Commercial Property Workshop 1 Preparation

Instructions

Site acquisitions: Commercial conveyancing,

planning law, VAT and construction projects

By the end of this online session you should be able to:-

1. Be able to identify the parties involved in a construction project (the

professional team) and their roles,

2. Be familiar with different types of building contract,

3. Appreciate the importance of collateral warranties.

4. Identify the searches and enquiries to be made on behalf of a purchaser

of property for commercial development

5. Explain the relevant planning law issues in relation to a proposed

commercial development

6. Explain the different types of contract that may be used to acquire that
property

7. Understand the VAT implications of a purchase and development of

commercial property

8. Explain the liabilities of a construction team to third parties and the

importance of collateral warranties

Preparation

Scenario:

You are acting for Eden Developments Ltd, a local property development
company, which is proposing to purchase a greenfield site at Dell Road, Rochdale.
You have received the attached letter, a site plan and a copy of the sale contract
(incorporating the standard commercial conditions of sale – 3 rd edition) sent to you
by Geoffrey Marshall, a director of the company (see below):

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 EDEN DEVELOPMENTS LIMITED
Eden House
Edenfield Road
Rochdale
OL11 5AA
S. Pendlebury
Jordan Maxwell Solicitors
Maxwell House
15 Regent Street
Manchester
M1 1AB

Dear Sam,

Re: Land at Dell Road, Rochdale

I have now agreed a purchase price of £1.3million with the seller (Mr. Johnson) for the
site at Dell Road. Our agents in this matter, Roberts & Smith, will be contacting you
shortly with full heads of terms and I should be grateful if you could progress matters as
soon as possible once details of Mr. Johnson’s solicitors are known.

I am enclosing a location plan and I have shown the area to be purchased edged in red.

As you know we intend to develop this site and to build 4 retail units for letting. We
have not yet applied for planning permission but I would like to secure the site as soon
as possible as it is in a prime location on the main road.

Please let me know if you require any further details from me at this stage.

Yours sincerely,

Geoffrey

Geoffrey Marshall
Director

Eden Developments Limited is a company registered in England and Wales with registered number 641041

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 N

Proposed site at Dell Road, Rochdale

(note: red edging is shown by thick black lines)

MELLOR
ROAD

D
E
L
L

R
O
A
D

WHITWORTH ROAD

Scale 1:1000
Site Plan 001
Date: July 2020

PLEASE REFER TO THE COMMERCIAL STANDARD CONDITIONS OF SALE IN

YOUR PLP MANUAL
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 CONTRACT
Incorporating the Standard Commercial Property Conditions (Third Edition – 2018
Revision)

Date :

Seller : Charles Johnson of Low Wood Farm, Low

Wood Lane, Rochdale, OL8 9TH

Buyer : Eden Developments Limited (company number

641041) whose registered office is situate at
Eden House, Edenfield Road, Rochdale, 0L11
5AA

Property : The freehold land at Dell Road Rochdale

(freehold/leasehold) more particularly delineated and shown edged
red on the attached plan and forming part of the
property comprised in a Conveyance dated 15th
October 1931 made between Harold Nuttall (1)
and Frederick Johnson (2) (“the Conveyance”)
(note: the plan is not reproduced and you
may assume that it is satisfactory)

Title number / Root of title : The Conveyance

Specified incumbrances : The Property is sold subject to the covenants

conditions and provisions contained mentioned
or referred to in the Conveyance
Completion date :

Contract rate : 4% per annum above Barclays Bank base rate

from time to time in force

Purchase price : £1,300,000 (one million three hundred thousand

pounds)

Deposit : £130,000 (one hundred and thirty thousand

pounds)

The seller will sell and the buyer will buy the property for the purchase price
for the purchase price.
WARNING Signed
This is a formal document, designed to
create legal rights and legal obligations.
Take advice before using it.
Authorised to sign on behalf of Seller/Buyer

Standard Commercial Property Conditions Part 2

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1. This contract incorporates the Standard Commercial Property Conditions (Third
Edition).

2. The property is sold with vacant possession.

(or)
2. The property is sold subject to the leases or tenancies set out on the attached
list but otherwise with vacant possession on completion.

3. The chattels at the Property and set out on the attached list are included in the
sale. [The amount of the purchase price apportioned to those chattels is £
]

4. The conditions in Part 2 shown against the boxes ticked below are included in
the contract:

Condition A1 (VAT: not a taxable supply)

[or]
Condition A2 (VAT: transfer of a going concern)

Condition B (capital allowances). The amount of the purchase price

apportioned to plant and machinery that are fixtures for the purposes of
the Capital Allowances Act 2001 is £

Condition C1 (flats: no tenants’ rights of first refusal)

[or]
Condition C2 (flats: with tenants’ rights of first refusal)

Notices may be sent to:

Seller’s Conveyancers*: Davidsons Solicitors

Tower House
South Road
Rochdale
OL8 7FD (ref BHT/Johnson)

Buyer’s Conveyancers*: Jordan Maxwell Solicitors

Maxwell House
15 Regent Street
Manchester
M1 1AB (ref SGP/Eden/103)

*Adding an e-mail address authorises service by e-mail: see condition 1.3.3(b)

Reproduced by kind permission of the Law Society and Solicitors’ Law Stationary Society Ltd

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Preparation Task 1

Please read Chapter 9 of the manual on Searches and

Enquiries (All) 15 mins

Now answer the task below 15 mins

Having received Geoffrey’s letter and plan, write a brief checklist of any
particular pre-contract enquiries or searches you will wish to make in relation to
this site, bearing in mind that it is being acquired for development purposes.
(Note: Please do not consider environmental searches or enquiries as these will
be dealt with in Week 2). You should quickly read though CPSE 1 (version 3.8),
a copy is available on Moodle, to see what enquires are raised in commercial
transactions.

In your answer you should consider whether you should raise any Optional
Enquiries with the local authority on form Con 29O which covers the following
optional enquiries:
Q. 4 Road proposals by private bodies
Q. 5 Advertisements
Q. 6 Completion Notices
Q. 7 Parks and Countryside
Q. 8 Pipelines
Q. 9 Houses in Multiple Occupation
Q. 10 Noise Abatement
Q. 11 Urban Development Areas
Q. 12 Enterprise Zones, Local Development Orders and BIDS
Q. 13 Inner urban Improvement Areas
Q. 14 Simplified Planning Zones
Q. 15 Land maintenance Notices
Q. 16 Mineral Consultation and Safeguarding Areas
Q. 17 Hazardous Substance Consents
Q. 18 Environmental and Pollution Notices
Q. 19 Food Safety Notices
Q. 20 Hedgerow Notices
Q. 21 Flood Defence and Land Drainage Consents
Q. 22 Common land and Town or Village Green

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Preparation Task 2
Please read Chapter 6 of the manual on Enforcement of
Planning Control (All) 30 mins

Now answer questions 1, 2 and 3 below: 30 mins

1. Explain (by reference to the appropriate statutory provisions) whether
planning permission will be required in this scenario.
2. What preliminary steps would you suggest are taken before any planning
application is submitted to the local planning authority?
3. What suggestions would you make to the client as to how we can “secure
the site as soon as possible” even though the company has not yet
applied for planning permission? (You should explain the advantages and
disadvantages of your suggestions).

Preparation Task 3

Please read Chapter 11 of the manual on An Outline of

Taxation of Commercial Properties – on VAT only
15 mins

Now answer questions 1, 2, 3 and 4 below: 30 mins

You will also need to read the VAT provisions in the standard commercial
conditions of sale (3rd Edition) when answering this question and also questions
25-31 of CPSE 1 version 3.8 (a copy is available on Moodle).

You receive a draft contract from the Seller’s solicitors, incorporating the
Standard Commercial Property Conditions (Third Edition – 2018 Revision), see
above.

1. Will Eden Developments Ltd be liable to pay VAT on the purchase price
for the land?

2. How does the draft contract deal with VAT? How does this differ from the
Standard Conditions of Sale (5th Edition)?

You will find the Standard Conditions of Sale (5 th edition) in Appendix 2 to

your Property Law and Practice Manual.

3. Will Eden Developments Ltd be liable to pay VAT on any other costs in
connection with its proposed purchase and development?

4. How could your client recoup any VAT it has had to pay (either on the

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 purchase price or on any other costs associated with the development)?

Preparation Task 4

Please read Chapter 10 of the manual on Construction

Projects (All) 30 mins

Now answer questions 1 and 2 below: 40 mins

1. Listed below on the left is a list of the various companies/professionals

involved in a (fictitious!) construction project. On the right is a list of the
various parties usually involved in a construction project.
Match the company/professional on the left to their role in the project on
the right. 10 mins

Allan & Co Associates Employer

(will advise on the amount of
materials to be used in the
construction of the building)

Better Developments Ltd Architect

(your client, the developer)

Claremont Doors Ltd Quantity Surveyor

(will install all glazing of windows
and doors in the building)

D.D. Design Partnership Building Contractor

(has drawn up the plans and
specifications for the building)

Edward & Partners Sub-contractor

(have designed the air-conditioning
system)

Fox & Son (Manchester) Ltd Consulting engineers

(will employ Claremont Doors Ltd)

2. With particular reference to chapters 10.4 (Duties owed to third parties)

and 10.5 (Protecting third parties) and to the diagrams below which
help to explain the liability of the professional team to third parties,
answer questions (a) and (b) below based on the Eden
Developments scenario.
30 mins

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 Traditional form of Building Contract
sale
Better Wise
Developments Ltd Investments Ltd

Architect Q.S Main Consulting

Contractor Engineers

Sub-contractors

Design and Build Contract

sale
Better Wise
Developments Ltd Investments Ltd

Main contractor

Architect Q.S. Sub-contractors Consulting

Engineers

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Eden Developments Ltd has now acquired the site and construction of the retail
units has commenced (using a Design and Build form of building contract). It
has also just agreed terms with a retailer, Super Sofas Limited, for the lease of
one of the units.
Assume now that you are acting for Super Sofas Limited in negotiating an
agreement for lease with Eden Developments Ltd and consider:
(a) What the liabilities of the building contractor/other consultants will be to
your client for any defects in the unit?
(b) What protections you should seek on behalf of your client. In your answer
you should refer to specific protections that can also be included in the
lease (you should download a copy of the specimen lease to identify
clauses you will add/amend (also check the specimen tenant’s
amendments posted on Moodle).

Total preparation time 205 minutes

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