Investing in property — Mills, Reevaldo & Elle

Although Elle and other female footballers in the UK would have welcomed Karen Carney’s report which recommended the introduction of a salary floor in women’s football, the reality remains that women are paid significantly less than their male counterparts. Female footballers often cannot rely on their career earnings to sustain their lifestyle post-retirement, especially considering that a career as a professional footballer lasts for only 8 years on average. Since giving birth to her baby, Elle has been focussed on setting up a stable source of passive income outside of football to secure her and her child’s future and has explored investing in commercial property. Elle has noticed a growing trend of athletes such as Anthony Joshua and Serena Williams investing in commercial real estate and would like to explore this further herself. She has approached Mills & Reeve to seek advice about what steps are required in a commercial property transaction. She has also had informal discussions with sports clothing brand Fleet Feet and energy drink brand, Blue Ox, about them potentially taking commercial leases of the property.

Step-by-step guide to a property transaction

Initial stages

Heads of terms – Once Elle settles on a property, she (or an estate agent acting on her behalf) will need to liaise with the seller to negotiate the key terms, such as the purchase price. These terms will usually be set out in a document called “Heads of Terms”.

Instructing solicitors – Once solicitors are instructed, the Heads of Terms will be sent to Elle’s solicitors who would liaise with the seller’s solicitors to discuss any queries in relation to Heads of Terms.

Contract package – Elle’s solicitors would then be sent a contract package by the seller’s solicitors – the package tends to include a draft contract, transfer, title documents, an Energy Performance Certificate (EPC) and the Commercial Property Standard Enquiries (CPSEs) – a standard set of enquiries about a property that the seller’s side will complete and send to Elle’s solicitors.

Pre-contract stage

Once the contract package is received, due diligence is then carried out on the property. This would involve Elle’s solicitors reviewing the CPSE replies, the draft contract and transfer and investigating title to the property (e.g. confirming the seller’s ownership of the property, that there are no restrictions on use and whether there are any third party rights e.g. a joint owner who would also need to be party to the sale). It is at this stage that searches will be made regarding the property – these will include things such as highways, utilities, environmental and local authority searches, which will uncover any issues related to matters such as flooding or planning permission which may influence Elle’s decision to invest.

At this stage a “Report on Title” would be provided to Elle outlining the results of the searches and investigations. This is an opportunity to highlight to Elle any particular points of concern about the property.

Exchange of contracts

Exchange is a landmark stage of the process, at which point a deposit of 10% of the purchase price is usually paid. Once contracts are exchanged, Elle is contractually bound to the purchase and if she is to withdraw, legal action could be brought against her, and she may lose her deposit. As any risk in the property would pass to Elle at this point, Elle would be advised to insure the property. She would also provide the funds required to her solicitor e.g. deposit amount and monies to pay Stamp Duty Land Tax (SDLT) and other fees.

Completion:

Elle’s solicitors would carry out pre-completion searches to ensure that there has been no substantial legal changes to the property between exchange and completion. The balance remaining to complete the purchase will be sent to the seller’s solicitors and Elle will be able to collect the keys to the property.

Post-completion

Following completion Elle’s solicitors will file any SDLT return due and register the transfer at the Land Registry. Once registration is completed Elle’s solicitors will send her a copy of the updated register and any other relevant documents.

Purchasing any type of property is a significant investment and Elle would need the expertise of solicitors well-versed in real estate to ensure that her investment is one which has the potential to be stable and profitable. As Fleet Feet and Blue Ox are potentially interested in taking leases of the property, she will also need the help of solicitors in agreeing and drafting documents such as an Agreement for Lease (a provisional lease agreement preceding the lease), a Lease, and a Licence for Alterations if the prospective tenants would be looking to make alterations to the property to fit it out for their use.

Lease of the property

Fleet Feet and Blue Ox have been competing to be granted a commercial lease of Elle’s newly-acquired property. Despite Elle’s previous dispute with Fleet Feet regarding the use of her image on a clothing product, she has since negotiated an endorsement deal with the brand and has a close relationship with them – due to this, Elle chooses to grant Fleet Feet a lease of the property and is now seeking further legal advice to facilitate this in a way which best serves her interests.

There are several steps involved in granting a lease that Elle would have experienced in the purchase of the property, such as the drafting of Heads of Terms, a Report on Lease and CPSE’s. However, there are a few differences in structuring a commercial lease agreement that Elle would not have come across, especially since Fleet Feet are looking to make alterations to the property to make it fit for their use:

i) Licence for Alterations – Since Fleet Feet will be looking to make alterations from the outset of the Lease, Ella will need to enter into a Licence for Alterations to set out the conditions for Fleet Feet’s alteration of her property in order to outline the extent of their right to alter the premises.

ii) Agreement for Lease – If Fleet Feet need to obtain planning permission for their use of the property, they may be unwilling to enter into a Lease until this is granted – an AfL could provide security for Elle in the interim by ensuring that if approval is granted, Fleet Feet cannot withdraw from entering into the Lease without being liable for damages suffered by Elle as a result.

iii) Post-completion – Depending on the terms of the Lease, the tenant could be responsible for paying SDLT and registering the Lease at the Land registry. Although not Elle’s responsibility, it would best serve her interests to include provisions within the AfL/Lease that oblige Fleet Feet to pay SDLT and undertake registration within a stipulated timeframe and notify her of the same once completed.

Conclusion

Investing in commercial property can be a complicated process, with there being many risks which could pose a danger to Elle’s investment – with the help of the experts at Mills & Reeve she can be guided through the process to ensure that her investment is protected in the best possible way and focus on preparing for the 2025 Women’s European Championships this summer!