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commercial buildings
| 14 August 2019

The importance of commercial searches when purchasing land/property

What are searches?

Purchasers who are not obtaining finance to purchase a property are not obliged to undertake searches. A lender would most likely request that the usual searches are in place before agreeing to drawdown on the loan, alternatively they may ask for no search insurance which would cover for losses incurred from adverse entries revealed in some searches, but not all. 

As it is not a requirement for cash purchasers to undertake these searches, many decide to proceed without to save on cost or time which can sometimes prove problematic later on down the line.

There are various searches that can be carried out depending on the nature of the transaction. The usual searches are; local authority search, environmental search, drainage and water search, highways search and a chancelcheck report. A brief overview of information supplied in searches that could affect future saleability and use of a property is given below.

A local authority search would reveal information affecting the property; for example, if there are any local land charges (LLC) registered. LLC’s are restrictions/prohibitions on the use and enjoyment of a property. The most common forms of land charges are planning permissions, planning enforcement notices, tree preservation orders and Community Infrastructure Levy (CIL) charges.

A drainage and water search would reveal whether there are any sewers located within the boundaries of the property which would give the water company a right of access or which may prevent future development. It will also confirm whether the property is connected to a mains water supply.

An environmental search will assess the risk of contamination to ascertain the likelihood of contamination which may result in a further soil report being necessary.

A highways search would reveal whether the public highway has been adopted by the local authority, and if not further investigation will be required to ascertain that suitable rights of way and provisions for maintenance are in place.

ChancelCheck reports may not be applicable. If the current land owner purchased the property after October 2013 it will not be required. These searches will reveal whether the property is situated in a parish which has a potential chancel repair liability. Chancel repair liability is a legal obligation to contribute to the repairs of a church/parish. This can be insured against once the same is revealed. However, if the parish approaches you it may prove difficult to insure.

 

Why are they important?

Searches are important as they reveal information that may affect a buyers intentions for the use and enjoyment of the land/property, or could even bear a financial implication. For example, as explained above local land charges can reveal whether there is a CIL liability charge for the area. This could also show financial charges owed to a council for CIL. If the seller built the property that is being purchased and triggered the CIL liability charge, the developer would owe to the council a sum of money. If that sum of money is not paid it could be registered as a local land charge which would be revealed by the local authority search. Once the matter has completed, the liability can pass to the current land owner who will be responsible for discharging the sum owed with the council with no way of being compensated by the seller following completion. The phrase ‘buyer beware’ is frequently used in the property world specifically for this reason and this is why matters such as this should be dealt with pre exchange/completion so that any issues can be addressed as it is likely that there is no way to pursue a seller for the loss after this without necessary provisions being in place.

 

What is CIL?

CIL is a planning charge which is a tool used by local authorities to help deliver infrastructure and support development in their area. If the planning charge is implemented in the area it may affect new developments. The amount of the charge would be calculated by the square footage of the new building and would be payable by the developer. It is important that when purchasing a property that is subject to a CIL planning charge, there are no payments due to the council as this liability can pass on completion of the purchase.

It is important to undertake searches against a property whether or not finance is being obtained to ensure that you are not left with issues post-completion that would become your responsibility. It may save on time and cost in the short term to avoid searches but this may prove to be a more costly and time consuming to rectify in the long run.

If you are in any doubt or have any questions, please contact us on 01702 338 338 to speak to our Southend office, 01277 500123 to speak to our Billericay office or 020 8049 5888 to speak to our Stratford office.

 

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