290 thoughts on “Dealing with property auction issues”
Hi bought a piece of land at auction later found out approx 40% of the land is shared (not stated) sellers solicitor has been asked twice to produce the contract without sucess do I have to complete purchase Regards John
A contract can only be legally rescinded (rescission is where the contract is “reversed” and the parties are put into the positions that they would have been as if the contract was ever entered into) if there is a contractual clause to this effect.
Often, the standard conditions of sale, which normally apply to the contract for the sale of land, contain provisions for rescinding the contract in certain circumstances, such as where there is a material difference between what was thought was being sold and what actually is being sold. However, auction terms and conditions will often modify the standard conditions of sale. The contract should be reviewed carefully.
Sometimes, if damages are not a suitable remedy, the court can order rescission in a case of misrepresentation. It does not arise often because of the obvious difficulties in effectively transferring property back to the seller and damages to compensate for the loss are normally considered an adequate remedy.
In the absence of any reason, contractual or legal, to rescind the contract, then the basic position is that you would have to complete or you would lose your deposit.
It is not clear how the land is shared. There is a difference between a joint owner and someone that has a right to use the land. There may be other avenues available, depending on the circumstances, to resolve any issues.
Please do feel free to get in touch if you would like to consider the matter further.
Note: This is general guidance only and should not be relied on as a substitution for properly considered legal advice.
Hi, Bought house in auction. My solicitor found out company selling property does not own it. Seller solicitor confirmed it was mistake on Memorandum of sale. Seller solicitor says company mentioned on Memorandum of sale is also owned by same person and refused to change name to actual company who owned property. My solicitor wants to rescind the contract based on misrepresentation. Please advise if I can take matter to court or litigation team. Thanks
An individual with any claim can progress the matter through the Courts. This is their prerogative and the legal system exists to resolve disputes and claims. We think your query relates more to whether or not it would be advisable to proceed with a claim. This is a different question and depends on all of the circumstances of the matter as a whole, including the legal position.
We cannot provide specific advice on our website. We would need to consider the matter as a whole, including the contractual documentation. However, it is an interesting point and one which we are not immediately aware of any case law on. The basic position is that you cannot sell something that does not belong to you, at least not without making a suitable contractual provision for this in any relevant contract. On this basis, then it would conceivably be possible to rescind the contract, as the seller company (i.e. the contracting party) cannot complete and cannot transfer title in the property to you.
However, the memorandum of sale is not a contractual document per se. All this does is record the proposed parties to the transaction. It may be that the auction pack contained the details of the owner and the argument would then arise as to whether or not it was reasonable to rely on the memorandum of sale as a representation.
We would suggest that you speak with your solicitor in detail about the contractual position.
Hi Cunningtons, I purchased a property via auction in September 2021, with a mortgage in principal. At the time of purchase I ensured the seller was aware that I was a first time buyer and the purchase would be dependent on the mortgage to which they offered me 4 months for completion, taking the completion date to 13th January 2022. Since then I have conducted the initial homebuyers report as instructed by my lender, which came back with some issues in the property and they advised I would need to further arrange an additional damp & timber report for the property before they would be able to move forward with valuation for the mortgage application, this was in November 2021. I had the additional report arranged, which had 5 recommendations advised to be finalized, my lender at this point confirmed that if these works were conducted and an additional report arranged, the mortgage would be approved. I advised the seller of the report findings and had asked for access to the property to arrange the works to be completed and also if an extension on completion would be granted at all as I was a little concerned that we were already heading in to December and I would not have enough time to have the works completed, along with the additional report arranged and all the administration completed from both the solicitors and lenders side. I had no response from the lender until the 5th January 2022 to advise they are happy to provide access, which at this point was already to late for me to arrange any works to be conducted as the completion date was still set for the 13th January. I requested the extension again and having been going back and forth with my solicitor with no response from the seller until today when I was advised that they have served the notice to complete on the property.
My problem is that I have already paid a 5% deposit and reservation fee’s to a total of over £16k and stand to potentially lose and additional 10% per the terms of the auction contract, however I do not think that I should be liable to pay any of the deposit as I had done everything in my power to try to arrange for the works to be conducted for me to obtain the mortgage and move forward with the sale. I feel like the seller had genuinely just ignored all correspondence as the contract works in their favor but surely there must be something in place for buyers that are unable to conduct any works due to the seller hindering them in doing so and in turn not being able to complete. I understand fully that I would be at breach of contract if I did not try to complete the sale, but how can I complete works on a property that 1) does not belong to me & 2) I have no access to? It does not make any sense that I should have to lose £30k because the seller did not want to answer in a timely manner or grant me access. Please help as this is all quite stressful and I do not believe that I am at fault, I have no issue with the reservation fee’s being taken as I entered in to the auction contract but I do not think it is fair for me to lose a 15% deposit for something that I had no control over. Kind Regards
We do absolutely understand how stressful the position must be and we are sorry to hear about this.
Purchasing property at auction is high risk. A good consideration of the contractual terms is absolutely vital before bidding on a property. If the contractual terms do not allow for some leeway in a situation where a lender’s mortgage offer is conditional, then it is really down to the buyer to ask for different contract terms or decide whether or not to take the risk. Most of the time, the contractual terms are not negotiable. It is very important for any prospective bidder to consider whether or not they are able to complete, or if there is something that could hinder this. If a buyer is purchasing with finance, then it is very important to consider the circumstances in which any mortgage offers could be withdrawn and consider whether or not there is a possibility of this occurring before bidding.
The premise behind an auction is that it places all the risk on the buyer. It is unlikely that there was a contractual term or obligation on the seller to do anything to facilitate the sale. We would suggest that trying to negotiate with the seller is important to try and obtain an extension of time to mitigate any loss to you.
Depending on the terms and conditions applicable, there could be scope to argue that by giving you 4 months to complete (provided that this was before the auction concluded), it was perhaps an implied term of the agreement that they would respond promptly to requests for access. Having said this, we are very hesitant to suggest that this would be the case and we are not aware of any case law on the point.
We do have to point out that we cannot give legal advice on our website. We can only provide general guidance, which is not a substitution for proper legal advice which takes account of all of the circumstances and relevant documentation.
Delayed completion: what are your options when someone in your chain of property transactions is late? With a group of strangers all working toward completing on the same date, it's a wonder it ever works out on time.
This collection of cases of property misrepresentation claims should remind all of us how important it is to tell the truth on a Property Information Form
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Hi bought a piece of land at auction later found out approx 40% of the land is shared (not stated) sellers solicitor has been asked twice to produce the contract without sucess do I have to complete purchase
Regards John
Thank you for your comment.
A contract can only be legally rescinded (rescission is where the contract is “reversed” and the parties are put into the positions that they would have been as if the contract was ever entered into) if there is a contractual clause to this effect.
Often, the standard conditions of sale, which normally apply to the contract for the sale of land, contain provisions for rescinding the contract in certain circumstances, such as where there is a material difference between what was thought was being sold and what actually is being sold. However, auction terms and conditions will often modify the standard conditions of sale. The contract should be reviewed carefully.
Sometimes, if damages are not a suitable remedy, the court can order rescission in a case of misrepresentation. It does not arise often because of the obvious difficulties in effectively transferring property back to the seller and damages to compensate for the loss are normally considered an adequate remedy.
In the absence of any reason, contractual or legal, to rescind the contract, then the basic position is that you would have to complete or you would lose your deposit.
It is not clear how the land is shared. There is a difference between a joint owner and someone that has a right to use the land. There may be other avenues available, depending on the circumstances, to resolve any issues.
Please do feel free to get in touch if you would like to consider the matter further.
Note: This is general guidance only and should not be relied on as a substitution for properly considered legal advice.
Hi,
Bought house in auction. My solicitor found out company selling property does not own it. Seller solicitor confirmed it was mistake on Memorandum of sale. Seller solicitor says company mentioned on Memorandum of sale is also owned by same person and refused to change name to actual company who owned property. My solicitor wants to rescind the contract based on misrepresentation. Please advise if I can take matter to court or litigation team. Thanks
Thank you for your comment.
An individual with any claim can progress the matter through the Courts. This is their prerogative and the legal system exists to resolve disputes and claims. We think your query relates more to whether or not it would be advisable to proceed with a claim. This is a different question and depends on all of the circumstances of the matter as a whole, including the legal position.
We cannot provide specific advice on our website. We would need to consider the matter as a whole, including the contractual documentation. However, it is an interesting point and one which we are not immediately aware of any case law on. The basic position is that you cannot sell something that does not belong to you, at least not without making a suitable contractual provision for this in any relevant contract. On this basis, then it would conceivably be possible to rescind the contract, as the seller company (i.e. the contracting party) cannot complete and cannot transfer title in the property to you.
However, the memorandum of sale is not a contractual document per se. All this does is record the proposed parties to the transaction. It may be that the auction pack contained the details of the owner and the argument would then arise as to whether or not it was reasonable to rely on the memorandum of sale as a representation.
We would suggest that you speak with your solicitor in detail about the contractual position.
Hi Cunningtons,
I purchased a property via auction in September 2021, with a mortgage in principal. At the time of purchase I ensured the seller was aware that I was a first time buyer and the purchase would be dependent on the mortgage to which they offered me 4 months for completion, taking the completion date to 13th January 2022.
Since then I have conducted the initial homebuyers report as instructed by my lender, which came back with some issues in the property and they advised I would need to further arrange an additional damp & timber report for the property before they would be able to move forward with valuation for the mortgage application, this was in November 2021. I had the additional report arranged, which had 5 recommendations advised to be finalized, my lender at this point confirmed that if these works were conducted and an additional report arranged, the mortgage would be approved. I advised the seller of the report findings and had asked for access to the property to arrange the works to be completed and also if an extension on completion would be granted at all as I was a little concerned that we were already heading in to December and I would not have enough time to have the works completed, along with the additional report arranged and all the administration completed from both the solicitors and lenders side. I had no response from the lender until the 5th January 2022 to advise they are happy to provide access, which at this point was already to late for me to arrange any works to be conducted as the completion date was still set for the 13th January. I requested the extension again and having been going back and forth with my solicitor with no response from the seller until today when I was advised that they have served the notice to complete on the property.
My problem is that I have already paid a 5% deposit and reservation fee’s to a total of over £16k and stand to potentially lose and additional 10% per the terms of the auction contract, however I do not think that I should be liable to pay any of the deposit as I had done everything in my power to try to arrange for the works to be conducted for me to obtain the mortgage and move forward with the sale. I feel like the seller had genuinely just ignored all correspondence as the contract works in their favor but surely there must be something in place for buyers that are unable to conduct any works due to the seller hindering them in doing so and in turn not being able to complete.
I understand fully that I would be at breach of contract if I did not try to complete the sale, but how can I complete works on a property that 1) does not belong to me & 2) I have no access to? It does not make any sense that I should have to lose £30k because the seller did not want to answer in a timely manner or grant me access.
Please help as this is all quite stressful and I do not believe that I am at fault, I have no issue with the reservation fee’s being taken as I entered in to the auction contract but I do not think it is fair for me to lose a 15% deposit for something that I had no control over.
Kind Regards
Thank you for your comment.
We do absolutely understand how stressful the position must be and we are sorry to hear about this.
Purchasing property at auction is high risk. A good consideration of the contractual terms is absolutely vital before bidding on a property. If the contractual terms do not allow for some leeway in a situation where a lender’s mortgage offer is conditional, then it is really down to the buyer to ask for different contract terms or decide whether or not to take the risk. Most of the time, the contractual terms are not negotiable. It is very important for any prospective bidder to consider whether or not they are able to complete, or if there is something that could hinder this. If a buyer is purchasing with finance, then it is very important to consider the circumstances in which any mortgage offers could be withdrawn and consider whether or not there is a possibility of this occurring before bidding.
The premise behind an auction is that it places all the risk on the buyer. It is unlikely that there was a contractual term or obligation on the seller to do anything to facilitate the sale. We would suggest that trying to negotiate with the seller is important to try and obtain an extension of time to mitigate any loss to you.
Depending on the terms and conditions applicable, there could be scope to argue that by giving you 4 months to complete (provided that this was before the auction concluded), it was perhaps an implied term of the agreement that they would respond promptly to requests for access. Having said this, we are very hesitant to suggest that this would be the case and we are not aware of any case law on the point.
We do have to point out that we cannot give legal advice on our website. We can only provide general guidance, which is not a substitution for proper legal advice which takes account of all of the circumstances and relevant documentation.