Commercial Property Contracts UK: Key Clauses

What this document is

A commercial property sale contract is the binding agreement between seller and buyer setting out the terms on which a freehold or leasehold interest will change hands. In England and Wales these contracts typically incorporate the Standard Commercial Property Conditions, which act as a baseline set of terms that the parties then amend through bespoke special conditions to reflect the particular deal.

Unlike residential transactions, commercial deals tend to be heavily negotiated, with buyers and sellers pushing on points like warranty scope, VAT treatment, apportionments, and what happens between exchange and completion. The contract is usually signed at exchange, which is the point at which both parties become legally committed.

Completion, when the money moves and the property transfers, happens later on an agreed date. Getting the contract right matters because once exchange has happened, pulling out is expensive and often impossible without serious financial consequences. Every clause earns its place by doing a specific job.

How to use this document

1. Parties and property description. The contract opens by naming the seller and buyer in full, including company numbers where relevant, and pinning down exactly what is being sold. For commercial property this means the legal title, title number at HM Land Registry, the plan attached to the contract, and any rights benefiting or burdening the land. Ambiguity here causes problems later, especially with shared access ways, airspace, and service media.
2. Price, deposit and payment terms. The contract states the purchase price, confirms whether VAT is chargeable, and sets out the deposit, which is typically ten per cent paid on exchange. It will specify how the deposit is held, usually as stakeholder or agent, and how the balance is paid on completion. Apportionments for rent, service charge and other outgoings are also dealt with so neither party is out of pocket.
3. Completion date and possession. A fixed completion date is agreed at exchange, and the contract sets out what time on that date completion must occur. For tenanted investment property, the buyer steps into the landlord's position and takes possession subject to the occupational leases. For vacant property, the seller must give actual possession, and the contract should be clear on the state in which the property is handed over.
4. Title, risk and insurance. The contract deals with how title is deduced, what the buyer is deemed to know about, and when risk passes. Under the Standard Commercial Property Conditions risk generally passes at exchange, which is why buyers usually put insurance in place from that point rather than waiting for completion. Insurance obligations, particularly in leasehold transactions, need careful attention.
5. Warranties, disclosures and remedies. The seller gives limited contractual warranties about matters such as compliance notices, disputes, and the accuracy of replies to Commercial Property Standard Enquiries. The contract also sets out what counts as a default, what notices must be served, and what remedies follow, including the ability to serve a notice to complete and ultimately to rescind and forfeit the deposit if the defaulting party fails to perform.

Common questions