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Top tips for buying commercial property at auction

As an alternative to investing in commercial property through traditional means, buying at auction can be hugely beneficial for business owners.

It can be much cheaper than buying on the open market and provide access to a wider range of less traditional spaces.

Additionally, purchasing property at auction may be the right option if you need to buy quickly and avoid delays which may arise from exchanging traditional contracts.

However, buying commercial property at auction is, by its nature, more of a risk than buying directly from the open market.

This is where due diligence comes in. To make sure the sale goes smoothly, you need to

Conduct your research

Before the auction, conduct extensive research on the property you’re interested in. This includes:

  • Location
  • The local property market
  • Planning permission and restrictions
  • Potential rental yields

Review the legal pack provided by the auction house, which contains essential information about the property, such as title deeds, leases, and searches.

You should also consult a solicitor to review these documents and ensure that you understand the agreement you’re entering into.

Secure early financing

Ensure you have your financing in place before the auction.

Unlike residential mortgages, commercial property financing can be more complex and time-consuming to arrange – which can lead to the very delays you’re trying to avoid.

Once your bid has been accepted, you have a contractual obligation to purchase the property. This means that you need to have funding in place as soon as possible.

Many auctions require the winning bidder to pay a deposit (usually 10 per cent of the purchase price) on the day of the auction and complete the purchase within 28 days.

Therefore, having your financing arranged beforehand is crucial to avoid losing your deposit and facing potential legal action for failing to complete the purchase.

Viewings and surveys

You may be given the opportunity to visit the property to assess its condition firsthand prior to the auction.

If you’re serious about entering a bid on the property, you should attend a viewing to make sure that it’s right for you, it’s fairly priced and meets all your requirements.

It’s also recommended that you commission a survey to identify any major issues within the building which might lead to higher costs in the future.

This will help you decide whether you’re willing to take on the property and any associated expenses, including repair costs.

Consider additional costs

Beyond the purchase price, buying at auction involves several additional costs – typical of any commercial property purchase.

You need to be ready for them and be able to pay them. Additional costs can include:

  • Auction house fees
  • Legal and financial services fees
  • Survey costs
  • Stamp Duty Land Tax (SDLT)

Factor these into your budget to avoid any surprises.

Find the right support

Buying property at auction is generally a much faster process than going through traditional channels, so you need to seek support from a solicitor and financial advisory service with experience in auction sales.

This will help you to avoid committing to a property which isn’t right for you or incurring unforeseen costs and obligations.

We can advise you on avoiding pitfalls at commercial property auctions and get your purchase right first time.

Is the auction hall right for you?

Buying property at auction can be a fraught experience and it’s easy to make snap decisions or spend more than your budget.

Before making a purchase, make sure that you have:

  • Set a budget
  • Identified what you need from your property
  • Considered additional costs such as Stamp Duty Land Tax
  • Planned for refurbishment

Following these steps can help you to make the most of your investment and avoid unanticipated delays or costs.

For advice on commercial property purchases at auction, including surveys and contractual issues, please contact us today.

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.