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Selling your Commercial Property at Auction
- AuthorJoe Taylor
Selling a Commercial Property at Auction is becoming increasingly popular, and there are many advantages over the conventional method of selling. Joe Taylor, Solicitor in our Commercial Property team explains more about the benefits of selling at auction, what is involved and how we can assist with the sale.
Generally, property sells faster at auction and most of the hard work is carried out beforehand. Once the gavel goes down, a binding contract is in place and the successful bidder is legally bound to purchase the property, so there is more certainty involved in the transaction and the successful buyer will pay a deposit to the auctioneer at the auction (typically 10%).
Purchasers at auction are usually cash investors or developers, so unusual or imperfect properties can often be popular.
What do I need to consider when selling a commercial property at auction?
Prior to selling your property, you will need to discuss various matters with the auctioneer, including:
- Costs for the auction house, including advertising costs. You should note that these may still be payable even if the property doesn’t sell.
- The guide price you wish to set.
- The reserve price you wish to set – this is the minimum price you are willing to accept at auction. This price is not published, so potential buyers will not know this before the auction. If the bids at auction don’t reach the reserve price, the property will not sell, but you will be able to negotiate with potential buyers afterwards.
- If you receive offers prior to the auction, whether you wish to accept these or wait to see what happens at auction.
- Preparing your property - you should be prepared if buyers wish to view the property before the auction.
What information is required for the auction pack?
You will need to provide us with as much information as possible about the property prior to the auction, so that we can prepare an auction pack for prospective buyers to review in the lead up to the auction. Typically, an auction pack will include the following:
- The Special Auction Conditions which (along with the General Auction Conditions provided by the auctioneer) form part of the Contract for Sale.
- The form of transfer deed which will be entered into on completion.
- The Title Register, Plan and copies of any historical Deeds referred to on the Title Register.
- The results of the searches you have carried out on the property in the lead up to the auction.
- Your replies to a form of standard enquiries, along with any related documents, such as:
- Occupational leases and/or tenancy documents
- Rent and service charge statements and budgets
- Rent deposit deeds or protection certificates
- Any licences you have granted to the tenant
- Buildings insurance
- VAT registration documents
- Existing indemnity insurance policies
- Planning and building regulations, including self-certification documents such as FENSA Certificates or Electrical Installation Certificates
- Health and safety, e.g. Fire Risk Assessments, Asbestos Reports etc.
- Energy Performance Certificates
To help with the auction pack, you would typically need to deal with the following:
- Answer standard enquiries. You will need to answer various standard enquiries relating to the property – usually in the form of Commercial Property Standard Enquiries. The enquiries will highlight the various different property related documents which you will need to dig out from your records and provide to us (many of these are listed above). We would work through these answers with you to make sure that they are adequately caveated to protect you as much as possible, but it is absolutely crucial that you answer these questions accurately, as misleading or false information could give rise to a claim for misrepresentation.
- Carry out searches. In a standard sale, the buyer would usually carry out various searches on the property to gather as much information as they can to make an informed decision. For an auction as the seller, you would usually pay for and carry out searches on the property to place in the auction pack for potential buyers to view, and require a successful buyer to reimburse you for the cost of those searches. Of course, if no buyer is found, you will not be able to recover that cost. The searches required would depend on the property itself, and we can discuss these with you.
- Tell us any special requirements you have for the Contract for Sale. This would include the timescales for completion. The standard completion date is 20 working days after the auction, but you can stipulate a different timescale in the auction pack. There may be other factors at play, such as the buyer paying you an amount towards pre-existing rent arrears, whether you want the buyer to contribute to your legal costs etc.
It is important to collate as much information as possible and provide it in the auction pack as early as possible; potential buyers may be discouraged from making a bid on your property if there is information missing, if you have not been transparent about an issue or if the information comes through too late.
When selling your property at auction, in the lead up to the auction, we will do the following for you to ensure a swift sale:
- Compile the auction pack with you to collate the necessary information.
- Obtain the title documents and deal with issues arising from them.
- Order searches.
- Draft the Special Auction Conditions and transfer deed.
- Liaise with the auctioneer to provide the full pack.
- Deal with any specific enquiries which are raised by potential buyers before the auction.
Following the auction, if a buyer is found, we will send you the transfer deed and any other required documents to sign in readiness for completion, and deal with the formalities and movement of monies on completion including paying off any existing mortgages.
To find out more about selling your commercial property at auction, you can contact Joe or the Commercial Property team on 023 9277 6522 or email firstname.lastname@example.org.
This article has been published as part of the latest issue of our Commercial Brief. To receive a copy of our Commercial Brief directly, you can complete our form to subscribe, or email email@example.com.
This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice. All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.