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Our top tips for buying a commercial property at auction

Purchasing a commercial property at auction can be an exhilarating experience, offering the potential for securing a property at a competitive price.

However, a successful auction process involves significant preparation and understanding to navigate the transaction effectively.

Before stepping up to the auction block, it is highly advisable to seek legal advice from a commercial property solicitor.

Research is key

Before stepping into the auction room, thorough research is vital. This includes understanding the market value of commercial properties in the area you are interested in and the potential rental income they can offer.

Examine the legal pack provided for each property carefully, as this document contains crucial information, such as title deeds, lease agreements and details of any existing tenancies or liabilities.

Finance arrangements

Ensure your finances are in order before the auction day. Unlike traditional property purchases, when you win a bid at an auction for a commercial property, you are legally obligated to complete the purchase.

Typically, you will need to pay a deposit of 10 per cent of the purchase price immediately, with the balance due within 28 days.

Therefore, having your funds arranged in advance, whether through cash reserves or pre-arranged lending, is essential.

Seek professional advice

The importance of seeking legal advice before buying a commercial property at auction cannot be overstated.

A common pitfall when purchasing a commercial property at auction is not seeking legal advice on the contents of the legal pack.

Legal advice can reduce the risk of expensive mistakes and help you gain a clearer understanding of the documentation involved. Commercial property solicitors will review the legal pack to help pinpoint potential issues with titles, leases or planning permissions, and discuss the contractual terms.

Their expertise plays a critical role in protecting your interests throughout the auction process. They can help you to make decisions that are not only legally sound but also aligned with your goals.

This guidance can be the difference between a successful acquisition and one troubled with complications and unforeseen liabilities.

Consider additional costs

Beyond the purchase price, buying at auction involves several additional costs. These can include:

Auction house fees
Legal fees
Survey costs
Stamp Duty Land Tax (SDLT)

Factor these into your budget to avoid any surprises.

Viewing and surveys

Always view the property in person and, if possible, conduct a full survey.

This can reveal structural issues or other problems not immediately apparent from the auction catalogue or legal pack.

Knowing these issues beforehand can help you assess the true value of the property and any additional investment required for repairs or modifications.

Post-auction steps

If you have successfully won a property, you must be prepared to act quickly. You will need to exchange contracts and pay the deposit on the day of the auction.

From there, the completion typically takes place within 28 days.

Ensure you have a solicitor ready to handle the legal aspects of the purchase and any negotiations that may arise during the completion period.

Are you planning on purchasing a commercial property at auction? Get in touch with our team today for advice.

Carl Jones

Director - Head of Commercial Department

I qualified as a Solicitor having completed my training with Mander Hadley in 1992 and am a member of the Law Society Property Section and The Warwickshire Law Society.