Buying commercial property: what to check before you commit

Who should own the property?

Decide who the buyer will be before you make an offer. The main options are buying personally (alone or with co-owners), through your trading company, through a separate property company, or through a pension scheme such as a self-invested personal pension (SIPP) or a small self-administered scheme (SSAS). The choice affects the tax on rent and on a future sale, who is liable for any loan, what lenders will offer, and how easily the property can be passed on, so take tax advice at the same time as legal advice.

Some legal points apply whichever route you choose. SDLT on a commercial purchase is charged at the same rates whether the buyer is an individual or a company. If you buy personally and later transfer the property to a company you are connected with, SDLT is normally charged on the market value, even if the company pays less or nothing, which is one reason to settle the question before you buy. Lenders to smaller companies often ask the directors for personal guarantees, which limits the protection a company gives you.

A pension scheme can own commercial property, and your business can rent it from the scheme, but the rent, and the price of any purchase from you or a connected person, must be on commercial terms. If they are not, HMRC treats the scheme as having made an unauthorised payment and charges tax on the difference. A registered pension scheme can borrow up to 50% of the net value of its assets immediately before the loan. In a scheme where members can direct the investments, residential property is taxable property and triggers tax charges, so a building with a flat above a shop needs to be looked at carefully.

How a commercial purchase proceeds

A commercial purchase usually starts with heads of terms agreed through the agents: the property, the price, the parties, any conditions, the timetable and the solicitors acting. The seller's solicitor then sends a draft contract with the title documents and replies to standard commercial property enquiries. Your solicitor investigates the title, orders searches, raises further enquiries and reports to you, while your surveyor and any lender carry out their own work.

Contracts are exchanged when the investigations are complete and the finance is in place, and a deposit is paid at exchange, the amount being agreed between the parties. Some contracts are conditional: they are exchanged, but completion takes place only once a condition is met, such as the grant of planning permission. On completion the price is paid and the transfer is dated. Your solicitor then files the SDLT return, registers the purchase at HM Land Registry and, if there are tenants, arranges for them to pay rent to you.

Checking the title

The title shows what the seller owns and what affects it. Your solicitor checks the register and title plan to confirm the boundaries match what you think you are buying, and that the property has the rights it needs: access from a public road, rights for drains, cables and other services that cross neighbouring land, and any rights of way or parking. The title documents also show the burdens on the property, such as restrictive covenants limiting how it can be used or built on, rights that neighbours have over it, mortgages that must be repaid on completion, and overage, which gives a previous owner a share of any increase in value if the land is developed.

If there is a gap or defect in the title, such as a missing right of access, the options include asking the seller to put it right before completion, reducing the price, or taking out title insurance, which pays out if someone later relies on the defect. If the property is unregistered, your solicitor examines the deeds instead, and the purchase must be registered at HM Land Registry within two months of completion.

Planning, use and building regulations

Check that the current use of the property is lawful and that the use you intend is allowed. In England, since 1 September 2020, shops, cafés and restaurants, financial and professional services, indoor sport and fitness, medical services, nurseries, offices, research and development and light industrial uses have been in a single use class, Class E, so changing between those uses does not normally need planning permission. Wales has not adopted Class E and still has separate classes for shops, financial and professional services, food and drink, and business uses. A condition on an earlier planning permission can still restrict the use, so the planning history matters as well as the class.

Your solicitor also checks for building regulations approval of past works, whether the building is listed or in a conservation area, and whether there are breaches the council could still act on. In England, the council generally has ten years to take enforcement action against a breach of planning control, a single time limit that has applied since 25 April 2024. In Wales, the limit is four years for building works and for a change of use to a single house, and ten years for other breaches. Where a use has continued long enough to be lawful, the council can confirm it with a lawful development certificate.

Contamination, surveys and energy ratings

Contaminated land is a particular risk on sites with an industrial past, such as former petrol stations, garages, works or dry cleaners. Under Part 2A of the Environmental Protection Act 1990, responsibility for cleaning up contamination falls first on whoever caused or knowingly permitted it, but if nobody in that position can be found after reasonable inquiry, it can fall on the current owner or occupier. An environmental search is the starting point. If it identifies a risk, an environmental consultant can review the site's history and, where needed, test the ground before you exchange.

A building survey should cover the structure, roof, mechanical and electrical services, and any materials known to cause problems. A measured survey confirms the floor area, which matters if the price or future rents are based on it. In non-domestic premises, the owner, and anyone with responsibility for maintenance or repair, has a legal duty to manage asbestos, so ask for the seller's asbestos register and management plan.

Energy performance matters if you intend to let the property. A landlord cannot grant a new lease of non-domestic property, or continue an existing letting, if the energy performance certificate rating is below E, unless a valid exemption is registered. The government has said it intends to require EPC B from 2031 for rented buildings over 1,000 square metres, but that needs secondary legislation before it becomes law.

Is VAT payable on the price?

The sale of a commercial building is normally exempt from VAT, with two main exceptions. The sale of the freehold of a new commercial building, meaning one completed less than three years before, is standard-rated, so VAT at 20% is added to the price. And if the seller has opted to tax the property, the sale is standard-rated whatever the age of the building. Opting to tax is a choice an owner notifies to HMRC so that it charges VAT on its sales and rents of the property and can recover VAT on its own costs. The option applies only to the owner that made it and normally cannot be revoked for 20 years, and a buyer decides for itself whether to opt.

If your business is registered for VAT and makes taxable supplies, you can usually recover VAT charged on the price, but you still need the cash to pay it at completion until HMRC repays you. If your business cannot recover VAT, for example because it makes exempt supplies or is not registered, the VAT is a real cost. Ask whether the property has been opted to tax at the start, and make sure the contract deals with VAT clearly.

If you are buying a let property and taking over the seller's property letting business, the sale can be treated as a transfer of a going concern, outside the scope of VAT. You must be registered, or required to be registered, for VAT and intend to carry on the same kind of business. Where the sale would otherwise be standard-rated, you must also opt to tax the property, notify HMRC of the option, and notify the seller that your option will not be disapplied, all by the relevant date. That is normally completion, but it can be earlier if a deposit is paid to the seller or its agent rather than held by a stakeholder. If a step is missed, VAT is chargeable, so the contract should say who does what and by when.

Stamp Duty Land Tax on commercial property

SDLT on non-residential and mixed-use property in England is charged on each slice of the price, and the same rates apply to a premium paid for a new lease. In Wales, Land Transaction Tax applies instead.

Part of the price	England: SDLT	Wales: Land Transaction Tax
Up to £150,000	0%	0%
£150,001 to £225,000	2%	0%
£225,001 to £250,000	2%	1%
£250,001 to £1 million	5%	5%
Above £1 million	5%	6%

SDLT is charged on the price including VAT, even if you can recover the VAT. For example, on a building bought in England for £500,000 with no VAT, the SDLT is £14,500: nothing on the first £150,000, £2,000 on the next £100,000 and £12,500 on the remaining £250,000. If the seller has opted to tax, the price becomes £600,000 including VAT and the SDLT rises to £19,500.

In England, a purchase that includes a flat alongside commercial space is taxed at the non-residential rates. The SDLT return and payment are due within 14 days of completion. In Wales, the Land Transaction Tax return is due within 30 days of the day after completion.

Buying a property with tenants

If the property is let, you become the landlord on completion and the leases become your income, so your solicitor should read every lease. Check the rent and the next review date, the service charge position, rent arrears and deposits, break clauses and expiry dates, the repairing obligations, and whether each tenant has a right to renew under the Landlord and Tenant Act 1954 or was validly contracted out. That last point decides whether you can recover possession when a lease ends and whether you may have to pay the tenant compensation. The contract should deal with rent received for periods after completion, arrears owed to the seller, and the handover of any rent deposits.

Check each letting against the minimum energy efficiency standard, because a letting of property rated below EPC E can only continue if an exemption is registered. If you plan to grant new leases, the ban on upwards-only rent reviews added to the 1954 Act by legislation that received Royal Assent on 29 April 2026 will apply to new and renewal business leases once regulations bring it into force. Our guide to commercial leases covers the terms that matter.

Borrowing to buy

If you are borrowing, the lender will value the property, set conditions in its loan offer and take a legal charge over the property as security, registered at HM Land Registry. Do not exchange contracts until the loan offer is in place and you can meet its conditions, because exchange commits you to complete whether or not the money arrives.

If the buyer is a company, the charge must also be delivered to Companies House for registration within 21 days, starting with the day after it is created. A charge that is not registered in time is void against a liquidator, an administrator and the company's creditors, and the money it secures becomes immediately repayable; only the court can extend the time. Lenders often also ask for personal guarantees from the directors and security over the company's other assets.

Budget for the deposit, SDLT, any VAT, the lender's arrangement and valuation fees, surveys, searches, legal costs, and any work needed before you can use the building. We agree the scope and cost of our work with you in writing before we start, and we can work alongside your accountant on the ownership and VAT questions.

Frequently asked questions

Does VAT apply when you buy commercial property?

VAT applies if the building is a new commercial building, completed less than three years before the sale, or if the seller has opted to tax it; otherwise the sale is normally exempt. Where VAT applies it is added at 20%, and SDLT is charged on the price including VAT. If VAT would apply to the sale of a let property, the sale can instead be outside the scope of VAT as a transfer of a going concern, if the buyer opts to tax and meets the other conditions by the relevant date.

How much Stamp Duty is due on commercial property in England?

SDLT on non-residential property in England is 0% on the first £150,000, 2% on the part from £150,001 to £250,000 and 5% on the part above £250,000. For example, a £400,000 purchase with no VAT pays £9,500. If VAT is charged, SDLT is calculated on the price including VAT. The return and payment are due within 14 days of completion, and Land Transaction Tax applies instead in Wales.

Can my pension scheme buy my business premises?

A registered pension scheme can buy commercial property, including premises your business then rents from it, provided the price and the rent are on commercial terms. If they are not, HMRC treats the difference as an unauthorised payment and charges tax. The scheme can borrow up to 50% of the net value of its assets immediately before the loan. Residential property, such as a flat above a shop, triggers tax charges in schemes where members direct the investments.

Should I buy business premises personally or through my company?

The answer depends on your tax position, your lender's terms and your plans for the property, so take tax and legal advice together before you commit. SDLT on commercial property is charged at the same rates for individuals and companies, but transferring a property you already own to a company you are connected with is normally taxed on its market value. A company limits your liability, although lenders often ask directors for personal guarantees.

What searches are needed when buying commercial property?

A commercial purchase normally needs a local authority search, a drainage and water search and an environmental search, with others depending on the location and the use, such as mining searches. The results cover planning history, road schemes, building control records, sewer connections and contamination risk. If the environmental search identifies a risk, an environmental consultant's report may be needed before you exchange contracts.

What is a transfer of a going concern in a property purchase?

A transfer of a going concern is a sale of a business that is treated as outside the scope of VAT. For a let commercial property, the buyer takes over the seller's property letting business. Where the sale would otherwise be standard-rated, the buyer must opt to tax, notify HMRC, and notify the seller that its option will not be disapplied, all by the relevant date, and must be registered or required to be registered for VAT.

Who is responsible for contaminated land?

Under Part 2A of the Environmental Protection Act 1990, the person who caused or knowingly permitted the contamination is responsible first. If nobody in that position can be found after reasonable inquiry, the current owner or occupier can be made responsible for the clean-up. A buyer of a site with an industrial past should therefore investigate its history, and consider an environmental report and protection in the contract, before exchanging.

Sources & further reading

• GOV.UK — SDLT rates for non-residential and mixed land and property
• GOV.WALES — Land Transaction Tax rates and bands
• GOV.UK — Opting to tax land and buildings (VAT Notice 742A)
• GOV.UK — Land and property (VAT Notice 742)
• GOV.UK — Transfer a business as a going concern (VAT Notice 700/9)
• HMRC — Pensions Tax Manual: investments, borrowing
• HSE — The duty to manage asbestos in buildings
• GOV.UK — Register a charge (mortgage) for a limited company

This article is general information, not legal advice. The law changes and depends on your circumstances — always take advice on your specific situation before acting. Last reviewed 17 September 2026. AD Solicitors is a trading name of AD Solicitors Limited, a recognised body regulated by the SRA (no. 8011228).