Property auctions are an increasingly popular way for property owners to sell their properties and for potential buyers to snap up a bargain
However, what at first sight appears to be a bargain can turn out to be an extremely costly mistake.
Property auction issues
We have acted on several cases for purchasers who have successfully bid on a property only to discover some significant problem with it.
Examples of situations where buyers have encountered difficulties could include:
- The purchaser of a long residential lease which was already subject to forfeiture proceedings by the landlord due to significant breaches of the terms of the lease. The new owner would inherit a considerable financial liability to the freehold landlord or faced the forfeiture of the lease.
- The property being described in a certain way or to include certain things, such as a larger piece of land or parking space, when this is not the case.
- The purchaser of a freehold of a commercial property discovering that the seller had reached an informal agreement with the existing tenant regarding the rent payable, which did not reflect the terms of the lease provided in the auction pack.
- A seller of a flat suggesting that it was able to extend the term of the lease and assign the benefit of this to the buyer when in fact legally, this was not possible.
- Including out-of-date searches in the auction pack, which did not reflect the true position.
In all cases, it is vital that you read the small print, and that you are aware of issues like the difference between buying at a traditional auction and a modern method auction.
The importance of taking legal advice on buying property at auction
One thing that many of the examples above have in common is that the buyer did not take any legal advice on the contents of the auction pack before bidding on the property. Whilst talking to a property auction conveyancing solicitor before bidding on property at auction may not seem like a necessary expense, it can reduce the risk of costly mistakes.
Whilst such advice cannot remove the inherent risk of purchasing a property at auction completely, asking a solicitor to check through the auction pack, identify potential issues and discuss the contractual terms will provide a bidder with a more informed idea of the risk that they are prepared to take and the amount they consider reasonable to bid.
Pre-auction enquiries can be raised with the seller or agent and whilst there would be no obligation on them to respond, if they want to maximise the bids they receive, it might be in their interests to do so.
If you are considering purchasing a property at auction and would like to instruct Cunningtons to assist in considering the auction pack, please do get in touch.
Misrepresentation at property auctions
We have previously written about misrepresentation in a residential property context (read My Seller Lied To Me here). This article focusses on property misrepresentation in the context of auctions.
The first thing that needs to be said about auctions is that generally, the applicable contractual terms have not been negotiated between the parties. They are generally presented in the auction pack on a “take it or leave it” basis. It is not uncommon for contractual terms to be heavily one-sided and to pass all the risk (and normally the cost) on to the successful bidder.
The contractual terms will invariably contain what are known as limitation or exclusion of liability clauses, which seek to limit or exclude liability for things said about the property which might not be factually accurate. Sometimes what are called “whole agreement” clauses are included, and these seek to specifically exclude anything said about the property which might otherwise have become a contractual term. Effectively, these clauses seek to protect the seller by saying that anything said about the property which is not included in the contract cannot be relied on if they turn out to be inaccurate.
Whilst “buyer beware” or “caveat emptor” is a principle of law, meaning that buyers should undertake the necessary steps they want to check the suitability of what they are going to purchase, the law does seek to balance the requirement for buyers to do this against the broad requirement for sellers to at least try to be accurate in the information that they provide. Certainly in cases of fraudulent or reckless misrepresentation there is some scope to challenge clauses which seek to limit or exclude liability.
Section 3 of the Misrepresentation Act 1967 provides that any terms within a contract which would exclude or restrict a seller’s liability for misrepresentation, or limit the remedy available to a buyer for this, are of no effect unless they are “reasonable”. If such terms are unreasonable and of no effect, then the misrepresentation is actionable and a claim can be pursued.
Test of Reasonableness
The test of reasonableness is contained in Section 11 and Schedule 2 of the Unfair Contract Terms Act 1977 (UCTA).
Sadly for buyers, there is not a black-or-white, yes-or-no test or criteria to determine whether or not such clauses are reasonable or not; merely examples of what may or may not be reasonable in the circumstances. The test is to a large degree subjective and this means that the Court has the ability to consider what the parties knew, or ought reasonably to have known, about the situation at the time. Each of these cases is therefore very fact-specific and a careful consideration of all of the facts is necessary.
Broadly, the guidelines set out in UCTA which the Court will consider are:
- the bargaining positions of the parties, taking account of alternatives that the buyer might have, such as alternative property;
- whether there has been an inducement to agree to the term or had an opportunity to enter into a similar contract with someone else without such a term;
- whether the buyer knew or ought reasonably to have known of the existence and the extent of the term;
- where the term excludes or restricts liability if some condition was not complied with, whether it was reasonable at the time the contract was entered into to expect that this condition would be met.
Case law on exclusion and limitation of liability clauses is extensive. This is understandable to the extent that the law exists to balance the interests of a seller to sell a property without fear of a future claim and the right of a buyer not to be misled, certainly not deliberately. Whilst cases can provide helpful guidance and may be relevant to your particular circumstances, they are rarely conclusive of the matter, as when situations like this arise, there are always factual differences.
Further advice for auction buyers
Check carefully what the terms say about the fees. Often there will be a contractual clause obliging the successful bidder to pay the seller’s legal costs. These can sometimes be quite high and an unexpected expense which should otherwise have been factored into your decision in respect of the maximum bid you are prepared to make.
Often, searches are included in auction packs, as it would be a rare circumstance when a buyer would have time to undertake their own searches. Normally the cost of these searches will be passed on to the successful bidder as well. Any searches should be checked carefully for what they reveal. They should be checked to make sure they are up-to-date. If there is missing information or queries which come out of the searches, the risk of this should be considered when bidding for a property. If searches are inadequate, then checking the auction terms to see whether the buyer can rescind the contract in the event of discovering something untoward later is worthwhile doing.
If you require finance or a mortgage to purchase the property, make sure that your lender is on board and satisfied that the property is going to provide good security.
We have acted for clients who have successfully bid on a property, paid a sizeable deposit and then discovered a defect in the title to the property, or something else which makes the property unsuitable security for a mortgage. The lender then withdraws the mortgage offer, leaving the client in a position of being unable to complete, and therefore liable to lose their deposit, or have to seek a bridging loan or some other finance at considerably worse rates.
Can Cunningtons help?
As you can appreciate, it is much easier to avoid legal problems with a property before you bid on it. So we would strongly recommend inspecting a property first, as well as talking to a property conveyancing solicitor. Otherwise, any savings you make through buying property at auction could disappear in a misrepresentation claim.
We would be interested to know about your experiences of purchasing property at auction.
If you feel that you have purchased a property pursuant to a misrepresentation, then we may be able to assist you, let us know your experiences in the comments section below.
I bought a small piece of land on 15th April 2021, intended to be a present for my teenage son to see what he could do with it, perhaps as an encouragement for him to further pursue his wish to study law. The land was advertised with a guide price of £1000, and after reading the Special Conditions of Sale, I understood that there was an auction fee of £300 and a further £650 for the search.
In the heat of the online auction, I bid to £5000, winning the auction. Whilst completing the paperwork, the sellers’ solicitors demanded £4750 to cover “Buyers’ contribution to seller’s auction and legal costs” on top of the aforementioned fees. Instantly, I objected to this as the fees were disproportionate.
Firstly, in the Special Conditions of Sale, all fees were written in numeric form, consecutively placed on the second page of the contract (easily spotted, understandable, and uncontestable); however, the largest fee of ‘higher of two point seven five percent of the purchase price or four thousand seven hundred and fifty pounds in relation to the Seller’s legal and agents costs’ was located on the 5th page, far away from any other cost stated. In addition, as quoted, the fee was written in word form as to be deceptively hidden from a less experienced buyer in an effort to throw them off course, compared to the other fees.
Secondly, the fee located in Clause 15 (as above) was ambiguously worded and lacked clarity. It is unclear as to which fee will carry through: being ‘higher of two point seven five percent of the purchase price’ or ‘four thousand seven hundred and fifty pounds’. Evidently, there is far too much room for error in the understanding of this clause.
Furthermore, this plot of land was previously purchased by the sellers as part of a larger plot for £750 on 29th October 2020. The ‘legal and agents costs’ demanded summed to £5450, extortionate compared to what they paid for and clearly unfair to the consumer as not only are they being misled through the hidden nature of the clause and its wording, but they are also being excessively charged for “seller’s legal and agents costs”.
Finally, before being served with the Notice to Complete, I contacted the auctioneer in regard to these charges. He then came back to me with a reduced charge of £3000, including search costs, after discussing with one of the partners in the sellers’ firm – which I agreed to pay. However, the reduction was later rescinded by another partner, of which was communicated to me via their solicitors (however, they did not acknowledge the reduction). They then forced me to pay the total cost of £5700 after serving a Notice to complete.
I now want to complain and escalate to the Legal Ombudsman. The seller is a property company and I am a consumer. Which laws and regulations can I base my complaint on and how should I approach it?
Thank you for this. The problem here is that in relation to any contract in writing if you sign it you are bound by all its terms so long as you had an opportunity to consider those terms. From what you have said it seems unlikely that you could argue that the terms you are objecting to were not properly incorporated into the contract, unless you can show you were not permitted to see the terms you were signing or actively discouraged from considering it.
As regards the value of the fees that they were charging, there may be something in the Unfair Terms in Consumer Contracts Regulations, since you say you were acting as a consumer, but that will depend on whether or not the terms you object to are particularly onerous or unusual in the industry, and since empty plots of land are usually purchased by commercial entities for development that is unclear. However if you wish some additional advice on this then please feel free to contact the Litigation team.
Hi , I recently bought a house at on-line auction. Paid deposit and then to keep things moving paid the 90% to my solicitor to help closing.
Problem is the Vendor is now gone missing and we are left waiting for 3 months with no reply.
6 weeks and no response from Vendor or Auction house
Thank you for your comments regarding this vanishing vendor. If you purchase at auction once the hammer falls, if you are the top bidder, a binding legal contract is formed by which the seller agrees to sell and you agree to buy the property in question for the price stated in your bid. If the completion date has passed you would be able to serve Notice to Complete upon the vendor.
The legal avenues open to you therefore depend on what you are seeking to accomplish. You may be able to, subject to the terms of the contract, either seek to recover from the vendor the deposit, interest thereupon, and damages to cover losses of an occasioned by their failure to complete the transaction, or seek to enforce that they complete the transaction by way of a claim in Court for an order for specific performance. To obtain the latter you would have to show that as at the date of the hearing of that claim, you are ready, willing, and able to complete the transaction. This means you must have a valid and un-expired mortgage offer or other funding in place to pay the balance. This should not be too problematic since you have said you have already put the balance of 90% of the purchase price on your solicitor’s client account.
The hardest bit, therefore, will be finding the vendor and making contact with them. This is something we may have to instruct a tracing agent or similar in respect of. If you wish our advice on this matter then please feel free to contact our Litigation department at the Braintree office for a confidential discussion.
I bid on a property based on the information available on the auctioneer website and view the property from outside which looks fine. My bid was successful. I was told there is a tenant living in the property but the auctioneer was unable to get hold of them. I managed to speak to the tenant following visit to the neighbours and they informed me that there was a fire in the property prior to the auction and due to this the property is not inhabitable at the moment and requires major repairs. The tenant living somewhere else and also emailed the auctioneer and the landlord why the property is put for sale in auction without giving details of the fire. This is misleading deliberately.
Could you please advise us on this where we stand as we no longer wish to buy this property. We considered the auctioneer deliberately mislead and not add this information rather just stating details of the property and rent per month.
Would appreciate it if you can provide some guidance on this.
Thanks
We sold our house with planning permission for nine flats to be developed on 23/03/21 at auction with completion on 6/06/21.
The new purchaser decided not to go ahead with the development and put the property back into auction on 20th April, using our legal pack.
Is it legally possible to re-auction a property that you haven’t completed on? I I would have to expected they would have to wait until after the completion in June?
We have also had a number of new prospective purchasers coming round and to view the property in advance of the auction on 20th April without being told in advance and they seem to be under the impression we are the sellers, when in fact we’ve already exchanged with the purchasers.
Thank you for your comment. From what you have said it is unclear whether you put the property back into auction or they have.
A property put in for auction is a binding legal contract and the top bidder is considered to have exchanged contracts once the hammer falls upon the auction. I can see that completion has not taken place yet. In theory, if contracts are exchanged then there may be a possibility for them to sell their equitable interest under the contract for sale at auction but they would have to make it clear that that is what a purchaser is in fact buying. However this will as always depend on the terms of the original contract of sale they formed with you and the terms of the auctioneer.
It may be worthwhile if you were to contact us to discuss this in more detail so we can work out what exactly what you are seeking to achieve in respect of this.
I purchased some land at auction, my solicitors have completed the necessary checks and we were ready to complete in the agreed timeframe. The seller has been ignoring me for 5 months now, no response to requests for information from my solicitor, just total silence. I’m not sure what’s left to do. I’d be happy to forget the purchase if I can get the money back that I’ve paid to the auction house and in fees to the solicitor, or to complete as planned but I’m just not getting anywhere. Now my solicitor has stopped replying as well. How can I reach an end to this?
Thank you for your comment. While we are unable to give specific advice without having taken full instructions and reviewed all the documentation, at a property auction, once the hammer falls, the winning bidder has entered into a definitive contract to purchase the property. It is legally binding in the same way as exchange of contracts would be in a traditional sale of property.
Therefore, you can take steps to enforce the completion of the transaction. You can do this by serving Notice to Complete upon the seller and then issuing proceedings for an order requiring them to complete the sale, though to get such an order you will have to show that you are ready, willing, and able to complete it. This means you will need to show that there is funding in place or that you have the sums to pay the balance due from you on completion to hand. You can also seek damages from the seller for losses you have undergone as a result of this.
This is something that we may be able to assist you with. Please contact our Litigation team for a discussion in complete confidence.
Hi, I showed my friend who is a builder around a flat which was up for auction and was being sold by another friend of mine. He made a good offer, almost 34% higher than the auction starting price. My friend, the vendor accepted his offer and he agreed to pay the auction house fees on top.
Today he was going to the auction house to sign the contract. They had already asked for a deposit which was put into their account today and now he has been told that they are still showing people around the flat and she has received a counter offer of £10,000 more, which she is looking to accept.
Should the auction house still be showing people around the property after they have accepted my friend’s deposit? He feels that the auction house have put somebody else in line to buy it, thus upping their own fees.
Many thanks. Cat
Thank you for your comments. Please note that without sight of the terms and conditions of the auction the advice that we can give you is in fact limited. However, in general it will depend on whether or not contracts are actually exchanged. That a deposit was paid may not necessarily amount to an acceptance of the contract; it may have been taken as a payment in exchange for a period of exclusivity or non-solicitation. Moreover, any and all communications are likely to be subject to contract. Unless and until the contracts are exchanged, it may be difficult to determine whether there is anything that can be done here.
It may be worthwhile if this person was to contact our litigation team at our Braintree office for a confidential discussion.
Recently purchased a property through online auction. Placed a bid at the last minute, and mistakenly put £800,000 instead of £80,000. No option on the site to rectify the mistake or to cancel bid. The auction ends, outbidding everyone at £140,000. Home report is £90,000. Reserve for the property was £140,000. Emailed FuturePropertyAuctions. No response. Received a call later, asking to make payment. Explained scenario and genuine mistake. Manager accepts this may have been a geniuine mistake, but offers no alternative. Either pay immediately, or face legal action. What rights do i have as a buyer for this obvious mistake? No one would ever bid £800,000 for a £90k property.
Thank you for your comments. While we cannot give specific advice on this, unfortunately the starting position for a sale at auction (subject to the terms of same) is that once you enter a bid, you are contracting to purchase the property at the price of your bid if it is the highest bid, and once the hammer falls, that is the definitive formation of the contract and you will be bound legally at that stage. While there are legal provisions to alter or rescind a contract due to a mistake, regardless of whether these are engaged it may be difficult to prove that the bid was a genuine mistake by yourself. If you are seeking further advice on this, I recommend that you telephone us on our office number for a discussion in complete confidence.
Hi Mark,
I bought a land for 6000 in Scotland, there was 3000 deposit money I already paid to auctioneer but he does not provide legal pack. he is saying he can provide legal pack to solicitor. there was no legal pack in advertising site. I paid my deposit through the credit card, can I pull back from my contract to buy and how should be other consequence and can I get back my money which I paid through deposit. please advise.
Thank you for your comment. As the property is in Scotland it may be that Scots law applies to the transaction, so you may be better served consulting a solicitor there. Scots law is not something we have any experience in.
I recently bought at auction.. Onlineone
Asking around via agent etc I have discovered the tenant raised some maintenance issues. Likely to have been after the auction was listed. What is the situation with these. Will I simply inherirt them or does current landlord need to attend to them prior to completion
Thank you for your comment relating to the tenant raising maintenance issues during the sale of property at auction. While we are unable to give specific advice here as we have not seen the exact terms of the contract or of the auction, whether the seller would have to deal with them depends upon what exactly is in the terms and conditions as they may affect the default position, though normally a purchaser of a property that is let to someone else “steps into the shoes” of the previous freehold owner and would inherit these. Please feel free to contact us at our office number for a confidential discussion.
I bought an auction property in Oct 2020, an 8 bed HMO, and should have completed in Dec and now have been issued a notice to complete for next Tue, 09 March 2021.
I had a solicitor check the legal pack and advised all was ok prior to auction.
My mortgage company issued an offer knowing this was an auction purchase with 8 weeks to complete.
With two weeks remaining before completion they sent my solicitor their requirements which basically said they wanted all searches to be done again as the legal pack had private searches and they needed public searches.
Thankfully the seller allowed us to extend but throughout this process there has been no urgency from the mortgage company solicitors with new requirements from them coming in dribs and drabs. Hence the seller solicitor has now refused to answer any more queries and issued a notice to complete.
I have set up a bridge to get the purchase over the line and considerable extra cost.
The mortgage solicitor has been replaced by one of the more senior partners which tells me the previous solicitor was not experienced. This would make sense as she had asked me to confirm that I had applied forban HMO licence a week ago. Anyone with any experience would know that I cannot apply until completion has happened. I have made several attempts to set up meetings with the HMO officer , in preparation of applying for one, but had to cancel as completions were delayed again and again.
A week ago the solicitor queried the rent being paid to landlord as it did not equate to rent stated. It was obvious to everyone that the agent’s commission had been deducted . But why was this asked for so late in the day.
A condition of the mortgage offer was that an asbestos report is to be carried out.. the seller should have legally carried it out himself and my solicitor had not realised this. It does not specify whether this should be carried prior to completion nor does it specify who should carry it out. I , my broker and solicitor thought this was something I would have to get done post completion due to shortage of time to completion. A couple of weeks ago the mortgage solicitor and my solicitor are insisting the seller gets this report. Not surprisingly they refused .
The offer said I should have adequate insurance which I have got but it did not say that the mortgage co be included as an interested party. This they asked for late in the process.
So I wonder if I have any grounds for making the mortgage company responsible for the extra costs incurred by these delays.
There are lots of examples of the lack of urgency with this case from the mortgage company. They knew it was an auction sale with tight deadlines and so should never have agreed to have taken this purchase on.
Thank you for your comment.
It is difficult to see who might be at fault here and for what, but dealing specifically with your comment regarding whether or not a mortgage lender could be liable for any delays, we are not immediately aware of any case law or other legal principle that would impose a duty of care on a lender in this way. Whilst a claim could be advanced, we suspect that the argument in response to any allegation would be that it is for a buyer to ensure that they have the finance in place that they need before bidding on a property. This is not to say that a potential claim does not exist, just that we are not immediately aware of any legal principles which might lead a lender to be liable in these circumstances. It may be worthwhile raising a complaint with the lender and seeing what is received in response.
Hi,
I have recently purchased a residential land in auction for GBP26, but subsequently my conveyance solicitor advised me there are several issues with the land (title not registered, ongoing potential repairment liabilility etc. that may have disclosed in the legal pack), I decided to pull out. However I have to pay GBP7000 in total (5000 deposit, 500 buyer premium and 1500 Admin fee) which I think is inbalance or not fair. Also the conveyance solicitor advise me there are likely recovery of the deposit as there are problems with their legal pack but its firm doesn’t cover this part. Therefore I would like to check if you will could handle this kind of case?
Thank you for your comment.
This firm is able to assist in matters such as these, but we are unable to confirm the position without sight of the relevant documentation. On a broad basis, a seller is not obliged to put anything in particular into an auction pack, and the risk is on the buyer to decide whether or not to proceed based on the information that they have or that they can obtain.
If they proceed to bid on the property and win the lot and then decide to withdraw, in all probability the contractually agreed fees would still likely be payable.
This is different to the situation where something in the auction pack is misleading which the buyer relies upon and if obliged to complete would cause a loss. In such circumstances there may be a basis to rescind the contract. Rescission is the means by which a Court can “reverse” the contract and would potentially be able to order a refund of sums paid.
We purchased a free hold property from auction and completed on 14 Aug 2020, the issue is the seller purchased the same property in June 2020, their application at land registry is still on hold, because their seller did not have the right paperwork namely power of attorney (full copy of the OPG stamped POA is requested by land registry), so they were asked to provide this, we have been in touch with them, initially they denied this but letter through their solicitor acknowledged this and asked us for more time to provide the paperwork. This has delayed our application and as result land registry will not transfer the property to our name until they deal with their application first. Do we have a case against our buyer?
Thank you for your comment.
It is unlikely there is any sort of claim here as there is in particular, no loss. If you have paid for the property, you are the owners of it but are not yet the registered legal proprietors. Applications to the Land Registry are dealt with in the order that they are received. The Land Registry continues to suffer from significant delays and your application will almost certainly not be dealt with before the seller’s. Only if the sellers are not registered or there is some other reason why they were not entitled to sell the property would there really be any potential scope for a claim.
I was the winning bidder on a property that was advertised as 3 bedrooms. It only has 2 bedrooms. Do i have a case for misrepresentation?
Unfortunately, with the information that you have provided it is not possible to say with any certainty whether or not there is a claim for misrepresentation. However, if the auction pack described the property in a particular way, and that was not the case, then there may very well be a claim for misrepresentation.
Having said this, the issue is likely to turn not on proving that a misrepresentation has occurred, but what loss you may have suffered. We are hesitant to suggest that the description of a particular property or the use of a room as a bedroom, study, living room etc would necessarily have any impact on the value of the property. The position may be different if the property was described in a way which indicated how many rooms there were and it transpires the property is actually considerably smaller or has less rooms than suggested. However, subject to a few minor exceptions, we would be hesitant to suggest that a description of what a particular room in a property is being used for at that point in time could form the basis of a misrepresentation claim.
Hi there,
I have recently completed a purchase on a property. Problem is it is non standard construction and this wasn’t disclosed in the legal pack. What should I do?
I was only made aware of this by an estate agent who came to value the property.
Is there a way to claim/sue auction or seller?
Thank you for your comment.
It is unlikely that there is a claim here. The construction of the property is not generally something that a seller would normally be providing information about, even in a non-auction transaction. This makes sense, as the method of construction and structural issues are unlikely to be something that the seller can explain with any authority, as they are not generally surveyors or structural engineers. Normally, a buyer will undertake their own survey which will reveal any issues. It would also be usual for a person purchasing a property with the assistance of a mortgage for their lender to insist on a survey being undertaken, to ensure that the property is in a condition and of a construction that its financial value is sufficient that the mortgage secured against it can be repaid from the equity.
At auction, the principle is the same, however, a purchaser may not be given the opportunity to have a survey undertaken or raise enquiries with the seller. A property being sold at auction is often “sold as seen”, insofar as it would be for any potential bidder to ensure that they have all the information about the property they want in order to proceed. If some of that information is missing, it is normally up to the bidder to decide whether or not they want to accept the risk. If purchasing with the assistance of a mortgage, the bidder would be well advised to ensure that there will be no issues with financing the transaction before any bids are placed, as once the hammer falls, the bidder is contractually obliged to complete the transaction or lose their deposit.
Unless something specific about the construction of the property was said and this was misleading, it would be a very rare case where there would be a claim for misrepresentation on the basis of something which was not specifically referred to in the auction pack. Put another way, unless the purchaser has been misled in some way (as opposed to the auction pack merely being silent on the point) then there is unlikely to be a misrepresentation claim.
-Dear Sir/Madam
I exchanged two properties in Nov 2020 with the intention to complete in Jan 2021
-There were discrepancies with the legal pack and tenancies which were brought to the attention after the exchange just before completion by my conveyancer . The auction pack included inter alia Assured Shorthold Tenancy Agreements (the ‘ASTs’) which the Properties were being sold subject to the rent was paid monthly in advance; and that deposits had been taken and protected pursuant to The Housing Act 2004.
The Misrepresentation – After contracts had exchanged it came to light that, contrary to the information provided, the rent was in fact paid in arrears and the defendant averred that deposits had not in fact been taken or protected. Given the reliance placed on the AST’s and the potential liability in the event that there was, in fact, a deposit that had been registered in accordance with the AST, my solicitors asked for assurances to be made in terms of the deposit and for apportionments to be made on the completion sums for any outstanding rent. Despite the assurances and further information sought, the vendor failed to provide evidence of the rent being paid or any assurance in respect of the Deposit said to have been paid in the AST’s but allegedly not taken.
-The seller ignored all our correspondence on this matter and their conveyancer served notice to complete.
-auctioneer didn’t want to get involved citing it was a legal matter.
-My solicitor served legal notices on the seller & advised me not to complete due to the misrepresentation as if I have completed, I won’t be able to claim damages/breech of contract
-In the meantime, vendor’s solicitor refrained from responding to any of my solicitor’s correspondence but unilaterally decided to forfeit the deposit.
-hence, as it’s stands, I stand to lose the 10% deposit, auctioneer fees plus Legals & cost on planning etc worth £28k
-so as it stands, this matter will be settled in the courts
I haven’t done anything wrong and followed legal advice and the law of the country but may still end up losing money if I lose the legal battle
Would like to get your opinion, in hindsight whether it would have been sensible just to avoid this stress and hassle and just gone ahead and completed knowingly I have been misrepresented (as the completion funds were my solicitor on the completion date) and then face the issues with the deposit, sitting tenants and rent arrears, payments etc after the completion
Thank you for your comment.
We have dealt with cases where an underlying agreement between the landlord and tenant was not disclosed and the auction pack clearly provided that the terms of the agreement between the landlord and tenant were as per the terms of the lease. However, this case is based on actual representations made. In your particular matter, it is not clear whether or not you were expressly told that there were “no problems with the tenants” or that the agreement with the tenants was exactly as set out in the tenancy agreements provided. It is also unclear whether or not all of the necessary formalities in relation to the assured shorthold tenancies were expressly said (or at the very least implicitly suggested) to have been complied with.
We would always recommend that a person considering bidding on a property at auction should first run the auction pack and relevant information pack past their own solicitor. Whilst there is obviously a cost involved with this, the purpose of that instruction of course is to minimise the risk of bidding on a property with more significant issues which would incur a greater cost or loss to the bidder.
From what you have written, it sounds as though your solicitors were protecting your position, but this may have been too late insofar as their instruction appears to have probably been given to them after your successful bid was placed.
There is little point providing advice with hindsight. Whether or not a solicitor has been negligent is an issue that is determined based on what a reasonably competent solicitor would have done at the time and faced with the information provided. However, your solicitors should have set out your options for you to enable you to make an informed decision as to whether or not to proceed with the purchase or to forfeit the deposit.
Unfortunately, without considering the documentation in much more detail we cannot really add much more to the position than we do above. If you would like to explore the matter in more detail, please do feel free to get in touch.
Good evening, I hope that you can help with my predicament!
I purchased a house in London at auction in April 2020. Because of Covid, the completion date was set for July 10. I sent the deposit and auctioneer fees promptly. However, sadly, the seller died of Covid four days after I signed the MofU and no completion has taken place.
Since then, we have barely heard from the seller’s solicitors, but it seems there was an issue with probate – an initial application was rejected due to lack of documentation, it was then resubmitted but we still don’t know the outcome. We also never received a management pack. My solicitor has also pointed out to me an anomaly in the original memorandum of sale – the auctioneer failed to delete either the words conditional or unconditional.
Given the lengthy delays and also a change in my circumstances – I’m not considering relocating to another part of the country, -I am now quite keen to extricate myself from the sale, or to at least know my options. Do you think I have grounds to withdraw and get back the deposit, and also reclaim some of the auctioneers fees considering the contract issue and the lack of management pack?
I have also become frustrated with my lawyer who has taken months to respond, at times, to emails and phone calls. They have also failed to outline an exit strategy for me. I wonder whether there are steps that they could have taken to speed this process along but haven’t.
Please can you help by advising me as to:
a) how can I extricate myself with as little financial loss as possible;
b) could/should my lawyers have done more – would another lawyer (such as yourself?) be able to speed things along or bring it to closure?
Many thanks
Thank you for your comment. The basic position with any contract is that if a party to the contract dies, it will vest in that person’s estate. This means the estate can potentially enforce the terms of any contract and likewise any other party to the contract can enforce the terms against the estate. I appreciate that your query is whether or not you are able to withdraw from the transaction. However, it is important to understand the context in which your query is raised.
We do not immediately know the answer to whether or not there are any grounds to withdraw from the transaction. Certainly there may within the contractual documentation be some scope to say that completion should have been by a certain date and in breach of this, you are now entitled to terminate the contract and withdraw from it. Having said this, it would not be unusual for there to be a requirement on a party to a contract to have served notice to complete before withdrawing from the contract.
A notice to complete is a formal notice obliging the other party to complete the purchase/sale. If they fail to do so, then a contractual remedy of rescission arises. Rescission enables a party to a transaction to withdraw from it and to be placed in the position it would have been in had it never entered into the contract at all.
Unfortunately we are not in a position to give you any advice on whether or not it would be appropriate to serve notice to complete in this particular matter. In order to do so we would need a better overview of the circumstances as a whole and a proper consideration of the relevant paperwork.
We suspect that what has occurred is that there is a hold up with obtaining a grant of probate and without this it is not going to be possible to convey the legal title to the property to you.
It is not clear whether or not the death of another party to a contract of sale like this would constitute frustration of contract, entitling the parties to go their separate ways. We think much would depend on what was contractually agreed as to the date of completion, as it was presumably envisaged good title being given to the property, which cannot be provided without a grant of probate which may take time.
As to whether or not your solicitor should or should not have taken any particular steps, we are unfortunately not in a position to advise on this. Beyond saying that it would normally be necessary to serve a notice to complete and that the other party would have to fail to comply with that notice before someone is entitled to rescind the contract, we would need to see your conveyancing file in order to provide advice on whether or not there is something further your solicitor should or should not have done.
If you would like to consider the matter in more detail, please do feel free to get in touch.
I bought a property at auction in 2015 which said a new lease would be granted. And that it was owner occupier suitable. It’s not.
my solicitor then said there were issues with seller also the freeholder, about owing service charges. My solicitor resolved this.
When my new lease came down i was asked to sign it front of solicitor”s secretary. At the time nothing was explained about major changes in it.
In fact the freeholder had cut the lease length from 199 to 90. Is this legal?
And since then the freeholders have every year chased me for a service charge that they owe. There have been something like 4 firms of solicitors driving me mad. And recently they tried to stop me paying the ground rent, as they claimed that i had not paid their solicitors cost at 2,500 for a bill of a 100 for their solicitors costs of 100. Which i was not billed for. And I thought leaseholders did not have to pay landlords solicitors costs. The landlord are Regus.
.
I feel like i have been hoodwinked. What can I do?
Thank you
Thank you for your comment.
The first thing that we note is that you purchase the property in 2015. The Limitation Act 1980 imposes “deadlines” to bring claims. The basic position in respect of claims based on a contract is that the limitation period by when a claim can be brought will expire 6 years from the date of the alleged breach of that contract. Therefore any claim against the seller, so far as one exists, may have expired or will shortly be expiring.
As for the issues you are experiencing, we cannot provide specific advice on our website. However, we can set out some of the basic principles. It is normally the case that someone that purchases leasehold properties does so subject to any existing breaches of the lease. This might be, for example, the historical non-payment of service charges or legal costs by the previous owner, so far as these are payable under the terms of the lease. What you are describing is actually a relatively complex area of law but the basic position is that a leaseholder is obliged to pay sums to the landlord if this is what the lease says.
As for the term of the lease, perhaps there has been some misunderstanding here. By way of example only, a lease with a 199 year term commencing on the 1st of January 1906 is the same as a lease of 90 years commencing on 1st January 2015. It sounds as though you may have purchased a property which had a shorter remaining term than would be desirable. In such circumstances, it is often the case that an attempt to extend the lease pursuant to the Leasehold Reform, Housing and Urban Development Act 1993 is made. Sometimes a property is sold or auctioned with the benefit of what is called a Section 42 Notice starting that process.
Unfortunately, we cannot really provide any further guidance without knowing more. If you would like us to look into you matter in more detail, please feel free to get in touch.
Hello There
I am hoping you can help. I have purchased a property via auction I was provided with the legal pack 3 days before the auction, despite enquiring about the property 3 weeks previously. The property was advertised as Free Hold, we inspected the property and were aware that part of the upper floor was over a shop next door, however all documentation and legal pack special condition didn’t identify any problems. We have since won the property, paid £9025 in auctions fees and 5% deposit. we cannot secure a mortgage as the property has a 32% flying freehold which renders it un mortgageable. I have gone down every avenue to try and secure funding. We believe that such a large Flying Free Hold should have been in the special condition we had conversations with the auction house prior to auction and they were fully aware we needed a mortgage to complete the sale and at no point was there any indication from the estate agent showing us the property or the auction house discussing it. Where do we stand as the auction house are standing by the fact that the title plan shows a flying free hold albeit not highlighting the size and implications this can have on being able to mortgage the property.??
Thank you for your comment.
From what you have written, we are afraid that it is unlikely that you have any recourse against the seller or auction house.
Sometimes it is possible to say that an auction pack was misleading so as to give rise to a claim for misrepresentation. A good example of this is the case of Atlantic Estates v Ezekiel [1991] which we refer to in our blog “Property Misrepresentation Claims in Practice”, which can be found here. In that case, a photograph of the wine bar being auctioned showed it being used as such. In fact the wine bar was unlicensed and the Court of Appeal held that this amounted to a misrepresentation as it could not be used as a wine bar without the licence.
Silence in itself, without some form of incorrect statement about the property, would not give rise to a claim. It is up to the buyer to decide whether or not, based on the information that they have, to take any risk on bidding for a property. There would therefore have to be something expressly stated to suggest that the property would amount to good security for a lender.
Whilst you may have made your intentions known, namely that you were purchasing with the assistance of a mortgage, it is likely that even if you were expressly told that the property would be fine to purchase and was good security for a mortgage, or was even mortgaged at the time, this is still unlikely to amount to a misrepresentation.
One reason for this is that it is more than likely that the contract of sale excluded oral representations. Another reason for this is that there must be a false statement of fact to give rise to a misrepresentation. A statement of opinion (i.e. that someone thinks that the property amounts to good security for a lender) does not amount to a representation. What is said or conveyed to the buyer must be a statement of fact, which is inaccurate.
Sometimes a mistaken statement about the legal position of a matter can amount to a statement of fact, but we are hesitant to suggest that someone’s opinion of the property representing good security for a lender would be anything but opinion, particularly on the basis that lenders consider a range of things, including the borrower’s financial circumstances, before agreeing to offer a mortgage.
If you are interested in reading about the distinction between a false statement of fact, law and opinion, Pankhania v LB Hackeny [2002], which we also refer to here, sets the legal principles out well.
We have to qualify the information that we set out here. We do not know the full facts of the matter what we post on our website is guidance only and sets out only broad principles. It should not be relied upon as a substitute for bespoke and properly considered legal advice. If you would like us to consider the matter in more detail, please do feel free to get in touch.
Hello, we are in the process of purchasing a property from auction. We were given a 56 day completion deadline which we stuck to and it looked like we were going to complete early but just as the deadline was approaching we were told that the sellers couldn’t complete yet. No mention of why was given until we pressed the matter and it turns out the sellers didn’t have the lasting power of attorney in place to be able to sell the property. Their story is they had tried to get it and thought they had but there was some sort of admin error which they weren’t aware of until close to completion. We paid £17k in auction fees and were counting on the quick turnaround for various reasons. We were even pressured into getting buildings insurance for the new property and to pay as quickly as possible which we did and only after this did we hear anything from the sellers side about not being able to complete. We haven’t been informed in writing about their need to extend the 56 days and in our opinion the matter has been handled very poorly. We are still waiting and wondering about our rights here and what steps can / should be taken. Do we have a misrepresentation case? Can we get out £17k back? Can we renegotiate the price of the house should they be able to sell in the coming weeks? Is it legal for them to try and sell the house without having any formal rights over it and on top of that taking a reservation fee from us, being shady about why there’s a delay and causing us extra expenses.
Thanks in advance.
If a party to the contract of sale is unable to complete and the other is, it would probably be worthwhile considering serving a notice to complete, subject to the terms and conditions attached to the sale. This is something you should discuss with your conveyancing solicitor. This is the starting point for rescinding, or “cancelling” the contract and recovering the deposit paid.
This does not sound like a property misrepresentation matter per se, but you are correct to identify that without the appropriate authority for someone to sell a property that does not belong to them (i.e. the power of attorney) if would not be appropriate to complete.
If you would like us to look into the matter for you, please feel free to get in touch.
I bought an auction property with tenant in situ expecting to use a mortgage for the purchase. Unfortunately i wasn’t made aware that the tenants are problematic and there was ongoing dispute with the seller. Prior to bidding on the property i did make enquiries from the lettings agent and was told that the tenants were responsive , pay their rent on time and was given evidence of statement of rent.
Now my mortgage lender has been unable to gain access to perform a valuation as the tenant is preventing access and will not respond to calls. This has been going on for weeks and i now have 3 days to complete. The seller has been unwilling to offer any help in facilitating access. I have no other source of funds so it looks like i may lose my deposit due to failure to complete. Can i claim back my deposit dure to misrepresentation as the seller failed to disclose issue with the tenant?
Thank you for your comment.
We are hesitant to suggest that this is a case where there has been a misrepresentation but it is possible, depending exactly what you asked and were told. The auction terms and conditions would also be very important to consider, as is the auction pack contents.
This is not a situation we have specifically come across before. The seller is still the landlord. Whilst you have exchanged contracts, you are not yet the legal owner and cannot force the tenant to comply with the terms of the tenancy agreement, which no doubt would contain provisions to allow the landlord or the landlord’s agents to attend the property on reasonable notice.
There may be some scope to suggest that the inability to access the property as a result of the seller’s tenant amounts to a frustration of contract (i.e. it cannot now be performed as a result of circumstances outside of the control of the parties) but we would need to consider this with you in more detail. This may entitle you to claim back the deposit. However, we suspect that much would turn on the contractual position. Ideally, a contractual clause allowing you access to the property for the purposes of carrying out a necessary valuation would be helpful, but we suspect that there is no such clause. We also suspect that the argument that the seller will adopt is that it was for the buyer to ensure that they had the finance in place before bidding and to enable them to complete. We would be interested to know whether or not there were any discussions regarding access for the purposes of obtaining a valuation prior to the auction itself.
We would be happy to consider the position with you in more detail if you would like to get in touch.
I have bought a property from an auction only to discover additional fees for ‘legal, admin and disbursement’ totally £13,000 on top of the usual auction fees and legal costs. Furthermore there is a second clause attached that states no disclosure will be made to how these fees a broken down. Whilst I accept this is a contractual obligation now having exchanged the fact that it is a commercial solicitor that is demanding this sum for unexplainable extortionate sum. As I am a consumer do to the implied terms of this contract surely the ‘Rights of Fair Trading/Terms’ apply. It is surely a misrepresentation to label it as ‘admin and legal costs’ if I am paying £13,000 for a service due to the explicit terms of this contract I have a legal right to be advised what they are for. I believe that I can argue that this is a ‘sham contract’ and that all the consumer regulations including misleading advertisement and misrepresentation rules apply. I am currently seeking expert advise on this as just because it has never been challenged and is practiced it does not make it right . Look at the PPI case? I think £13,000 is excess for conveyancing for a property at a guide price of £50,000! then to place these contractual clause by a commercial firm makes this a ‘sham contract’
Much will depend on the terms and conditions that the transaction was subject to. The basic position is that if someone has contractually agreed to be liable for a cost, whether or not that cost is currently known, this is still potentially enforceable contractual term. From what you have written, it appears that you have contractually agreed to pay the seller’s legal and other costs associated with the transaction.
We are not aware of the specific legislation that you refer to and we are not aware of any legislation which specifically states that a seller/auctioneer must set out what the charges will be in advance. It would generally be for a buyer to make their own enquiries until they are satisfied that they are prepared to bid for the property in question, including the position with respect to any contractually agreed charges. If those queries are unanswered, then the risk would lie with the buyer.
In theory, there could be a consumer/trader relationship and some scope to challenge the charges on the basis of the contract term being unfair. However, we are unaware of any specific case law on this point, so cannot point to a historical case which might lend itself to suggesting that such a claim would be successful.
Hi.
I’m in process of trying to get back my auction reservation fee.
I was told before viewing the property that the only yearly charges are £64pm maintenance fee which money wise was perfect.
So I bidded.
I won the auction bid.
First I was mislead by being told I have to pay 4.2% of the property price by estate agent Aprox £4.3k which i was then told it’s £6k minimum which I just let slip as no one replied back to me regarding it. (I have email proof of this)
In the auction pack it stated £64pm maintenance charge no other charges mentioned which I was told by the estate agent also…
I received the management pack after waiting 2 months for it (2 weeks before completion) to find that the maintenance charge is in fact £107pm, £10 ground rent and £1.5k reservation fund..
It has now affected my mortgage offer meaning I can only borrow £10k less that I was originally agreed to because of the of the maintenance charges were incorrect .
I have 3 documents of proof that I was told it was £64pm ( including the auction pack). Apparently it’s not enough proof…
The auction company have said it was the amount the seller was paying when filling out the form which again isn’t true because it was £98pcm back in 2018-2019 ( management pack proves this)
Where do I stand with getting my deposit back?
A caveat is in place but apparently it doesn’t cover this.
I’ve been mislead and lied to by both estate agent, seller and the auction pack.
Thank you for your comment.
We are unclear whether or not the transaction proceeded to completion or not. This would likely be relevant to the position as if the issue was brought to your attention before completion and you proceeded, there is a possibility that this may have the effect of affirming the contract or waiving any claims in relation to the matter.
On the assumption that completion did not take place for this reason, much will depend on the auction terms and conditions. A reservation fee is normally stated to be non-refundable, whether or not the matter proceeds to completion. Maintenance and other charges can sometimes vary, so it would be necessary to also consider whether what was stated in the auction pack took account of this. It does appear from what you have written that there may have been a mistake, if the seller had paid larged historical charges than those stated. This might give rise to a claim for misrepresentation.
It would be necessary to consider the matter in more detail before we could provide any conclusive advice. If you would like to get in touch to discuss further, please feel free.
I recently bid on a property a few days before the auction and it was rejected. The auctioneer agent contacted me via phone and said that the sellers could agree if increased the figure, which I did and bid was agreed. However, at this point I told the auction that the bid would be under the name of a different family member. I paid the auction fees and the 10% deposit over the phone via the other family members debit card. The auctioneer agent sent an email attaching forms to sign and return by the bidder. In addition, I was asked to send my ID with the bidders via email and return the signed bidder form.
Please note that at this point no legal pack was available to me or none was present on the website of the auction. The auctioneer agent said that no legal pack was available and there was no access to the site as they didn’t have keys and neither did the owners.
Thereafter, a week went by, two weeks went by, our solicitor had not been contacted by anyone. I further contacted the auction and after a few phone calls and emails eventually got a response stating that the sellers had not appointed a solicitor yet. 4 weeks passed. Eventually my solicitor contacted the auction house and was passed over details of the sellers now appointed solicitors. My solicitor contacted the sellers solicitors and communication began.
It became known to us at this point that the sellers had just completed their purchase of the property via another auction and at the point of sale where I bid for the property at the auction house the sellers technically never owned the property and therefore it should not have been marketed or on auction. The Seller has bought from a limited company which had floating charges against it.
Articles of Roup had been drafted up and provided to my solicitor 5 weeks after the bid, in which it states that the bidder would have to pay legal costs of the seller for £1000. My solicitor rejected the articles of roup and sent standard missives instead.
My solicitor wrote the sellers solicitor asking for a clean title to the property and entered into missives with the sellers. However, the sellers solicitors failed to communicate with my solicitor and more time passed. In the interim, my solicitor had carried out searches against the initial company that sold the property at auction to the current sellers, which showed charges against it. Therefore, asking the sellers side to provide us with proof that no charge was against the said property and that the title would be clean. Still no response.
The sellers solicitors have now come back saying that we are in breach of the auctions contract and therefore in forfeit of the deposit, losing £12000.
I was informed that the sellers have now put the property on the market and selling to someone else.
Therefore the auction house should not have put the property in the auction, as the seller hadn’t completed missives and the title wasn’t in their name at the point I agreed the bid. There was no legal pack or any documents relating to the property available at the point of bidding. The reason there was a delay of 4 weeks after the bid in my opinion was that the sale wasn’t completed and therefore couldn’t appoint a solicitor and hence why articles of roup were drafted up later.
In addition to the above the auction house are stating that I am the buyer and not my family member; although the completed form is completed and signed by them and has their name on it; and payment was made via their debit card.
In my opinion there is been misrepresentation by the auction house and the delay in responses by th auction house and the sellers solicitors is because the property wasn’t owned by the sellers at the point I placed my bid, and hence; after 4 weeks their solicitors details were provided after concluding missives.
I need your advice and it would greatly be appreciated.
Is this the fault of the auction house ? Should an action be raised against the auction house or the solicitors acting for the seller ?
What would the best way be to recover my deposit and legal expenses incurred so far ?
Thank you for your comment Raymond.
You mention “articles of roup”. We understand that this is something used in auctions in Scotland. Unfortunately we are unable to advise on Scottish Law. Unfortunately we are only able to provide advance, guidance and comment on the law in England and Wales.
Great article thanks. We bought a property at auction. Read the legal pack viewed the property. And thought everything was great put an offer and then we’re failed mortgage due to the non standard construction of the property. We were unable to mortgage the property causing rescindment of contract and charge of fees to the value of 20k. I know it is mentioned above that the duty of care does not lie with the seller in this respect but with me to undertake surveys. But I am surprised that nothing is mentioned at all or even the property is not advertised as a cash purchase due to this. The scheme of repairs for the property is 47k property value is 71k! And nothing was mentioned. What would u say is their any possibility of actionable misrepresentation or shall I just swallow this horrendous bitter pill and stay away from auctions forever
The issue that stands out here is that this sale did not complete.
While we cannot advise on individual issues over the web it would depend on whether a Notice to Complete was served and also what state the property was said to be in according to the auction pack. There are certain circumstances in which the deposit can be ordered to be returned by a Court but without having seen the exact correspondence and chronology between the parties it will be difficult to determine.
However you can of course contact us for a confidential discussion should you wish to explore this.
We have been served a notice and this has been extended till 8th December.
Thanks for your response and it will be good to explore options now before it is too late.
Hi
I have recently bought a suite that I had not been out to view. I have paid £13,000 for a bedroom with en-suite in penthouse that has 4 suites as was advertised. I have found out that the suite I have bought does not come with an en-suite (the other suites have them). By the looks of things the suite I have purchased comes with access to the shared bathroom.
What are my rights to break the contract for mis representation?
Thank you for your comment and I am sorry to hear that you are having this issue. Purchasing a property at auction is a high risk activity and whether there is a claim for misrepresentation will depend on what was actually in the auction pack or other paperwork supplied to you and other bidders, as you would have to be able to point to a specific statement by the seller that was false and that you relied upon. It also will depend on the content of the contract, as there may be an entire agreement or non-reliance clause in it or the auction’s conditions.
We are afraid, however, that we cannot give anything other than general guidance on our website, primarily for the fact that without considering the position in detail with our clients, we cannot give accurate advice.
If you wish to go through this with us further, please feel free to contact us for a confidential discussion.
I brought a property at an auction, and after renovating the property we tried to sell and found we had red ash in the floors. We got the usual report completed and to our surprise the company we contacted, knew all about the property as the previous owner who had sold it at auction, got this same company to carryout the testing and to verify there was red ash. He obviously choose not to let the auction house know there was red ash, even though you asked when putting a property up for auction if you have any reports pertaining to the property being sold.
Generally when buying from this particular auction house, they would tell me if the property potentially had red or black ask. To what degree is this classed as misrepresentation by the seller. To remove the red ash cost £10,000 and the removal and replacement of all fittings. And added an extra 6 weeks to before we could sell again.
Thank you for your comment.
We are sorry to say that it is quite unlikely that there is any sort of claim here. Unless something specific was said about the position, as a minimum that the property was structurally sound and free from defects, then there can be no false statement that has been relied on when entering into the contract (i.e. making the successful bid).
A seller, at auction or otherwise, has no obligation to volunteer information about the property, including materials used in construction. This is normally the remit of the buyer’s surveyor. It is also highly unlikely that there was any duty of care on the auctioneer to identify the problem. It is a matter of “caveat emptor” or “buyer beware” insofar as it is down to the buyer to decide whether or not they wish to make any bids based on the information that they have.
I bought a land in an auction for £3000 only to discover in the legal pack that i need to pay extra £3000 for the seller legal fees and extra £650 for searches . All these are in addition to the auctioner fee of £1000. This is rediculous. i have already pay £4000(3000+1000) and i am wanting advice how i can get a refund as i cannot complete the purchase due to the 3k legal fees
Thank you for your comment. Unfortunately it does not sound as though you have any option but to complete the sale.
Whilst we can only provide general guidance and pointers, and would need to consider the documentation and circumstances in more detail, if the terms of the contract were set out in the auction pack (as they normally would be) and these contained obligations to pay certain sums, then you will likely be bound by these.
Thanks for your reply. It is clear cannot complete the purchase because it does make any sense to pay over £5300 to buy a land worth only £3000 which means i will forfiet my money. There is a suggestion online that i might be able hold ground under “unfair contract terms” . Nonetheless i will also complain to my card issuer. Lesson learnt, stay away from property auction Never never again.
Hello Mark,
What would happen if purchase not completed? The 10`% deposit or £3000 requested happens to be the wining bid and that has been paid. And also what are my chances of deposit refund from Section 49(2) of the Law of Property Act 1925
Thank you for your further comments.
We are unable to give specific legal advice on our website. We are only able to provide general guidance which should not be considered a substitute for bespoke legal advice. This is primarily because without considering the circumstances as a whole, including the exact terms of any auction conditions, we cannot give accurate advice.
Section 49(2) of the Law of Property Act 1925 gives the Court a mechanism and legal discretion to refund a deposit. The Court will always apply the overriding principle that the deposit exists to ensure performance of the contract i.e. completion. The Court also recognises that there must be certainty with respect to the purpose of and intention behind paying a deposit. The Court does not exercise such discretion other than in exceptional circumstances. As mentioned, we cannot give specific advice but we would consider it unlikely that an unwillingness of a seller to complete on a purchase for no other reason than the contractual terms identified before the contract was entered into are no longer acceptable to the buyer.
Thanks you very much. One more question pls. The searches for the land was dated 24/02/2020 is that still valid for 11/11/2020. The seller solicitor searches were done in march
We are afraid we cannot say without considering the title documentation in detail but the basic position is that the buyer would need to be satisfied with the information that they had been provided with and if not, undertake their own enquiries and searches.
I bought a property at auction that had a lapsed planning consent to build an additional property in the garden of the existing house. The price was much more than a single property in that area would cost and the planning application number was on the auction for you to view the plans, in my view alluding to it being an investment.
Even though the planning had lapsed by 18 months I did not think that there would be a problem re-submitting the plans.
I paid my 10% deposit at the auction and them contacted the architect who submitted the original plans to act on my behalf to gain planning again. He informed me that the property could not be built as a local farmer owned the road that the new property would be accessed from and he was demanding £50,000 to give access.
The seller new this and a previous sale not at auction had fallen through due to this problem.
I have informed my solicitor that I do not wish to proceed with the purchase and I want my deposit of £40,000 back due to misrepresentation.
The sellers solicitor replied that he expected the purchase to be completed and if not we would be sued for any losses the seller would incur.
Please can you advise me on my options.
Thanks
We are unable to provide specific advice on our website. We do not have all of the necessary information and documentation to do this. We can, however, offer some general guidance.
It seems that you did not rely on any sort of representation by the seller that the planning permission was extant, that it would be easy to re-submit plans or that the plan you had in mind for the land would be achievable. It appears that you noted that the planning had lapsed before entering into the contract (by making a successful bid) and assumed that there would be no issues in proceeding in the way that you thought. Therefore even if the seller had actively stated that planning would be granted, you would not have relied on this statement as you undertook your own enquiries to satisfy yourself. It appears that they provided the details of the planning application and will no doubt argue that it was then down to you to check the position. We are afraid that this is the case, as the principle of “buyer beware” applies equally to auctions as it does any other property transaction.
Further, planning applications relate to a local authority’s function of ensuring compliance with planning policy. It is not generally relevant to the legal rights that anyone may have in relation to the property or land, in this instance, whether or not a third party may seek to exercise their rights to prevent the land being used in a particular way.
The seller was not obliged to disclose the reasons why the previous sale or sales fell through. Many properties are auctioned because there are some issues with selling the property in the “traditional” way. Many bidders at auction do not instruct a solicitor or surveyor to investigate the property before bidding, which is in contrast to a situation where a buyer makes an offer and the solicitor and surveyor investigate before contracts are exchanged. Purchasing a property at auction is always a risk. That risk can be mitigated by instructing a solicitor and surveyor to look at the auction pack and property before placing any bids.
As mentioned, we are unable to provide specific advice and you should ask your current solicitor about your options. However, it seems to us that your options may be limited to either forfeiting the deposit or completing the purchase, adapting your plans accordingly.
The purchase was agreed after the auction finished, it never met its reserve so the deal was finalised by phone. Does this still fall under an auction contract as the gavel never fell?
Thanks
Thank you for your comment.
At an auction, a contract is formed when the hammer falls. However, whether or not the auction terms and conditions will still apply to the transaction will ultimately depend on what the contractual documentation says. If the auction documentation was used, instead of new contract being drawn up, it may be that these terms and conditions still apply.
You mention that the deal was finalised by telephone. Unless a contract in writing was entered into, this would not comply with Section 2 of the Law of Property (Miscellaneous Provisions) At 1989. Save for a few exceptions, auctions being one of them, all contracts for the sale of land must be in writing. We suspect you mean that you agreed the terms of the purchase, which were then committed to writing.
I have purchased a property at auction recently to learn that it has knotweed which was not mentioned in the particulars.
I went to view the property on 2 occasions prior to the auction and Knot weed was cut to surface level and was not present.
I’ve owned the property 2 weeks and it’s growing and is causing all sorts of concerns and I have been told I have rights in issuing a claim,
Thank you for your comment Sandeep.
This is a tricky one. On the one hand, auction terms and conditions are normally drafted in such a way to attempt to exclude any possibility for a misrepresentation claim unless based on the contents of the auction pack, which are normally very limited in terms of information anyway. They attempt to place the entire risk of the transaction on the bidder. Further, it is not clear from what you have written whether or not an actual representation was made in the auction pack. There is a difference between staying silent on a particular point or actively misleading a bidder by suggesting that the property did not suffer from a knotweed problem when it did. If the point was not mentioned, then there can be no misrepresentation, as there was no statement to rely on when entering into the contract.
Having said this, a deliberate concealment of the issue could amount to a fraud and the basic position is that liability for fraud cannot be excluded from contracts. The burden of proof (what any claimant has to prove to win their claim) is set very high in cases of fraud. Normally there has to be shown an active intention to mislead the other party. This state of mind element can be very difficult to prove. Put into context, there may very well be a difference between someone mowing their lawn which contains knotweed plants but not realising what these plant are or the implications of this, and someone taking deliberate steps to cut back or remove the knotweed themselves knowing that specialist treatment is required by licensed companies and the cost associated with this. As a claimant is required to prove their case, it would be down to you to prove such dishonest intention.
Whilst you viewed the property, and it is fair to say that the issue may have been identified by you from an inspection had the cutting back not taken place, did you also appoint a surveyor? Normally this would be something a surveyor would check for. If so, there may be a potential professional negligence claim against your surveyor.
We would be happy to look into the position in more detail for you, so do feel free to contact us. However, perhaps you would like to make enquiries into the cost of removal first. This might put into context the potential cost to you so you can decide whether or not it would be cost effective to embark on a litigious process.
I bought a property at Auction in November 2019, it is bedroomed town house in Derbyshire. I had initially been registered to bid on another property but did not secure the property of preference. I registered for the Derbyshire property as i thought it might be a good deal too if the first fell through. I had the legal pack reviewed but did not go to see the property. I was not going to bid on the property but a sales agent from the auction house called me about an hour before the end of the online auction and encouraged me to bid on it saying it was a lovely property in good condition and that it may be a good investment.
I went ahead and bid and all was fine, I was paying cash so no problem with the sale going through. I secured a tenant for the property using the property description.
It was not until I got the keys that I discovered that the property, although a 3 bedroomed town house had been mis described. The description had said it was lounge and kitchen to the ground floor and then 2 bedrooms and family bathroom on the middle floor and a master bedroom and en suite to the 2nd floor.
The property actually has a garage and one bedroom on the ground floor, a lounge and kitchen to the first floor and 2 bedrooms an en suite and a family bathroom to the 2nd floor.
The layout of the property therefore had limited suitability for a family as no one would want a child to be on the ground floor when they were sleeping on the 2nd floor. I had to completely rethink the layout and create a smaller lounge and a small bedroom to the middle floor.
What I discovered is that the auctioneer used the description of another house type in the street which has the described layout.
I did review the photographs but as it did not say which room was which and had no floor plan I could only go on what was described.
I contacted the auctioneer who said that they were not liable as they say in the terms and conditions that they expect the buyer to be prudent and to have seen the property but then that does beg the question that as they register who has seen the property then why did they phone me and encourage me to bid and surely the fact that they used a description of another house in the street which was inaccurate for this property still means that they were negligent in describing the property.
It cost me £4500 to change the property which is still not totally satisfactory. I did not mind that it needed some work but don’t think I would have bid on it if had it been accurately described. Do you think I would have grounds to make a claim against them?
Thank you for your comment, Charleen.
Buying property at auction can be risky. The terms and conditions are the first thing which would need to be considered and without doing this, it would not really be possible to say what the contractual position is.
In some cases, the law of mistake might be relevant. There may be the potential for a claim here, however, this would depend a great deal on whether or not you were actively mislead or made reasonable assumptions about what you were buying. Also, it would be necessary to work out whether or not, as a result of any misleading information or mistakes, you altered the property to the description, in which case it could be said that your loss is all attributable to this. If alternations were made which do not reflect the description of the property as given, then there could be an argument to suggest that the cost of doing this work cannot be considered a loss caused by the erroneous description.
If your total loss was £4,500, then some caution should be exercised. Claims below £10,000 would generally be dealt with in the Small Claims Case Management Track (colloquially referred to as the “Small Claims Court”). The basic rule here is that the parties will not be awarded their legal costs. Whilst we do regularly act for clients with small claims, it is on the understanding that they will be unable to recover their legal costs. If not all of the £4,500 loss to you is attributable to the inaccurate description, then it would be important to keep an eye on the cost/benefit ratio.
Whilst we are only able to provide general guidance and pointers here, and not legal advice, we hope this is of some assistance.