When does a residential transaction become commercial?
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When does a residential transaction become commercial?

Kelly Myatt, Director and solicitor specialising in residential, commercial and agricultural transactions is often asked to deal with “in-between” jobs. 

These types of jobs on first appearance seem residential in nature, however, hidden in the depths of the detail can often be commercial elements.

An example would be the purchase of a residential property situated on a large plot of land. The plot of land and arguably the existing dwelling has potential for development.  What first appeared to be a straightforward purchase of a residential property now has a fresh direction. Dealing with a property of this nature, we would request, review and report on replies to both residential and commercial standard enquiries. Due diligence would be carried out, not only on the existing dwelling, but also on the potential development of the plot, including whether any planning permissions have been secured, and if so, of what nature and to what extent. We would also review and assess to what extent any planning permissions have been implemented or commenced by the current owners. Furthermore, search results would also be considered carefully to ensure there is no adverse impact on any future development and/or plot sale.

Thinking ahead, once purchased and if developed or additional dwellings are built on the land, we could have a site to “set up” which would turn into plot sales of the individual dwellings. Having first-hand knowledge of the site in this instance is incredibly beneficial and can save time and expense.

A further example of a “hybrid job” could be the purchase of an HMO (Home in Multiple Occupation). A property used by the occupants as a home but owned by the registered proprietors as a commercial investment. The purchase of an existing or potential HMO has both residential and commercial elements to be carefully considered including planning requirements, health & safety, and fire risk requirements. Again, due diligence would be carried out on both the residential and commercial elements of the property and a full and comprehensive report prepared so that the buyer has the full picture before committing to purchase.

Aside from the legalities of the transaction itself, is the Stamp Duty Land Tax (SDLT) position. Whilst we are not tax experts we do submit and file returns on behalf of our clients and therefore have a basic understanding of the difference between residential and commercial transactions for SDLT purposes. The devil is in the detail. There is a lot of guidance available from HM Revenue and Customs to assist in ascertaining whether residential rates of SDLT or commercial rates of SDLT apply to the transaction. In some circumstances, we will advise that you take specialist SDLT advice if we consider it appropriate to the type of transaction.

In short, it is often difficult to decipher what type of transaction a job will be until you are into the detail of it. Kelly’s background in both residential and commercial transactions can bring unique experience and perspective to the job which could save time and cost. Feel free to contact Kelly on 01782 652323 for further detail.


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