Ten property issues not to be ignored when selling
This article by Adrian R Tattersley, a Chartered Legal Executive with PFM Dental Legal, was first posted on www.smile-onnews.com
When selling your practice there will undoubtedly be property issues to consider, which, if left unattended, could end up delaying your sale or, worse still, stopping it altogether. There are very few issues that cannot be resolved – especially if you use a lawyer experienced in dental transactions. Here are the top 10 issues you can’t afford to ignore whether your practice operates from freehold or leasehold premises.
1. Deeds not words
Despite the advance of digital technology, hard copy property deeds are still important. Not only are they needed for the sale, they are also the first stop to identifying anything that needs to be resolved.
If you own your property you may have a Title Information Document (a copy of the title from the Land Registry) and a Title Plan showing what you own. If you rent the property from a landlord, you will have a lease and with it maybe also the landlord’s permission for alterations you have done or details of past rent reviews.
Send all these to your lawyer as soon as you can so they can review them and spot anything that needs to be addressed to avoid delaying the sale.
2. Landlord consent
When transferring a lease, you may need the landlord’s formal written consent for the lease transfer. This is given in a legal document called Licence to Assign. To obtain that consent your buyer and yourself will need to satisfy the landlord that the buyer will be a good tenant. Speak to your lawyer who will guide you on how best to approach your landlord for that consent.
3. Know your property
Do the boundary walls and fences match the red line boundaries on your Title Plan? If not, then discuss the position with your lawyer. If there is a discrepancy this can often be resolved swiftly and easily by reviewing your history with the property. Your lawyer can prepare a statement for you to sign which, together with other technical drafting, can resolve the situation and avoid delays on the sale.
4. Know your rights
Many practices front on to a public highway so no formal rights of way are needed. However, what about that back road you have used for years? Is that a public road? If it isn’t you may not have official rights of way over it. Tell your lawyer if there is a back road you have used so they can check the position. If you don’t have any rights, there are well recognised solutions your lawyer can apply to avoid delaying the sale.
An owner or tenant is under a legal duty, first to identify if asbestos exists in the property and second, to manage what asbestos may be in the property. If you have not already done this, you will need to do so.
Take advice from your lawyer or consider the online DIY resources for managing asbestos at http://www.hse.gov.uk/asbestos/. While these resources are normally sufficient, especially for smaller commercial properties such as dental surgeries, be aware that a prospective buyer may not accept them because you are not an asbestos expert and may ask for a professionally prepared Asbestos Report.
Since April 2008 sellers must produce, on a sale of non-domestic premises, an Energy Performance Certificate (EPC). This shows the energy efficiency rating of the property graded from A (the best rating) to G and includes recommendations on how to improve the energy efficiency.
Be aware that, from 1 April 2018, properties in England and Wales must meet the Minimum Energy Efficiency Standard (MEES). A property with an ‘F’ or ‘G’ rating will be sub-standard. If you are a tenant, you may be responsible under the terms of your lease to ensure the property meets the MEES.
7. Planning and building regulations consent
If you have built extensions, then you may have needed planning permission. If you have altered the inside of the property, then you may have needed building regulations approval. Your lawyer will ask for these documents. If you haven’t got them, speak with your lawyer – it’s not the end of the world but your lawyer may need to consider the position to minimise the risk of delaying the sale.
Dentists who are registered for VAT will need to consider if they need to charge VAT on the sale price of their practice or only the part of the sale relating to the property. A 20% VAT charge is significant to potential buyers. However, if certain conditions are met, you may class the sale as a ‘transfer of a business as a going concern’ meaning that the transaction will not be treated as a VATable supply and you will not be required to charge VAT. That makes your practice attractive to non-VAT registered buyers.
9. Capital allowances
Dentists who spent money on certain items in their surgeries may claim capital allowances. This is a means of recording the expenditure then applying a calculation to reach a figure that can be deducted from your headline profit. You then pay tax on the bottom line.
Check with your accountant if you have claimed capital allowances and if the claim is exhausted. If it isn’t, you may be able to retain the ability to claim even after your sale.
10. Structure the deal
It is best to know from the outset how your sale can or ought to be structured from a lawyer’s perspective. Different documents are needed in different circumstances. By knowing how to structure the deal you avoid the risk of incurring costs for the preparation of inappropriate documents. Speak with your lawyer.