Whilst not intending to be flippant, what happens depends on the various contracts involved, of which we suspect there are at least two; one with the auctioneer and one with the successful bidder.
When the hammer falls (or the online auction closes) it is generally the case that a contract is formed. A buyer can potentially claim specific performance. Specific performance is a remedy that the Court can award for breach of contract obliging the defaulting party to complete the deal.
We are aware that some online auctions are not really auctions per se. There may therefore still be some discretion that you can exercise to accept or reject the bids made.
You should almost certainly take the relevant contractual documentation to a solicitor to get advice as to what your prospective liability could be and whether or not there is scope to withdraw from the sale, which would be unlikely.
Having just failed to secure a property, despite being the successful bidder, I’ve learned a lot about the auction process. For example, one property I saw a year ago is currently listed for a June action as being capable of achieving £2500/month rental. The vendor said it needs “refurbishing” (it’s an old commercial workshop). and the photos are from a distance. They don’t say that it’s condemned, and that it has been empty for 10+ years. It has water pouring through the roof, and has the lowest possible energy rating so it is illegal to rent. It needs to be demolished and not refurbished. Another property was listed as Freehold but was actually a leasehold. Many bidders seem to be “overseas bidders”, so prices are going stratospheric. The successful buyers don’t even seem to visit the property after purchase, they are just “gambling chips” to resell in the future.
Another auction property 15+ years ago was sold as one with sea views but in fact, was a cliff-top property. It was not made clear just how precarious it was, the write-up just said “structural problems”). Between the hammer falling and completion, the cliff collapsed, and the buyer still had to buy.
Auction sales are always a risky business. A bidder would be well placed to ask themselves why a property is up for auction and not for sale on the open market.
We receive countless enquiries where a successful bidder’s mortgage lender has withdrawn funding after discovering an issue with the property. The vast majority of the time, we cannot help the buyer. All of the risk is contractually placed on them to ensure that they are able to proceed and the property meets the lender’s requirements. It is not therefore the seller’s “problem” if the buyer cannot complete and they lose their deposit.
We have seen some dubious practices and things said by a seller which really push the boundaries of honesty. We have seen ambiguous descriptions of properties, the inclusion of draft documentation with a view to suggesting this was an option of the successful bidder to use later when it is not legally possible, nebulous descriptions as to the rental yield of properties, incorrect explanations as to the position with any existing tenants (which seems to happen mostly with commercial property), the sellers not in fact being the legal owners and pictures which belie the actual condition of the property.
It is normally only where there is fraud or dishonesty that we can assist. Fraud or dishonesty cannot be excluded from a contract and therefore a fraudulent misrepresentation is normally actionable. Sometimes, if contracts are not drafted well enough, there is also scope to claim reckless/negligent misrepresentation.
Much of the risk involved can be minimised if a bidder takes the auction pack relating to the property to a good conveyancing solicitor to look at. The solicitor will be able to identify legal issues which could be an issue for their client or their client’s lender. They would not generally be able to assist with things such as undisclosed structural issues or non-legal aspects, but the investment in a good conveyancing solicitor before bidding on a property would almost certainly be worthwhile.
May I ask a question about an auction in reverse? I successfully bid for a small tract of land at auction on a rundown industrial estate – it wasn’t worth much being leasehold. (well actually, I bought to an auction contract as a “sold prior”). My offer was accepted. I was took the vendor a few weeks to gain the transfer license needed, buy which time he had changed his mind about the sale.
The auctioneer, knowing that the vendor had sold, agreed to try and get more at a subsequent auction, and so although the vendor was in contract to me, sold it for him to someone else. That means that the auctioneer sold a property knowing that the vendor was not entitled to sell it. Who is liable, the auctioneer or the vendor. My argument is that the vendor would have been unable to sell without the auctioneer’s help, so the auctioneer can’t just say it wasn’t his fault. The auctioneer accepts that an offer was submitted and accepted. Can I argue with any success that since I was the “owner to be”, the auctioneer sold it without my authority and so he is the responsible person rather than the former vendor? The difference between my agreed price and the final sale price is worthwhile but not stratospheric.
We are not certain from your comment precisely what the position is. However, if your bid was accepted, then the chances are a contract was formed on the terms agreed; this would depend on the format and terms of the auction, however. Sometimes, certainly with what is often called the “modern method of auction”, it is normally the case that bids are invited but there is no obligation on a seller/auctioneer to accept them.
When a purchaser exchanges contracts on any property, and the acceptance of a bid at auction can be considered exchange so far as it creates a binding contract, the purchase acquires an “equitable interest” in the property. That interest can be enforced. It might be appropriate to serve a notice to complete on the seller, compelling them to complete the transaction with you. Failing this, then there may be a claim for specific performance, which would oblige the seller to complete the transaction.
If a property is sold to a third party after exchange of contracts, then it is possible that the purchaser has not acquired the beneficial interest in the property at all.
We do not provide specific legal advice on our website. We would also need to consider the relevant terms and conditions applicable to the transaction in detail. However, there could be several possible targets for a claim. The seller themselves may be in breach of contract. The new owner may be capable of being compelled to transfer the property to you (although this is complicated). As for the auctioneer, there are some rare situations where an auctioneer can become personally liable to a buyer, but this does not occur often. There may be some basis of claim there, likely based on procuring a breach of contract between you and the seller, however.
Whatever the case, the most likely person capable of being pursued for any losses you have suffered will be the seller.
Do feel free to get in touch if you would like to discuss matters in more detail.
Hi Mark Thank you for your reply, regards my question to You on the 30/06/2023. As it was mentioned by you, ” statement of facts it is important”. I might have not been very clear on explaining the circumstances. Auction House did advertise two properties, 30 and 32 Balmoral Road as having full and valid HMO licenses, and in the Legal Pack, both Licenses were included. That was not the case , as on the reply from Liverpool City Council it was stated: 30 Balmoral Road does have a initial ( 1 year only ) License, whilst 32 Balmoral Road did not have a License. Properties were represented as HMO Licensed , but at least one of them was not, therefore it could not been legally used as a HMO property. Would we have a chance in the Court, or would it be better to go Ombudsman route? Best regards
Thank you for your comment. We cannot give specific advice on our website. If you would like to consider the position further, please do feel free to get in touch.
As to whether or not the Ombudsman or the Court is the best option, this will depend on the facts of all the circumstances and the evidence available. However, what we would say is that the Ombudsman is a consumer-facing body, and so long as it has jurisdiction to deal with the issue, would not cost anything to pursue.
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I sold my house on online auction 6 days ago in as personal family circumstance has now arisen i as the seller need to withdraw
What happens
Thank you for your comment.
Whilst not intending to be flippant, what happens depends on the various contracts involved, of which we suspect there are at least two; one with the auctioneer and one with the successful bidder.
When the hammer falls (or the online auction closes) it is generally the case that a contract is formed. A buyer can potentially claim specific performance. Specific performance is a remedy that the Court can award for breach of contract obliging the defaulting party to complete the deal.
We are aware that some online auctions are not really auctions per se. There may therefore still be some discretion that you can exercise to accept or reject the bids made.
You should almost certainly take the relevant contractual documentation to a solicitor to get advice as to what your prospective liability could be and whether or not there is scope to withdraw from the sale, which would be unlikely.
Having just failed to secure a property, despite being the successful bidder, I’ve learned a lot about the auction process. For example, one property I saw a year ago is currently listed for a June action as being capable of achieving £2500/month rental. The vendor said it needs “refurbishing” (it’s an old commercial workshop). and the photos are from a distance. They don’t say that it’s condemned, and that it has been empty for 10+ years. It has water pouring through the roof, and has the lowest possible energy rating so it is illegal to rent. It needs to be demolished and not refurbished. Another property was listed as Freehold but was actually a leasehold. Many bidders seem to be “overseas bidders”, so prices are going stratospheric. The successful buyers don’t even seem to visit the property after purchase, they are just “gambling chips” to resell in the future.
Another auction property 15+ years ago was sold as one with sea views but in fact, was a cliff-top property. It was not made clear just how precarious it was, the write-up just said “structural problems”). Between the hammer falling and completion, the cliff collapsed, and the buyer still had to buy.
Thank you for your comment.
Auction sales are always a risky business. A bidder would be well placed to ask themselves why a property is up for auction and not for sale on the open market.
We receive countless enquiries where a successful bidder’s mortgage lender has withdrawn funding after discovering an issue with the property. The vast majority of the time, we cannot help the buyer. All of the risk is contractually placed on them to ensure that they are able to proceed and the property meets the lender’s requirements. It is not therefore the seller’s “problem” if the buyer cannot complete and they lose their deposit.
We have seen some dubious practices and things said by a seller which really push the boundaries of honesty. We have seen ambiguous descriptions of properties, the inclusion of draft documentation with a view to suggesting this was an option of the successful bidder to use later when it is not legally possible, nebulous descriptions as to the rental yield of properties, incorrect explanations as to the position with any existing tenants (which seems to happen mostly with commercial property), the sellers not in fact being the legal owners and pictures which belie the actual condition of the property.
It is normally only where there is fraud or dishonesty that we can assist. Fraud or dishonesty cannot be excluded from a contract and therefore a fraudulent misrepresentation is normally actionable. Sometimes, if contracts are not drafted well enough, there is also scope to claim reckless/negligent misrepresentation.
Much of the risk involved can be minimised if a bidder takes the auction pack relating to the property to a good conveyancing solicitor to look at. The solicitor will be able to identify legal issues which could be an issue for their client or their client’s lender. They would not generally be able to assist with things such as undisclosed structural issues or non-legal aspects, but the investment in a good conveyancing solicitor before bidding on a property would almost certainly be worthwhile.
May I ask a question about an auction in reverse? I successfully bid for a small tract of land at auction on a rundown industrial estate – it wasn’t worth much being leasehold. (well actually, I bought to an auction contract as a “sold prior”). My offer was accepted. I was took the vendor a few weeks to gain the transfer license needed, buy which time he had changed his mind about the sale.
The auctioneer, knowing that the vendor had sold, agreed to try and get more at a subsequent auction, and so although the vendor was in contract to me, sold it for him to someone else. That means that the auctioneer sold a property knowing that the vendor was not entitled to sell it. Who is liable, the auctioneer or the vendor. My argument is that the vendor would have been unable to sell without the auctioneer’s help, so the auctioneer can’t just say it wasn’t his fault. The auctioneer accepts that an offer was submitted and accepted. Can I argue with any success that since I was the “owner to be”, the auctioneer sold it without my authority and so he is the responsible person rather than the former vendor? The difference between my agreed price and the final sale price is worthwhile but not stratospheric.
Thank you for your comment.
We are not certain from your comment precisely what the position is. However, if your bid was accepted, then the chances are a contract was formed on the terms agreed; this would depend on the format and terms of the auction, however. Sometimes, certainly with what is often called the “modern method of auction”, it is normally the case that bids are invited but there is no obligation on a seller/auctioneer to accept them.
When a purchaser exchanges contracts on any property, and the acceptance of a bid at auction can be considered exchange so far as it creates a binding contract, the purchase acquires an “equitable interest” in the property. That interest can be enforced. It might be appropriate to serve a notice to complete on the seller, compelling them to complete the transaction with you. Failing this, then there may be a claim for specific performance, which would oblige the seller to complete the transaction.
If a property is sold to a third party after exchange of contracts, then it is possible that the purchaser has not acquired the beneficial interest in the property at all.
We do not provide specific legal advice on our website. We would also need to consider the relevant terms and conditions applicable to the transaction in detail. However, there could be several possible targets for a claim. The seller themselves may be in breach of contract. The new owner may be capable of being compelled to transfer the property to you (although this is complicated). As for the auctioneer, there are some rare situations where an auctioneer can become personally liable to a buyer, but this does not occur often. There may be some basis of claim there, likely based on procuring a breach of contract between you and the seller, however.
Whatever the case, the most likely person capable of being pursued for any losses you have suffered will be the seller.
Do feel free to get in touch if you would like to discuss matters in more detail.
Hi Mark
Thank you for your reply, regards my question to You on the 30/06/2023.
As it was mentioned by you, ” statement of facts it is important”.
I might have not been very clear on explaining the circumstances.
Auction House did advertise two properties, 30 and 32 Balmoral Road as having full and valid HMO licenses, and in the Legal Pack, both Licenses were included.
That was not the case , as on the reply from Liverpool City Council it was stated:
30 Balmoral Road does have a initial ( 1 year only ) License, whilst 32 Balmoral Road did not have a License.
Properties were represented as HMO Licensed , but at least one of them was not, therefore it could not been legally used as a HMO property.
Would we have a chance in the Court, or would it be better to go Ombudsman route?
Best regards
Xhemil
Thank you for your comment. We cannot give specific advice on our website. If you would like to consider the position further, please do feel free to get in touch.
As to whether or not the Ombudsman or the Court is the best option, this will depend on the facts of all the circumstances and the evidence available. However, what we would say is that the Ombudsman is a consumer-facing body, and so long as it has jurisdiction to deal with the issue, would not cost anything to pursue.