In this insight, we turn to the purchase of a standalone commercial building in its entirety (for example, an office building or warehouse). While some of the points we covered in our first insight on buying a unit within a larger building will also be relevant here, purchasing a standalone building brings with it a different set of considerations. In particular, the buyer takes on full ownership and responsibility for the entire structure and site, rather than acquiring a leasehold interest in part of a building managed by others.

In this insight we have set out a list of key matters to be aware of and consider at the outset of an acquisition. This is not a comprehensive list and key matters can vary significantly depending on the property in question; it is always important to obtain specific legal advice.

1. Tax treatment

As with buying a unit, it is essential to understand whether the purchase price is inclusive or exclusive of VAT and how VAT will be dealt with on completion. The seller will provide replies to Pre-Contract VAT Enquiries which will need to be carefully reviewed to ensure there are no unexpected tax implications. Capital Gains Tax (CGT) is a tax on any gains made (or deemed to have been made) on the disposal of property. While it is primarily a matter for the seller, buyers also need to be aware of it. In particular, where the purchase price exceeds certain thresholds, the seller is required to obtain a CG50 clearance certificate. If this certificate is not available at completion the buyer would be required to withhold 15% of the purchase price and remit it directly to Revenue.

Independent tax advice should always be obtained and factored into the overall costs for the transaction at an early stage.

2. Freehold vs Long Leasehold Title

Unlike purchasing a unit within a larger building, where the buyer typically acquires a long leasehold interest, when buying a standalone building it is more common to acquire a freehold interest (i.e. outright ownership of both the building and the land it sits on). However, some standalone buildings are still held on long leasehold title, which is treated as equivalent to freehold ownership but can contain significant obligations (known as covenants) that must be complied with on an ongoing basis. It is important to understand which applies. Your solicitor will investigate the title in detail, identify what exactly is being acquired, and review any ground rent or head lease obligations if the title is leasehold rather than freehold.

3. What Exactly Are You Buying? — The Identity of the Property

When buying a standalone building, you will generally be acquiring the entire structure, the land on which it sits, and any surrounding grounds or yard areas. However, the precise boundaries of the property should never be assumed. Your solicitor will review the title documents, including the title folio and filed plan (the Land Registry records which describe and map the property) or the title deeds, to confirm exactly what is included in the sale. The seller should also provide plans clearly showing the boundaries of the property. A desktop review of the title documents alone is not sufficient, and a declaration of identity should also be obtained. A declaration of identity is a document which confirms, by reference to a physical inspection, that the property described in the title documents matches the property on the ground. This declaration is typically provided by the seller, but this is subject to commercial agreement. In some transactions the seller may not agree to provide one, in which case the cost of obtaining it will fall on you as the purchaser. It is also important to confirm whether boundary features such as walls, fences, gates and access roads, form part of the property being acquired, and whether there are any agreements in place in relation to these features, as they can give rise to disputes further down the line.

4. Access, Rights and Easements

When buying a standalone building, it is important to ensure that the property has the benefit of all necessary rights and easements (legal rights to use another person's land for a specific purpose). These may include rights of way over adjoining land (for example, where the only access road to the building crosses a neighbouring property), rights to connect to and use services such as water, electricity, gas and drainage, and rights to maintain pipes, cables and drains running under or through neighbouring land. Your solicitor will carry out a thorough review of the title to identify any such rights and the declaration of identity will confirm the location of such easements.

5. Structural Responsibility — the Buyer Takes It All On

One of the most significant differences between buying a standalone building and buying a unit within a larger building is that there is no management company or building owner to maintain and repair the external structure. As the sole owner, the buyer takes on full responsibility for the upkeep and repair of the entire building, including the roof, walls, foundations, windows and all structural elements. This makes a professional structural survey by a suitably qualified surveyor, architect or engineer essential. In commercial property transactions as buyer, you purchase the property on the basis of "caveat emptor" (buyer beware), meaning the onus is on the buyer to satisfy themselves as to the condition of the property prior to purchase. The structural survey would ideally be carried out before contract exchange so that you are fully aware of the condition of the property.

6. Planning and Building Regulation Compliance

Planning and building regulation compliance is a key area of due diligence. Your solicitor will carry out a desktop review of available compliance documentation and will flag any gaps. Common areas of concern include extensions or alterations carried out without the benefit of planning permission, changes of use which may not have been properly permitted, and fire safety compliance. Points to pay particular attention to are:

  • Permitted Use - your solicitor should verify the permitted planning use of the property and ensure that it aligns with your intended use. If the proposed use differs from the permitted use, a new planning permission for change of use will be required. Separately, where the property is held on long leasehold title, as the lease may contain a user clause restricting the permitted use of the property, which must be considered alongside the planning position.
  • Fire Safety Certificates and Disability Access Certificates - here a Fire Safety Certificate (FSC) and/or Disability Access Certificate (DAC) have been obtained, these should be carefully reviewed. These certificates are issued on the basis of plans submitted prior to construction and confirm that the building will be compliant if constructed in accordance with those plans. It is important to verify that the building as constructed is in line with the certified plans. Any material deviations may necessitate the obtaining of a regularisation certificate, which can be a costly and time-consuming exercise.

Any planning and/or building regulation compliance issues identified should be assessed carefully as they can affect the usability, insurability and re-salability of the building.

7. Environmental and Contamination Considerations

Standalone commercial buildings, particularly older industrial or warehouse properties, can sometimes be affected by issues of ground contamination or environmental liability. It is worth considering whether the nature of the previous use of the building or site gives rise to any concerns in this regard (a petrol station and forecourt will carry greater risk than an office building). In typical commercial transactions currently the seller may not provide a warranty in relation to environmental law but they should still be in a position to confirm that they are not actually aware of any environmental law breaches.

If there is any indication that there may be environmental issues, based on matters disclosed or the profile of the property, it will be important to obtain environmental assessment. If a property is purchased and pre-existing environmental issues later come to light, the buyer can face ongoing environmental obligations, legal proceedings and regulatory requirements, whether or not they were responsible for the contamination, as seen in Brownfield Restoration Ireland Limited v Wicklow County Council.

8. Insurance

When buying a standalone building, the buyer is solely responsible for insuring the entire structure from completion. Unlike buying a unit where the building owner or management company typically insures the overall building, here the responsibility rests entirely with you. You should arrange appropriate buildings insurance, which should be in place from the date of completion. You will also want to consider public liability insurance and, if the property is let to a tenant, loss of rent insurance.

9. Is a Tenant in Situ?

Where a standalone commercial building is being acquired with a commercial tenant in occupation, an additional layer of due diligence will be required. At a high level, you will need to consider:

  • How much rent is the tenant paying and when is it reviewed?
  • How long is left in the lease term, and does the tenant have the benefit of a break option?
  • Has the tenant been in occupation for 5 years or more without having signed a deed of renunciation (renouncing statutory rights to a new lease)? If so, they may have accrued statutory renewal rights entitling them to a new lease.
  • Is the tenant in arrears of rent, service charge or any other monies?

10. Commercial Rates

Commercial rates are an ongoing cost which must be factored into the overall cost of the building from completion. Due to a change in the law in 2023, any commercial rates outstanding on the property must be fully discharged by the seller prior to completion — the buyer cannot simply hold back an amount from the purchase price to cover any arrears. On completion, as buyer, you must file a Section 11 Notification with the relevant local authority within 10 working days, notifying them of the change of owner. To file this notification you will need the tax number of the buyer and a designated point of contact for the local authority.

11. BER Certificate

It is a legal requirement that any building being sold in Ireland has a valid BER (Building Energy Rating) certificate and advisory report in place (some exemptions apply). Typically, the seller's agent will provide this at an early stage. If no valid certificate is in place and no exemption applies, the seller will need to obtain one before completion can take place.

12. Stamp Duty and Post-Completion Steps

After the completion of the acquisition your solicitor will attend to various post completion matters including:

  • Making the stamp duty return to Revenue - filing and payment must be made to Revenue within 44 days of completion
  • Lodging the document evidencing your ownership of the property (the title deeds or deed of transfer) with Tailte Éireann for registration.
  • Submitting a notification to the relevant local authority notifying of the change of ownership for commercial rates (Section 11 Notification) - typically this is submitted by your solicitor within 10 working days of completion