Selling Commercial Property at Auction - Are There Any Special Considerations?
Commercial property owners often choose to sell at auction, with benefits such as greater certainty of a speedy sale, the opportunity to achieve a favourable price due to competitive bidding, and a larger pool of interested buyers than they might find elsewhere.
The commercial auction property market is robust and continues to grow – and may be a great option if you're keen to move quickly, need to sell a property to raise capital, or wish to sell an existing facility or rental unit to further your business plans.
For those new to commercial property auctions or unsure of how the process may differ from an auction sale of a residential home, we explain some of the important considerations and variances to be aware of when selling a commercial property at auction.
Key Takeaways: Selling Commercial Property at Auction
- Selling commercial property at auction is faster than a conventional sale, with contracts exchanged on the fall of the gavel and completion typically within 20 working days.
- Any freehold commercial property can be sold at auction, including offices, warehouses, pubs, industrial units, retail premises and development land.
- A comprehensive legal pack – including title deeds, an EPC, lease agreements and any planning documents – must be prepared by your solicitor before the auction date.
- If your property does not meet the reserve price on the day, the auctioneer will contact interested parties to try to agree a post-auction sale.
Why Sell a Commercial Property at Auction?
We’ve listed a few of the primary benefits here, but the biggest positive is that commercial property auction sales are faster via auction, especially for larger premises or desirable business structures that will command a reasonably high value.
Although commercial properties can be sold through a conventional sale process, the reality is that the sales routes available are somewhat limited, and unusual business premises may not be aligned with the budgets and expectations of local buyers and entrepreneurs.
Interest in commercial auctions has grown rapidly because anybody can bid once they have registered with the Clive Emson team and had their credentials verified. Therefore, rather than marketing a commercial premise purely to local businesses, you will attract interest from:
- Professional landlords
- Pension Funds
- Real estate investors
- Public sector and business federations
- Nationally trading companies
- Developers
- Expanding local organisations
- Private Investors
Auction sales are quick and transparent, which means the sale concludes as soon as the auctioneer closes bids, with very little risk that the transaction will fall through, along with the assurity of proving market value.
What Property Types Can I Sell at a Commercial Auction?
Any property can be sold at auction but your solicitor will need to provide a legal pack which will need to be made available for potential buyers to read in advance of the Clive Emson auctionl.
We facilitate commercial property sales across a huge scope of property types, including:
- Restaurants, hotels and pubs.
- Office buildings and entire blocks.
- Business parks and shopping centres.
- Warehouses, industrial units and factories.
- Plots of land and development lots.
- Properties in industrial estates, town centres and rural locations.
The legal pack your solicitor prepares will typically include title deeds, an Energy Performance Certificate (EPC), any relevant planning permissions, and copies of lease agreements if the property has sitting tenants. Buyers will need access to this documentation before bidding.
The seller is normally the freehold owner and the sale comprises the property or plot of land itself rather than the business as a going concern.
How Does a Commercial Property Auction Work?
The first step to selling a commercial property is to contact the auction team and arrange a convenient time to inspect the property with the auctioneer. Experienced auctioneers have years of knowledge about the prices properties sell for and can offer insights to help you set a reserve price – the minimum the property will be sold for – which will meet your expectations.
Guide prices are displayed with the property particulars and should be set carefully to generate interest without representing a value that is lower than you would accept.
After selecting your pricing, the auction team will work through a few steps with you:
- Issuing an agency agreement that sets out the terms and conditions of the auction sale and how the auctioneer will represent your interests as a seller.
- Arranging property inspections, drafting the sale particulars including walk-through videos, floorplans, location details and high-quality photography.
- Progressing the documentation required from your solicitor for the sale including ownership deeds, survey results, energy performance certificates and any other relevant paperwork.
- Marketing the property, typically over a three to four-week period, advertising the property to engage with interested buyers.
Once the auction day arrives, you can choose to sit in on the process, with visibility of the latest bids made, along with the final price.
When the auction concludes, contracts are exchanged and the highest bidder remits a deposit straight away and then usually has 20 working days to pay the full balance.
Are There Any Risks of Selling a Commercial Property Through an Auction?
Professionally managed auction sales are low-risk, and the support and assistance from the auctioneer make it unlikely you will experience any problems or delays – the process is straightforward and provides a convenient sale experience.
However, there are some possible setbacks you may need to be aware of, such as the risk that, on the day, your property does not receive a bid at or above the reserve price. However, the auctioneer will make contact with all interested parties in order to try and achieve a sale at an acceptable for all concerned
Related reading: What happens if a property doesn’t sell at auction?
Specifics to Consider When Listing a Commercial Property for Auction Sale
If you are selling a rental investment property with sitting tenants or a commercial unit with business tenants, you must detail the rental or lease agreement terms with the sale documentation, including a copy of the lease contract for prospective buyers to review.
It may also be necessary to include additional documents such as planning permission secured against the site, any possible issues such as being on a flood plain, business rates payable, and service charges linked with commercial properties on serviced industrial estates.
For further information about commercial auction property sales or the price you may be able to achieve for your premise, please contact the Clive Emson team. Let us know your commercial property details and we'll send you a FREE valuation.
Frequently Asked Questions
What are the special considerations when selling commercial property at auction?
Selling commercial property at auction differs from a residential auction sale in a few key ways. Your solicitor will need to prepare a comprehensive legal pack covering title deeds, EPCs, lease agreements and planning documents. If the property is tenanted, rental and service charge information must also be included. Commercial properties may also have VAT implications depending on whether the seller has opted to tax, so it is worth seeking advice from a tax professional before proceeding.
What documents are needed to sell commercial property at auction?
Your solicitor will compile a legal pack that typically includes title deeds, an Energy Performance Certificate, any planning permissions, business rates details, and copies of any lease or tenancy agreements. For tenanted properties, service charge accounts and rent deposit deeds will also be required. Preparing these documents early is important, as property searches can take several weeks to return.
What are the disadvantages of selling a commercial property at auction?
The main risk is that the property may not reach its reserve price on the day of the auction. In this event, the auctioneer will work to negotiate a post-auction sale with interested parties. There are also auctioneer fees to consider, and a fixed marketing and auction timeline means less flexibility than a private sale. However, for many sellers the speed and certainty of an auction sale outweigh these factors.
How long does it take to complete after a commercial property auction?
Once the gavel falls, contracts are exchanged immediately and the winning bidder pays a deposit on the day. Completion then follows within 20 working days, making auction one of the fastest routes to a legally binding commercial property sale.
Does VAT apply when selling commercial property at auction?
VAT on commercial property sales depends on whether the seller has previously opted to tax the property. If they have, VAT will be chargeable on the sale price. Buyers will need to factor this in. If you are unsure about the VAT position of your property, speak with a qualified tax adviser before listing. Clive Emson is not a tax adviser and this article does not constitute financial advice.
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