When purchasing land or entering into a Lease of commercial property, as a buyer you are subject to the legal principle of caveat emptor, which translates as “buyer beware”. This means that once contracts have exchanged, you cannot pull out because you have discovered something which could have been revealed by undertaking searches prior to exchange. Not carrying out searches can put you at risk of potential liabilities or costly problems at a later date.
Searches enable buyers to learn as much as they can about a property before committing to the purchase. Anything unexpected which is revealed can be raised with the seller pre-exchange, with a view to resolving or renegotiating the purchase price or other terms of the transaction. Therefore, sellers need to be equally aware of the importance of searches when selling commercial property.
If you are taking out a mortgage to purchase the property, your lender will likely require at least a Local Search, Drainage & Water Search and an Environmental Search. Frequently they also still require a search concerning Chancel Repair Liability. Even if you are a cash purchaser, the below searches should always be considered.
The Local Authority will provide information affecting the property. Such matters include whether there are any local land charges registered against the property, restrictions on permitted development, or planning conditions which may interfere with your intended use of the property. They will also reveal information regarding whether the roads serving the property are maintainable at public expense and whether there are any proposed traffic or railway schemes in the neighbouring area. Local Authority searches also reveal whether there is a Tree Preservation Order, Enforcement Notices or Common Land affecting the property being searched.
Drainage & Water Search This will show whether the property drains to a private sewer, resulting in liability for maintenance costs or contains a main or sewer within the boundary, which gives the water company a right of access to the property. It also reveals whether the property is connected to mains water, whether metering is in place at the property and the location of water mains, drains and surface water drains in the vicinity of the property.
Environmental Search An environmental search will assess the property’s risk of contamination. The usual form of Environmental Search carried out is a “desktop search” meaning that the search is made against historic data and maps of the area to ascertain the likelihood of contamination (as opposed to an on-site survey and testing which may be required in certain circumstances). As well as potentially affecting the structure and use of the property, such contamination may result in a buyer being liable for clean-up costs under the Environmental Protection Act 1990 if the original polluter cannot be found. If risks are identified, an environmental survey should be carried out to assess the full extent and nature of the contamination.
Chancel Check Search This will reveal whether the property is situated in a parish which has a potential chancel repair liability. If so, insurance should be taken out in relation to the risk. However, if the current owner of the property purchased it after 13 October 2013, the property was purchased free of any chancel liability, so insurance will not be necessary; however cautious mortgage lenders will still frequently require an indemnity policy to be put on risk if a potential risk of chancel repair liability is revealed.
Additional Searches There are more searches which may be necessary depending on factors such as the location, age and condition of the property. For example, a Flood Search should be carried out if the property is situated in a known flood-risk area or searches with gas and electrical companies if the site is to be acquired for development.