority can recover the CIL that was subject to the relief if a disqualifying event occurs within seven years.

 

32.1 Has any planning permission (including any permission under section 73 of the Town and Country Planning Act 1990) relating to the Property been granted that is subject to the Community Infrastructure Levy ("CIL")?

32.2 Has any other CIL liability been incurred in respect of the Property relating to development authorised by permitted development rights or any other "general consent" (as defined in Regulation 5 of the CIL Regulations 2010)?

32.3 Are you aware of any existing or future CIL liability relating to the Property?

32.4 Has any notice or correspondence relating to any existing or future CIL liability in respect of the Property (including in relation to any payments of CIL in kind) been sent, lodged or received? If so, please supply a copy of all such notices and correspondence.

32.5 Have you lodged or received notice of any undetermined planning applications (including any planning appeals) relating to the Property or are you aware of any such applications?

32.6 If any CIL liability has been, or is to be, incurred, relating to the Property, has any notice been served under the CIL legislation assuming liability for the CIL or is there any legal obligation on anyone to do so?

32.7 Where someone has assumed liability for any CIL, or is under an obligation to assume liability for any existing or future CIL, relating to the Property, what protection is in place

(a) to prevent that person withdrawing their assumption of liability?

(b) to prevent that person transferring their assumption of liability without the consent of the Buyer, following completion of the Transaction?

(c) to protect the Buyer from default liability if the person who has assumed liability defaults and the collecting authority seeks or requires payment of the whole or any part of the CIL from the Buyer?

32.8 If any CIL liability has been, or is to be, incurred, relating to the Property, have any of the buildings forming part of the Property been in lawful use for a continuous period of six months within the period of the twelve months before planning permission first permitted the chargeable development? If so, please specify which buildings or part(s) of such buildings have been in lawful use.

32.9 If any CIL liability has been, or is to be, incurred relating to the Property, is there any proposal to demolish any of the buildings forming part of the Property, or have any buildings that once formed part of the Property been demolished since the grant of a planning permission that is subject to CIL? If so, please provide details.

32.10 In relation to any CIL liability that has been, or is to be, incurred relating to the Property, are you aware that any relief has been claimed? If so, please provide full details including the date when the chargeable development in connection with which the relief was claimed was commenced.

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