Technically, a tender is any formal offer set out in writing. In relation to
the sale of property it is an unusual method of sale although it has potential
merit – more certainty than selling by private treaty with more flexibility
and discretion than selling by public auction.
There
are two main styles of sale by tender – formal and informal. A formal
sale by tender is largely similar to a public auction with all the terms and legal
documentation being published in advance. All the potential buyers are then invited
to submit their best offer using the printed tender document submitted by a set
time and date. Unlike a sale by auction the bidding is secret and, accordingly,
each prospective buyer must decide their top price without guidance from the strength
of rival bidding in the room.
In the tender conditions the seller will
usually reserve the right not to accept the highest (or any) price although in
most cases the seller will accept the best price. It is, however, his decision.
In contrast, at an auction, the seller has no right to refuse the best offer (once
bidding exceeds the reserve) and therefore he cannot reject a particular buyer
for personal reasons.
It would be unusual for formal tenders to be invited
on a ‘subject to contract’ basis as that would have little benefit
to anyone. This means the formal acceptance immediately creates a binding contract.
That
side an informal tender might be arranged on a fairly ad-hoc basis inviting best
offers though still, technically, ‘subject to contract’. This could
be arranged as an alternative to a contract race where there are several contenders.
Each one being invited to submit a ‘best and final offer’, subject
only to contract, with the seller effectively offering to give the top bidder
a short but exclusive period to complete the legal investigations and exchange
contracts unconditionally.
Sometimes all the prospective buyers will be
invited to attend a meeting with the seller-client present when the offers can
be opened in their presence so that everyone can see the arrangements were fair
and impartial.
In effect, this is not so dissimilar to the approach adopted
in Scotland when a property is proving popular. Then a closing date will be set
and all prospective buyers invited to submit their best offer. One is then accepted
and formal missives agreed.
