Commercial acquisitions and disposals
Commercial auction purchase
Legal work to buy commercial property at auction, from reviewing the legal pack before you bid to completing by the auction deadline.
Every cost on its own line: the law firm's legal fee, VAT, the searches and other third-party costs, and any property tax. Your quote opens as soon as you send the form.
An instant quote covers the legal work and costs, but it is not a review of the legal pack. Send the pack to the law firm as early as you can, so the review is finished before auction day. The auction property guide explains what to check.
Buying commercial property at auction is fast and final. If your bid succeeds, you are usually legally committed when the hammer falls, or when an online auction closes, with a deposit to pay on the day and completion only weeks away. There is no chance to renegotiate afterwards, so the legal work has to happen before you bid.
This service is for investors, developers and businesses buying shops, offices, industrial units, land or let investments at auction. Your solicitor reviews the legal pack (the seller's bundle of title documents, searches and sale conditions), flags the risks, explains any extra costs in the special conditions and then completes the purchase on time.
An instant itemised quote is available online and takes into account the lot's use, whether VAT is charged on the price or the sale is a transfer of a going concern (no VAT because a let property passes as a running business), the number of existing tenancies and the buying entity. It works out SDLT or LTT on the VAT-inclusive price, so get it before the auction and leave time for the legal pack review.
What is involved
Most of the checks come before you bid, because the contract is binding the moment your bid wins. The work runs in this order:
- Before the auction: reviewing the legal pack, which usually includes the title, special conditions of sale, searches, leases and replies to enquiries, and reporting on title defects, tenancies, planning and VAT, including anything missing.
- Special conditions: these are the terms specific to the lot. They can pass on extra costs, such as the seller's search fees or legal costs, require you to pay arrears or other sums, or change the completion date, so your solicitor highlights them for you to allow for in your bid.
- Funding: checking that your money or your lender can complete within the deadline, because an ordinary mortgage offer may not be ready in time.
- On the day: if your bid succeeds, contracts are exchanged at once, the point where the deal becomes legally binding, and you pay the deposit, often 10% of the price, plus any buyer's fee.
- After the auction: receiving the signed sale memorandum (the record of the contract), raising any final questions, dealing with your lender, preparing the transfer and arranging the completion money.
- Completion: under the common auction conditions many auctioneers use, usually 20 working days after the auction unless the special conditions set another date.
- After completion: filing the SDLT or LTT return, registering your ownership and notifying any tenants.
What the legal fee covers
- Reviewing the auction legal pack before you bid
- A written summary of the main risks and extra costs
- Checking the special conditions and any addendum (late changes announced by the auctioneer)
- Acting after the auction to complete the purchase
- Dealing with your lender's requirements, if you are borrowing
- Preparing the transfer and handling the completion money
- Submitting the property tax return on time
- Registering your ownership
Costs you may see on top
- The auctioneer's buyer's fee or administration charge
- Seller's costs passed to you in the special conditions, such as searches or legal fees
- SDLT or LTT on the hammer price, plus any VAT added to it
- VAT on top of the hammer price, where the seller has opted to tax and the lot is not sold as a going concern
- Valuation and legal fees charged by any lender funding the purchase
- Searches not included in the legal pack
- The fee for registering your ownership at HM Land Registry
What to have ready
- The catalogue entry and the full legal pack, including any addendum
- Proof of funds for the deposit and the buyer's fee
- Your finance offer, or a bridging lender ready to act
- Photo identification and proof of address, which auctioneers need before you bid
- Details of the buying entity and the people behind it
- Your VAT registration number, if VAT may apply
- Your plans for the property, so planning and use can be checked
How long it takes
The pack review has to happen before the auction, so instruct your solicitor as soon as the legal pack is published. A few working days is often enough for a straightforward lot, but let investments and land take longer.
After the auction, completion is commonly due 20 working days later under the standard conditions many auctioneers use, though some special conditions set 28 days or another date. Late legal packs, missing documents and finance that is not ready in time are the main risks to the timetable.
Things to watch for
- Read the special conditions and any addendum issued on the day. Late changes, such as extra costs or a new completion date, still bind you if you bid.
- Have your funding ready before you bid. If you cannot complete on time, you can lose your deposit and be liable for the seller's losses.
- Check the VAT position in the pack. If the seller has opted to tax, VAT may be added to the hammer price, and SDLT is then charged on the VAT-inclusive figure.
- Look closely at the tenancies in a let lot. Rent arrears, an upcoming break or a tenant's right to renew under the 1954 Act all affect what the property is worth to you.
- Treat the guide price as a guide only. It is not a valuation, and the lot may sell for much more.
Questions people ask
Can I pull out after my bid is accepted?
Usually not. In a traditional auction, contracts are exchanged when the hammer falls, so you are legally bound to complete. Some online auctions use a conditional format, where you pay a reservation fee and have a set time to exchange, but the terms vary between auctioneers. Read the auction conditions before bidding so you know which applies.
How much deposit do I need on the day?
Under the common auction conditions many auctioneers use, the deposit is 10% of the price, or a minimum amount if that is higher, payable before you leave the auction. You will usually pay the auctioneer's buyer's fee as well. Check the auctioneer's own conditions and the special conditions for the lot, because some set different amounts or payment methods.
Is VAT added to the hammer price?
Only if VAT applies to the sale, for example because the seller has opted to tax or the lot is a new commercial building, and the sale is not a transfer of a going concern. The legal pack should say which applies. In England and Northern Ireland, SDLT on a £300,000 lot is £4,500, but if VAT takes the price to £360,000 the SDLT rises to £7,500. If you are VAT registered you may be able to recover the VAT, but you still have to fund it on completion.
What if the legal pack is incomplete?
Ask the auctioneer or the seller's solicitor for the missing documents before bidding. If they do not arrive, your solicitor can explain what risk that creates, so you can reflect it in your maximum bid or decide not to bid. Under the standard conditions, buyers are treated as buying with knowledge of the documents in the pack, whether or not they have read them.
Who does the work
Your matter is handled by a law firm regulated by the Solicitors Regulation Authority, the Council for Licensed Conveyancers or CILEx Regulation, or in Northern Ireland by a solicitor regulated by the Law Society of Northern Ireland. At the moment the law firms on our panel act for property in England and Wales, so for property in Northern Ireland we tell you whether a firm can act for you before we pass your details to anyone. The firm confirms who will work on your file, their experience and its terms before you instruct it. How we choose our firms.