Commercial property auction buyers are being warned that apparent bargains can carry significant tax, environmental and occupational liabilities if the legal pack is not reviewed before bidding.
The caution from RG Law comes against a backdrop of sustained auction activity. Property consultancy Allsop raised £30 million at its July 2026 commercial auction, taking its commercial auction sales for the year to almost £200 million. Separately, analysis from Essential Information Group (EIG) found that around half of commercial and mixed-use properties sold at auction achieved a sale price within 10% of their guide price.
RG Law says those figures reflect the appeal of commercial auctions, but argues that an attractive guide price or apparent redevelopment opportunity should not distract buyers from establishing exactly what they will inherit with the building.
At a traditional unconditional auction, the successful bidder becomes legally bound when the hammer falls and cannot withdraw from the purchase. Under RG Law's auction guidance, a buyer who attempts to back out could lose their 10% deposit and become responsible for any legal problems attached to the property. Completion is typically required within 20 working days, leaving little room for due diligence after the event.
Among the most significant risks are the property's VAT status and the potential for contaminated land. Where a property has been elected for VAT, the tax treatment can materially affect the amount the buyer must fund and the structure of the transaction. The legal pack should be checked to confirm whether VAT is payable on top of the purchase price.
A property's historic use is equally important, particularly for brownfield sites where former industrial or commercial activity may have caused contamination. The replies to Commercial Property Standard Enquiries, together with supporting searches and documents, should be examined for evidence of potentially contaminative uses and any associated remediation or environmental liabilities.
"The biggest mistake we see is buyers entering the bidding process without first asking a commercial property professional to review the legal pack," said Uba Ngenegbo, associate commercial property at RG Law.
"Commercial auctions can move quickly and the bidding can be highly competitive, but that makes early legal advice more important. A conveyancer should review the pack and report to the prospective bidder before they commit themselves."
While commercial auctions are less common than their residential equivalents, RG Law notes they can be particularly attractive to sellers and auctioneers because competitive bidding may produce comparatively stronger returns.
The risks extend beyond VAT and land contamination. Buyers targeting commercial properties for conversion or redevelopment may also inherit an existing lease that prevents them from taking possession or carrying out their plans for years.
RG Law recently advised the new owner of a commercial building who intended to convert the property into flats, only to discover that an existing business tenant held a ten-year lease. Although the lease included a break option after three years, only the tenant could exercise it. The tenant also held the right to quiet enjoyment, meaning disruptive building work could potentially give rise to legal action.
The owner offered the business £5,000 to surrender the lease, which the tenant rejected. In addition to the blocked redevelopment, the owner inherited responsibility for commercial waste collections, communal cleaning, fire safety, lift servicing and general building maintenance.
Although the property was not itself an auction purchase, the scenario illustrates the rights and responsibilities a bidder could take on when buying an occupied commercial building without fully understanding the lease and management obligations.
"Purchasing a building does not automatically give the new owner the right to remove an existing occupier or begin redevelopment work," Ngenegbo said. "A commercial lease can fundamentally affect what the purchaser is able to do with the property and when they can do it.
"A break clause does not necessarily give the landlord the right to recover possession. In this example, the option belonged to the tenant, which meant the business could potentially remain for the entire ten-year term. The purchaser also inherited responsibilities for operating and maintaining the building, all of which had a significant effect on the redevelopment plans."
RG Law recommends instructing a solicitor as soon as a buyer identifies a property of interest, to allow sufficient time for the legal pack to be reviewed before the auction. The review should cover:
- The property's VAT status and whether VAT is payable in addition to the purchase price
- The replies to Commercial Property Standard Enquiries and all supporting documents
- The property's title, searches and historic use, including potential contamination risks
- Any existing lease and the rights of occupiers
- Contract terms, special conditions and the completion deadline
- Title defects, restrictive clauses and missing rights
- Additional fees, arrears, penalties and management obligations
- Any issue that could affect funding or make the property unmortgageable
"The principle is caveat emptor: buyer beware. A legal-pack review cannot guarantee that a property will be entirely risk-free, but it can identify potential problems before the buyer becomes legally bound," Ngenegbo added.
"It gives the buyer the opportunity to understand the VAT position, investigate possible contamination, assess any occupational rights and decide whether their plans for the property are realistic. Those restrictions and liabilities can then be reflected in the maximum bid.
"Our most important advice is to involve a conveyancer from the outset. Once the hammer falls at a traditional unconditional auction, it may be too late to reconsider. The buyer could lose their deposit, face unexpected costs running into thousands of pounds or become legally bound to an unsuitable purchase."
