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17th October 2019

What you see is what you get – buying a commercial property at auction

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Buying a commercial property at auction could be the answer to your space problems, but get it wrong and it could be a complete nightmare. So what do you need to know if you are thinking about grabbing a bargain:



Attend an auction



Try and attend at least one auction before you take the plunge or watch one from the comfort of your desk online. Get an understanding of what is happening in the auction room. Some properties look like they may sell, but in reality they haven’t reached their reserve. Attending an auction will also get you used to the pace of the bidding (which is much slower than you might expect), and help you to feel confident when the day of your auction arrives.



Read the legal pack



When a property is sold, a legal pack is usually produced by the seller’s solicitor and made available to download free of charge online (or in hard copy if you wish to attend the auctioneer’s offices). The pack should contain some minimum information including:


  1. The legal title, usually in the form of Land Registry official copies and a title plan. Any documents which are “filed” should also be available.
  2. A set of replies to standard enquiries. These are usually in the form of Commercial Property Standard Enquiries (CPSE’s) and the version will depend on what is being sold. You should expect to see CPSE.1 and if it is an investment property then you should get CPSE.2 as well.
  3. Searches which a buyer would usually carry out on a purchase such as a Local Search, an Search of the Index Map, a water and drainage search and a desktop environmental search. They should be recent, less than three months old.
  4. Special Conditions of Sale, which contains useful information such as whether the property is subject to VAT, and whether there are any rent arrears. The completion timings (i.e. the time between the auction and handing over the keys) are also clarified; as standard this is 4 weeks, but sellers can extend this to many months or a specific date and will therefore dictate your funding timescales.


Sellers cannot hide a title defect, but if it is in the legal pack then it is not hidden - anything in the title pack is deemed to be disclosed whether or not you have read it or understood it.



An auction contract usually incorporates the RICS Common Auction Conditions – these conditions contain the small print. They will be varied by the Special Conditions of Sale mentioned above and the Extra Special Conditions.



Get your solicitors to review the papers, it isn’t always what the papers say, it can be about what is missing. The cost may depend slightly on how much paperwork there is (and the kind of property it is, for example if it is a multi-let building there may be a number of leases to review). Timeframes can be tight, so make sure you ask your solicitors to look at the legal pack in plenty of time



Inspect the property



Talk to the auctioneers about getting access to inspect the property with someone who knows what they are looking at. If possible get access for a full structural survey (although this is not usually possible if the property is let). Whilst some structural issues may be flushed out in the replies to enquiries often it is for the buyer to establish the state of repair, and the maxim “buyer beware” applies to property purchases. You must satisfy yourself that you are happy with what you are buying.



Following your viewing, make your interest known to the auctioneer. The vast majority of auction properties sell on the day of the auction, but a small proportion can sell before. Ask the auctioneer to inform you if the seller suddenly decides that they want to accept a pre-auction offer, but beware that if a deal is agreed before the sale, you will be expected to exchange contracts well before the auction, so you need to be prepared!



Research and more research



If the property is let then look at the accounts of the occupier, are they doing well? Has there been publicity about them recently, perhaps profit warnings? Similarly, look at the general locality to determine whether the location is an up-and-coming one, or whether occupiers are leaving. If the latter, you may also spot that some nearby vacated buildings have gained permission for alternative uses, which may give you a back-up if the current occupier leaves.



Get your finance in order



It cannot be said too many times, if you are borrowing money to make a purchase, make sure that everything is in order before you go to the auction. There are specialist auction financiers who understand and can deal with the auction timeframe, but these can be more costly than a traditional “High Street lender”. Make sure you have an agreement in principle before you go.



Getting your finances in order includes taking tax advice. If you are a commercial property investor you may need to register for VAT so that you can benefit from the rules for a transfer of a going concern (“TOGC”). This is a decision you should make having taken appropriate advice.



If you are buying with someone else then make sure you are very clear about your intentions including budget, and how the property is to be held if you are successful (tenants in common or joint tenants). talk to your solicitor about the implications.



On the day



  • Take your ID with you in order to satisfy the anti-money laundering requirements of the auctioneer, driving licence and utility bill for example.
  • Check to see if there is an addendum relating to the property – this is any changes to the information supplied or to the contract terms.
  • Stick to your budget, overstretching yourself can land you with a big bill, including forfeiting the deposit if you cannot complete.
  • Make sure you can pay the deposit on the day.
  • Make sure that you can complete in accordance with the Special Conditions, often 20 working days.
  • If you are buying with someone else who is not present at the auction make sure that you have their written authority and proof of ID to present to the auctioneer, and to sign the contract on their behalf.
  • Let your solicitor know as soon as you are successful so that they can gear up for completion.


If you are not successful at auction but you are still interested in the property or others which did not sell, talk to the auctioneers, there may be opportunities available to you.



This article was originally posted in Business Weekly on the 17th October 2019.