Land deals – the danger of obvious…

May 14, 2012 12:20 pm Published by

Getting to the point of shaking hands on a sale, purchase, lease or anything else can feel pretty momentous – weeks of negotiation, possibly longer, have paid off and you’ve reached agreement, you might even have something down on paper, which is great.

But when people are caught up in the momentum of ‘getting it done’, it isn’t unusual for things to get overlooked and go unsaid or unwritten – after all, they’re obvious, right?

Fair enough, you might think, there’s no need to make heavy weather of things unnecessarily – but what’s obvious to one person isn’t always obvious to another and it isn’t unusual for these ‘trifling’ details to cause a transaction to lose momentum. Sometimes only momentarily, but other times it can be the start of a terminal decline.

In the context of leases, for instance, it may be agreed that a tenant’s repairing obligation is going to be limited by reference to a schedule of condition, which is particularly useful for a tenant if a property is starting to look a bit frayed around the edges. This is fine, but who’s going to prepare the schedule – and who’s going to pay for it?

A rent review pattern may be agreed – but what is the review going to be based on? Market values, turnover, or might it be index linked? – and if it is going to be index linked, which index? In the current market these little words may not make a significant difference on the rental levels payable, but as things recover they will become increasingly significant.

Or what about VAT? It may not have been mentioned, so it may have been innocently assumed that VAT won’t be charged– but if a seller or landlord has previously made a VAT election on the property in question, it could be that they won’t have any option but to charge VAT in addition to the agreed sums. An additional twenty percent on the purchase price or rent may cause cash flow issues for the acquiring party at the least or, if they’re exempt from VAT and can’t recover it, it could mean curtains for the whole deal.

Asking the right questions at the start of discussions helps to smooth the way ahead – it doesn’t take very long and the chances are it will keep your fees down, as it will give your professional advisers less to quibble over(!)

For an informal, practical chat, please feel free to contact Mr Andrew Fleming, Company and Commercial Partner on 01473 230033 or email arf@blockslegal.co.uk www.blockslegal.co.uk/

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