Why do property deals take so long?
Fifteen years ago this November I remember completing my quickest ever commercial property sale...
I received the call just before lunchtime on Thursday, we concluded the contract and the funds were instructed on Friday lunchtime and the money was received in the afternoon. It was a good-sized transaction, a few million pounds.
But what made that transaction so smooth? And what are the issues that can slow them down?
That deal happened quickly because the parties had been talking for some time, the purchaser had carried out its practical due diligence, and had the price sitting in its bank account so there was no lender. Most importantly circumstances had changed, it was in the interests of both parties to complete as quickly as possible, so was a priority transaction for both. A few wrinkles also helped – being able to take a laptop into negotiation meetings to agree and finalise wording quickly, and my suggestion to the purchaser that they use the same firm of solicitors that had acted on the purchase of adjoining property and who I knew were familiar with a very complicated title. Overall the key factors were that it was a straightforward negotiation between two parties who were both keen to do a deal quickly.
However, commercial property transactions are not always this straightforward, as soon as a lender or other third party is involved, the complexities increase exponentially. There are particular issues with lease transactions. If a landlord is granting a lease and has already granted a standard security, the consent of the creditor is required. On the grant of a sub-lease, or consent to an assignation, landlord’s consent is required. In those circumstances, neither the creditor nor the property owner has a particular interest in the transaction happening quickly, and it is very often at the bottom of someone’s pile. That is why it always used to be the case that the last element of a sub-lease or an assignation to be completed was landlord’s consent. It was landlord’s consent that drove the whole timing of the transaction.
There is now another factor in play - telecommunications. If the person acquiring the property needs new telecoms facilities or to enhance existing ones the telecoms provider will probably need a new wayleave, or telecoms contract. It is likely that the bare minimum period needed for this will be three months. While we can, all, do our best on the legal side, if you are planning an office move maybe the first person you should speak to should be your IT manager.
In summary, the more parties involved, the more exponentially complicated deals are. Deals are done more quickly if everyone involved wants them to, time to completion depends on the slowest element, and you need to plan on this basis.