Properties sold at auction are becoming increasingly popular, with the Essential Information Group (EIG) reporting that total UK property auction sales reached £5.5 billion in 2024.
Buying commercial property at auction is an exciting opportunity for investors and developers and can offer competitive prices and access to assets that may not be available on the open market.
There are two main types of property auction. The first is the traditional (unconditional) auction and the second is the modern method, also known as a conditional auction.
Traditional auctions move quickly and once the hammer falls, you are legally committed to the purchase.
With limited options to renegotiate after you have bought the property, you must understand the legal risks and requirements of traditional auctions before making any important decisions and in advance of placing a bid.
What is an auction pack?
Every commercial property sold at auction comes with a legal auction pack. The pack is usually prepared by the seller’s solicitors and will often include:
- Title register and plan
- Searches
- Replies to standard enquiries
- Special conditions of sale
- Leases and tenancy documentation, if applicable
However, there are no rules about what must be included in the legal pack and an absence of documentation may be a red flag. The legal pack may also contain legal jargon or clauses that you may not be familiar with at first glance.
There could be restrictive covenants limiting development, rights of way affecting access, overage provisions, leases which impact value or obligations that can carry unexpected costs.
Having the right legal support in advance can help you make an informed decision about whether to continue your bid and how much to offer.
If you do not have a legal review of the pack before the auction, you risk committing to issues and a purchase that cannot be undone.
What should you know before bidding at auction?
An auction room is fast-paced and it is important not to get caught up in the thrill and have a clear knowledge of the property you intend to bid on.
Before attending a traditional auction, you should:
- Understand the market value of the property
- Account for refurbishment or repair costs (you may even want to carry out a survey)
- Budget for Stamp Duty Land Tax, legal fees and auction costs
- Set a maximum bid price
What happens if my auction bid gets accepted?
Once a bid is accepted, auction purchases operate to a strict deadline.
The successful bidder will usually be required to pay a 10 per cent deposit and completion will usually take place within 20 to 28 days.
If you require funding for the purchase, your lender should be made aware of all title matters affecting the property, and mortgage arrangements should be agreed before you bid.
Some properties may not meet lender criteria due to construction type, tenant profile, planning issues or title defects and this could create delays or put your deposit at risk.
Your solicitor should liaise with your lender early in the process and ensure the appropriate documentation is prepared in time to meet the completion deadline.
How does the auction completion process differ?
Unlike standard property transactions, the exchange of contracts happens immediately after your bid is accepted.
From there, you are legally bound to complete the process under the auction’s conditions.
With the lack of a cooling-off period, your solicitor will need to act quickly to:
- Ensure any outstanding searches or enquiries are completed
- Meet lender requirements
- Arrange documentation
- Make sure the funds are transferred on time
- Complete the purchase
Failure to complete this within the agreed-upon timeframe can put you at risk of a loss of deposit and potential legal action.
Why do you need a solicitor when buying commercial property at auction?
Buying commercial property at a traditional auction does carry legal risks.
Whether it is hidden title defects, problematic tenancies, environmental liabilities or restrictive planning, your property’s value and future use could be affected if you do not have the right support in place.
A solicitor is essential in the auction process as they can assess the potential risks, explain your obligations early and offer reassurance that you have taken the necessary steps to protect your commercial position.
How can we support your commercial property auction sale?
Our Commercial Property team can support investors, developers and occupiers at every stage of the traditional auction process.
We will review your auction pack, liaise with lenders and manage the conveyancing process through to completion.
With the right preparation and professional guidance, your commercial property purchase can remain valuable and become the start of your next business venture.
If you need further advice on buying commercial property at auction, contact Juliet Rayner at juliet.rayner@mackrell.com or at 0207 420 4194.
