Buying a Commercial Property at Auction
Buying a property at auction involves making a purchase at speed. Once the hammer falls, the buyer is legally committed to the purchase, the deposit becomes payable and usually the buyer is required to complete the purchase within twenty eight days of the auction date. While there are bargains to be had at auctions, very often an auction property is one that would be difficult to sell in the general market place due to its poor condition or because is has legal problems. Buying at auction carries more risk than buying in the conventional way. It is therefore vital that a potential buyer is well informed about the property before he places his bid.
Here’s a checklist to minimise risk. As you would expect, the overriding principle is one of caveat emptor, ‘let the buyer beware’.
1. Do your own research by looking at the market and comparing similar properties.
2. Inspect the property and arrange a survey.
3. Ensure that your finances are in place and ‘liquid’ so you can move swiftly.
4. If you are borrowing money for the purchase, it is vital that you check that the legal title to the property is sound and that the funds will be available by the date that will be set for completion.
5. Examine the auctioneers’ ‘legal pack’. The extent of the information will vary but this will usually contain the contract, legal title information and searches. Importantly, it will also contain details of any leases and covenants relating to the property - a crucial area to examine.
6. Obtain legal advice on the auctioneers’ pack, as the documentation may reveal legal problems which could have potential implications on the value of the property or the ability to obtain a mortgage on it. This advice may have a bearing on your decision to bid or the price that you are prepared to pay for the property.
7. Check the planning situation to ascertain whether the property would be suitable for future business development plans.
Safety First
We advocate a ‘safety first’ approach to buying commercial property at auction. Calmly assess the opportunity cost, then once the preparation has been completed, let the auction commence!
This article contains information of general interest about current legal issues. It does not give legal advice and specific advice should always be sought about your particular circumstances. We will be happy to assist.
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