When closing a business in New York through an auction, one of the most important—but often overlooked—steps is setting the right terms and conditions of sale. These terms establish the rules governing how buyers participate, how payments are made, and how liabilities are managed. Thoughtfully structured conditions protect the seller from disputes, ensure legal compliance, and secure the integrity of the auction process.
1. Start With Legal Review Under New York State Regulations
Before finalizing any terms, business owners should have their attorney review the auction agreement to ensure it complies with New York State law. Licensed auctioneers are regulated by the New York State Department of State, which requires written contracts specifying responsibilities, commissions, and handling of proceeds.
The terms must also align with Article 2 and Article 9 of the Uniform Commercial Code (UCC), governing the sale and transfer of goods and secured assets. For auctions involving machinery or business property, attorneys typically ensure that title transfer provisions are clearly written to prevent post-sale claims or ownership disputes.
2. Define Asset Descriptions and Sale “As-Is, Where-Is”
Every auction catalog should include precise descriptions of each item, but terms should clearly state that all property is sold “as-is, where-is, with no warranties expressed or implied.” This clause shields the seller from liability if buyers later allege defects or misrepresentations.
Reputable New York auction firms like Auction Advisors, Hilco Global, and Rosen Systems include this disclaimer in every sale, confirming that buyers are responsible for inspecting assets before bidding. Sellers should also specify that photographs and descriptions are for reference only and do not constitute guarantees of condition.
3. Establish Payment Terms and Buyer Obligations
To protect proceeds, auction terms must define strict payment timelines and acceptable methods. Most New York auctions require full payment within 24 to 48 hours after the sale. Acceptable forms include wire transfers, certified checks, or credit card payments with a processing fee.
The terms should also require a non-refundable buyer’s premium—typically between 10% and 18%—to cover administrative costs. This premium, paid by the buyer, ensures the seller receives the full hammer price. For instance, Heritage Global Partners and Tiger Group standardize these fees to discourage non-serious bidders and protect sellers from withdrawal losses.
4. Include Deposit and Default Provisions
Deposits are crucial to ensuring buyer commitment. Many New York auctioneers require bidders to provide a refundable deposit or bid approval amount before participation. Terms should specify that deposits are forfeited if a winning bidder fails to complete the purchase.
A default clause should outline the seller’s rights to resell the item, retain deposits, and pursue damages or costs incurred due to nonpayment. Including this provision helps the business maintain leverage and reduces the risk of delayed settlement.
5. Set Clear Rules for Inspection, Pickup, and Removal
Auction terms should define when and how buyers may inspect, remove, and transport purchased items. Business auctions in New York often occur in leased or shared premises, making logistics and safety key considerations.
Typical conditions include:
- Inspection: Buyers may inspect assets only during specified preview hours.
- Removal: Buyers must remove items within a defined timeframe (often 3–5 days) after full payment.
- Responsibility: Buyers assume all risk and cost for dismantling, rigging, and transportation.
Auctioneers like Industrial Assets Inc. and A.J. Willner Auctions also require proof of insurance from riggers or movers before allowing removal, protecting both the seller and property owner from liability.
6. Address Taxes, Fees, and Regulatory Compliance
New York requires collection of sales tax on most auctioned goods unless a valid resale or exemption certificate is presented. The terms should clearly explain tax obligations and the process for claiming exemptions.
For specialized assets—such as industrial machinery, vehicles, or commercial kitchen equipment—sellers must also comply with local environmental, health, or safety laws. Including clauses stating that all assets are sold in compliance with applicable regulations prevents post-sale claims or regulatory issues.
7. Protect the Seller’s Rights and Limit Liability
The terms should include strong protective language for the seller and auctioneer. Common provisions include:
- The seller reserves the right to withdraw any item before or during the auction.
- The auctioneer’s decisions on bidding disputes are final and binding.
- The seller and auctioneer disclaim liability for accidents, damage, or loss on premises.
- All transactions are governed by New York State law, with venue for disputes set in the seller’s county (e.g., New York, Kings, or Westchester County).
This ensures that any potential legal action occurs in a familiar jurisdiction, minimizing unnecessary legal exposure.
8. Include Terms for Online or Hybrid Auctions
If the auction is conducted online, digital participation rules must be added. Platforms such as BidSpotter, Proxibid, and HilcoBid require sellers to include clauses on internet connectivity issues, bidding errors, and platform fees.
Terms should state that the auctioneer is not responsible for internet interruptions, and that bids placed online are legally binding once confirmed. This ensures that digital bidders are held to the same standards as in-person participants.
9. Clarify Commission Structure and Settlement Timing
Auctioneers typically charge commissions ranging from 10% to 25% of gross sales. The agreement should define exactly how these fees are calculated, when proceeds will be remitted, and how expenses (advertising, cataloging, storage) are deducted.
Most licensed auctioneers in New York are required to deposit proceeds into a trust account and issue settlements within a set period—often 10 to 15 business days after sale completion. Clear wording prevents misunderstandings and protects the seller’s right to timely payment.
10. Have Final Terms Reviewed by Your CPA and Attorney
Before finalizing the auction, your CPA should confirm that the terms address all tax responsibilities, and your attorney should verify that the document protects against post-sale claims. Together, they ensure the terms comply with New York State Department of Taxation and Finance requirements, as well as consumer protection and business dissolution laws.
Choosing the right auction terms and conditions is more than a formality—it’s the foundation of a secure and compliant business liquidation. For New York business owners, these provisions define the rules of engagement, safeguard financial outcomes, and ensure that the auction serves as an orderly, transparent, and legally defensible conclusion to operations. With the right protections in place, sellers can move forward confidently, knowing their interests remain protected at every stage of the process.
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