I wonder how often auctioneers take a conscious step back to examine whether our enthusiasm for auctions allows for an emotional or ethical dilemma when we are asked to advise on sensitive instructions by our clients?
Lambert Smith Hampton is regularly instructed by clients including the Ministry of Defence, Homes & Communities Agency and the Environment Agency, as well as local government bodies throughout the UK. In the current climate, deficit reduction is key and tough decisions are being taken, often involving the disposal of buildings of a historical nature, with their associated community interest.
For example, some councils own Victorian-era schools that have been replaced as a result of new school building programmes. If they are unfit for commercial use, these surplus assets often lie dormant. The council has to use funds, much needed elsewhere, to cover empty rates, security and maintenance, in order to minimise the risk of their buildings falling into disrepair and impacting further on the local community.
This type of sale makes sense on paper but is often very sensitive and can unsettle a local community if handled in the wrong way. Many questions arise. Should the asset be sold? Is it ready for sale? Should the council develop it prior to sale? Should it obtain planning permission?
We have to remember that, in the majority of cases, these decisions have been made before we are appointed, and we should therefore have no ethical dilemma. All we can do is be respectful and sensitive to each situation and ensure our advice delivers the correct message to the local community and property markets.
The reach and depth of our advertising and marketing, including PR and social media, will ensure all geographical and investor markets are saturated. This inclusiveness will not preclude any willing and able purchaser, and the seller can be confident that the best price is achieved in a timely manner.
The sale contract will often include a clawback or overage provision. Where the seller believes it is more efficient to sell the asset into the private sector to allow more immediate development, for example, this will ensure the seller will reap financial benefit – perhaps upon a future planning gain.
The process of managing government assets and dealing with their capital receipts by public auction warrants open competition, with absolute transparency.
We were recently instructed to sell a Grade II listed city centre building of historical significance. Our client chose our new online auction platform, providing the benefits of a ballroom sale, but with the added benefit of being able to bespoke their offer. We extended the usual marketing period to allow interested parties to make planning enquiries, but the focus of the long-stop auction date meant that the highest pre-authorised bidder at or above the reserve price would purchase the property on the fall of the electronic hammer. This provided the seller with certainty and a binding sale.
However, in this instance the reach of our coverage was so significant that local community groups called into question the council’s decision to sell and asserted their right to apply to list the property as an asset of community value, suspending the marketing of the property.
Ultimately, an auctioneer will offer advice and provide a robust process to ensure the best price is paid. The reach of an auction is so wide that it is fully inclusive, so as a route to market it is often more prudent to use auctions rather than other channels. As this example demonstrates, there are checks and balances within the auction disposal process allowing for potentially sensitive issues to be handled appropriately and not be ignored.
I believe it is our responsibility to provide a service that secures the best value once a property is deemed ready for sale. We need to remain impartial to any historic or community issues. So, as long as we continue to review each instruction on a case-by-case basis, follow RICS auctioneering guidelines and do not become complacent in our work, these types of cases can happily sit side by side with our more traditional instructions and ensure a diverse range of properties continue to be offered at auction.
Oliver Childs is head of auctions at Lambert Smith Hampton
