Buying commercial property from an administrator differs significantly from a typical purchase. While administrator sales can offer good value, they come with reduced legal protections, limited documentation, and greater financing challenges. Buyers must be proactive, well-advised, and prepared to accept higher risks.
What is an Administrator?
In the context of commercial property, an administrator is a licensed insolvency practitioner appointed to manage the affairs of a company that has become insolvent. Their primary duty is to act in the best interests of the company’s creditors, which often includes selling off assets, such as property, as quickly and efficiently as possible.
Speed vs. Due Diligence
A defining feature of buying from an administrator is the urgency of the sale. Administrators are typically under pressure to dispose of assets swiftly to satisfy creditor claims. While this can benefit buyers seeking a quick acquisition it means greater risk because of less scope for full due diligence.
In a typical purchase, buyers undertake comprehensive due diligence, including their solicitor’s obtaining information from the seller to a wide variety of questions.
This transparency helps buyers make informed decisions. If misinformation is given by a seller, then the buyer may have a claim for misrepresentation. In contrast, administrators will not have access to much information and, to the extent that they do, they will not want to expose themselves or the company they represent to risk of a claim for misrepresentation so sell property entirely on a “sold as seen” basis without any replies to enquiries. The buyer must therefore rely solely on their own searches and enquiries of authorities.
In addition, an administrator sale contract will exclude all remedies of a buyer against the seller and administrators in the event of issues arising post-completion. Since the seller has sold in distress the risk of issues arising is higher because of disgruntled creditors and missing information.
Financing Challenges
Financing a commercial property purchase from an administrator can also be more difficult. In a typical purchase the availability of detailed documentation, such as lease agreements, financial records, and property history, makes it easier for lenders to assess risk and approve financing.
On the other hand, buying from an administrator can complicate financing. The distressed nature of the sale often means incomplete documentation and limited transparency. This increases perceived risk for lenders, who may respond with stricter terms or even refuse finance altogether. Buyers may need to explore alternative funding options or must proceed as a cash buyer.
Given the heightened risk and time pressure involved in a purchase from an administrator it is essential to engage a solicitor with specialist experience in administration purchases early in a transaction. This ensures that the limited time available is utilised in identifying as much information as is available and that risks can be identified and mitigated against so far as possible.
Farleys has a team of commercial property specialists available to advise you today. For comprehensive legal advice tailored to your situation, get in touch today on 0845 287 0939 or complete our online contact form and a member of the team will get in touch with you.
