What is commercial conveyancing?

Conveyancing is commonly defined as the legal process of transferring ownership of title and property rights from one party to another. However, conveyancing also includes creating, varying or extinguishing a legal or equitable interest in real or personal property, such as the creation or removal of an easement, caveat, covenant or mortgage, as well as the giving of legal advice in respect of those matters.

Commercial conveyancing may also include the sale or purchase of a business, including the purchase of stock and transfer of a lease, trading name or domain name. 

The transfer of a freehold commercial premises is very similar to a transfer of a residential premises. Where commercial conveyancing differs is that the conveyancer must have particular regard to GST clauses in the contract, and have a good understanding of retail leases to ensure that any lease the sale may be subject to was prepared correctly with guarantees and disclosure statements as applicable.

In many cases, a vendor registering or deregistering for GST between the day of sale and settlement can cause purchasers a lot of issues, and as such it is essential that an experienced conveyancer’s advice be obtained before entering into a sale for a commercial premises.

Properties that are used to carry on a business and derive an income such as a retail shop, factory, or industrial warehouse are generally considered to be commercial properties. However, a mixed-use property such a house which as been used as a medical practice or accountants office may also be considered commercial and thus have GST implications that require special consideration.

Conveyancing fees are usually made up three (3) components:

• The professional fees your conveyancer charges you to provide advice, prepare legal documents and undertake the conveyancing process.

• Disbursements which are the costs incurred and paid for by the conveyancer to undertake the conveyancing process such as a search of title, copy of plan of subdivision, or obtaining property certificates.

• Taxes, Registration and lodgement costs charged by Land Registry or other bodies such as stamp duty, registration fees on the transfer of land or mortgage, and lodgement costs on submitting the transfer and mortgage to Land Registry.

There are no specific costs which are only relevant to commercial conveyancing, and as such it should cost you no more than residential conveyancing costs.

Sale of business is different to commercial conveyancing, although it can be undertaken by an experienced conveyancer if their licence is unrestricted. While commercial conveyancing usually relates to the transfer of the freehold estate and ensuring the leases and GST clauses properly reflect the client’s intentions, sale of business relates to the purchase of stock or goodwill, and the transfer of a trading name or domain name.

The risks associated with undertaking your own conveyancing as a seller is that if you omit or overlook any document or disclosure that is required to given the purchaser may avoid the contract and you may still be liable to pay the estate agent’s commission.

As a purchaser, it is important to note that it is not uncommon for documents and disclosures to be omitted from a section 32 and accordingly you must have regard to what documents the section 32 should contain, as much as what documents is does contain, which something that generally only experience will allow you to do. In addition to assuming responsibility for a defective property, you may also become liable for the vendor’s GST liabilities, backdated land tax and other charges if you are not aware of all the certificates you need to obtain before settlement.

Both conveyancers and solicitors have formal qualifications to give legal advice and prepare legal documents in respect of property matters. While a solicitor has a broader knowledge of legal matters, having spent a long time studying other areas of law such as criminal law, tax law and copyright law, a conveyancer specifically studies property law and generally has a more in-depth knowledge on conveyancing matters given that they’ve studied that area of law for longer.

The licensing requirement for conveyancers however, is very minimal, requiring them to only undertake one (1) year of supervised training in addition to their formal qualification before being able to apply for their own conveyancing licence. Accordingly, there are a lot of licenced conveyancers who have perhaps opened their own practices while inexperienced and tend to give incorrect advice to their clients.

Similarly, when purchasers and sellers engage a solicitor, the file is commonly handled by a legal executive, paralegal or an employee with no formal qualification, who also tend to give incorrect advice to their clients.

When selecting a conveyancer or solicitor to represent you in your property dealings, the most important factor is the amount of experience and knowledge the individual file manager has.

Both the buyer and seller will need to engage their own conveyancer to represent their respective interests in the transfer, and each party will be responsible for their conveyancer’s costs.

However, we do see many contracts with conditions and stipulations that a purchaser must pay the vendor’s conveyancing costs on any requests for finance extensions, nominations, and changes to the settlement date. Such conditions would appear to be a breach of section 42(3) of the Property Law Act 1958 which provides that no contract of the sale of land shall contain a condition stipulating for the payment by the purchaser to the vendor or their conveyancer of any costs except by reason of default.

Thanks to the automation and electronic delivery of many certificates, and electronic conveyancing, it is possible to complete a settlement the same week that the contracts are executed.

However, where a mortgagee is involved on either side of the transaction, they will usually require a minimum of 14-21 days to prepare the discharge of mortgage or mortgage contract, arrange for the purchaser’s execution and verify the returned documents before advancing any funds.  

Preferably, the settlement period should be no less than 28 days, and where a purchaser is obtaining finance and bank valuations will be required, the settlement period should ideally be no less than 45 days.