Introduction
When buying commercial property at auction, carrying out detailed research on the property is a crucial part of the process and should never be overlooked. Unlike private treaty transactions, auction purchases involve immediate exchange of contracts following a successful bid, meaning buyers must complete their investigations before the auction takes place. This section explains the key factors you should examine in order to develop a clear understanding of any commercial property you are considering.
Research on the Commercial Property for Auction
Once you have identified a commercial property that interests you, it is important to understand how pricing works within auctions. The guide price quoted in the auction catalogue is not necessarily the price the property will sell for. Instead, it provides an indication of the level at which bidding may start or the minimum price the seller hopes to achieve.
Guide prices can change prior to the auction date, particularly where there is strong interest. In many cases, final sale prices exceed the guide price. Buyers should also be aware that most properties are subject to a confidential reserve price set by the seller. If bidding does not reach this level, the property may be withdrawn from the auction.
Because of this uncertainty, buyers should establish their own independent assessment of value before deciding whether to bid.
Reviewing auction conditions and documentation
As a potential bidder, it is essential to read the auction conditions and thoroughly review all documentation relating to the property. Buyers should confirm that the information provided in the catalogue accurately reflects the property’s legal status, condition and occupation arrangements.
While some buyers choose to review documentation themselves, it is strongly recommended that professional advice is obtained from a solicitor and, where appropriate, a surveyor. Professional input can help identify risks that may not be immediately obvious.
Legal packs are usually available for download from the auctioneer’s website. If documentation is not available online, it should be requested from the seller’s solicitor. Buyers should ensure they obtain all relevant information well in advance of auction day, as auctioneers may not always provide documents at short notice.
Legal and title investigations
The legal pack typically contains title documentation, lease information (if applicable), special conditions of sale and supporting searches. Buyers should review these carefully to understand ownership rights, access arrangements, restrictions, covenants and any financial obligations attached to the property.
Where the property is leasehold or tenanted, lease agreements should be examined closely to understand rental income, tenant responsibilities, repair obligations and break clauses.
Carrying out appropriate searches and enquiries helps identify issues that could influence the decision to proceed or affect the value of the property.
Planning, compliance and energy considerations
Planning permission and lawful use are important factors when researching commercial property. Buyers should confirm that the property can legally be used for its intended purpose and whether any planning conditions or restrictions apply.
Energy Performance Certificate (EPC) ratings are also increasingly important due to regulatory requirements affecting commercial lettings. Properties with lower EPC ratings may require improvements to comply with minimum energy efficiency standards before they can be leased, which could result in additional costs.
Other compliance considerations may include building regulations approvals, fire safety requirements, accessibility standards and environmental factors depending on the nature of the property.
Property condition and surveys
Responsibility for Research
The extent of research conducted ultimately rests with the buyer. Auction sales operate on the principle that the buyer has satisfied themselves regarding the property prior to bidding. Once contracts are exchanged, the buyer generally accepts the property in its existing condition, subject to the legal terms agreed.
Neither the seller nor the auctioneer will normally accept responsibility for issues discovered after the purchase completes. For this reason, undertaking thorough research before auction day is one of the most important steps in the entire buying process.
Summary
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