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- Including out-of-date searches in the auction pack, which did not reflect the true position.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.
Your post emphasizes the importance of proper planning and preparation for business liquidation auctions. This is crucial to ensure a smooth and successful process.
Hello
Is it legal for auction/ seller list property on open market if property have Compulsory Purchase Order case confirmed and completed by government.
I won a property then I discovered CPO has confirmed for the property and the seller was hiding this information. The auction told me they will pass my information to seller lawyer to take legal action against me if I don’t completed the purchase I refuse to do because I think there is a fundamental issue and auction must not advertise this property from the beginning.
Any Advice, Thanks
Thank you for your comment. This is a very interesting question.
The basic position is that no seller has to disclose anything in particular in relation to a property. They can simply put it on the market, say “buyer beware” and “undertake your own enquiries”.
We do not immediately know the legal effect of a compulsory purchase order. We do not believe that it divests the owner of the property of their legal or equitable title i.e. the owner still owns it, just might be forced to sell it in the future. If this is the case, and the seller had the right to sell the property, we suspect that, subject to the information you were provided with and the terms of the contract, the risk was on you to take the risk in proceeding.
Hi, we’ve just bid on a property in a post auction bid, had our offer formally accepted and paid the 10% plus auction fees and now they have told us they have sold to someone else.
Is this legal?
Thank you,
Chris.
Thank you for your comment.
It would depend on the terms of the contract. The basic position is that when a winning bid is accepted, there is an equivalent of an exchange of contracts, committing the parties to the transaction; the buyer must buy and the seller must sell. However, the terms of the contract you entered into may say something different, for example, giving the seller the opportunity to make the final decision to sell. Certainly we would expect that you to be refunded the deposit you have paid, if the transaction was not proceeding. It sounds remarkably unfair if this has not happened and there may have been a failure of consideration entitling you to a claim.
Hi, I bid for property at auction sold by mortgage company and only later found out that there will be additional council tax and insurance arrears of previous owner that I will have to pay in addition. These could be substantial. So I will only know final price after completion. This was deliberately not made clear in legal pack and if I go through with sale I am likely to go over what I can afford to pay. It seems very dubious practice. Is there anything I can do? Thanks
Properties are often sold at auction when there are “problems” with them. The question always arises as why a property could not be sold on the open market. The basic position in any property transaction is ”buyer beware” or “caveat emptor”. This means that it is down to the buyer to decide, whether or not on the information that they have, they are prepared to proceed with the transaction. It is not normally until something else happens, such as the seller actively misleading the buyer about something, does this position change to the extent that it gives rise to a claim.
Hi there
A friend of mine has had their property up for auction for a few months with only a couple of bids that were too low for the them to accept. One of these bidders has contacted them privately to ask if they could purchase the property outside of auction, giving my friend/ the seller the % fee the auction house would have taken. My friend is tempted, but in the auction contract, it says they would be liable for fees if anyone who has had negotiations with the auction house exchanged with them outside of auction.
I wondered how the auction house would know if this happened – do they keep checks on land registry/ the property ? i suggested to my friend it might be too risky, but then noticed this forum so thought I would ask .
Thanks
Thank you for your comment.
It would be a fairly standard estate agency contract to include a clause making the seller liable to pay their commission if a sale proceeded with someone that the agent had introduced. This is of course what they are being paid to do. We cannot say with any certainty (and cannot provide any specific advice here in any event) what would happen or what your friend would become liable for if they proceeded with a sale to someone that bid on the property during the auction.
As to whether or not the auction house/agent would find out, this depends on what they keep a record of or monitor. We have acted for estate agencies in commission disputes. Our clients are normally well advised to keep an eye on the HM Land Registry registers. When a transaction takes place, this normally triggers a change to the register. If it transpires that the sale proceeded to a person introduced by the agent during, for example, a period of sole selling rights, or the sale otherwise triggers the payment of a commission according to the terms of the contract, then the failure to pay this commission would normally amount to a breach of contract, entitling the agent to pursue that commission. We have also successfully recovered interest on sums due, when the transaction has been identified at a later point in time, well after completion, but the contract says that the commission is payable at an earlier point in time, normally on completion.
I understand that a damages claim after breach of contract attempts to put the innocent party into the same position if the contract was completed. How often is a damages claim taken to court. Is there any case law. What are the considerations bearing in mind the seller receives a significant amount from the 10% deposit.
Thank you for your comment.
Your question is in fact immensely broad. Entire books are written about the law of damages. The vast majority of cases that go to Court claim damages. There are therefore countless cases on the subject.
You are correct that to a large degree, damages for breach of contract aim to put the aggrieved party in the position they would have been in had the contract been performed.
Because damages are compensatory, the Court can award damages that take account of consequential losses that follow the breach. There are tests to apply regarding the “remoteness” of the loss caused by the breach and broadly, the type of loss suffered would have to be within the contemplation of the parties at the time the contract was entered into.
The terms of the contract itself can also have a material impact on the level and type of damages that can be claimed. Limitation and exclusion of liability clauses are very common.
We are not really sure what you mean about the seller receiving a significant sum from the deposit. In any case where a breach of contract is alleged and the claimant seeks damages, if the claimant also legally owes the defendant money, then the defendant can claim “set-off” and effectively say that what they are owed should reduce the amount of the claim.
We bought a property at auction. Unfortunately we made a rookie mistake and didn’t do a survey or get a solicitor to review the legal pack. We were aware of some damp in the basement but didn’t anticipate significant problems. We have found out that damp is significant and the lender have insisted all work is done before mortgage is offered. However we are also aware that regularisation work was not completed so we suspect other building control issues might emerge. We cannot do the work until completion and we cannot afford a bridging loan. We will have to pull out. I understand we will lose our deposit and have to pay auction and solicitor fees. The market is now relatively stable since December 2022 so I cannot see how they can claim further damages. Is there anything else we might be liable for ?
Thank you for your comment.
We cannot really say what you may or may not be liable for without considering the contractual documentation.
Hi
We have purchased a property at auction and found out it has a major damp problem, potential to be up to £30,000 + It is a ground and basement flat. We then found out that building regulations have not been signed off and there could be major issues with the building work.
Can we withdraw from this purchase. We have already put down a deposit of £50,000.
The bank with no lend until remedial works are done and they don’t even know about the building regs issue yet.
Help !! not sure what the total cost of the works will be. I feel that this was mis-sold as a 3 bed flat when it has not passed regulations yet.
Thank you for your comment and we are sorry to hear of the circumstances that you are in. Whilst of no real consolation for you, we do regularly see situations where individuals have bid on property only to discover that there is an issue significant enough that a lender will withdraw their mortgage offer.
In these circumstances, whether or not there is any prospect of withdrawing from the transaction does depend on the contractual terms agreed between the parties. Normally, auction terms and conditions are such that all of the risk is placed on the buyer to undertake their own enquiries. If they are not given the opportunity to do this, then the buyer has to decide whether or not to proceed with the risk of purchasing the property and there being something wrong later.
Unless it can be said that you are misled by the seller (and often this needs to be deliberate rather than accidental because of the auction terms and conditions) there may not be much that can be done.
However, if you would like to consider the position in more detail, please do feel free to get in touch.
Hi,
In October, I won a property via auction which I viewed in September and paid the reservation deposit as required by the auction house. The house was in good order when I viewed the property in September with no obvious damage.
In late November and early December I instructed some survey work. Which highlights a collapsed ceiling which wasn’t there when I viewed the property. I informed my solicitor and the auction house and they told me they informed the seller who is instructing contractors to repair the ceiling which wasn’t like that when the property was advertised and when I viewed it.
In early January the seller’s solicitor’s confirmed that the repair work was completed by the seller himself and are unable to confirm the extent of the repair or provide guarantee for the work done.
I went to the property with 3 different contractors who all confirmed that the repair work is subpar and highlighted another area in the property where the ceiling is drooping and will need repairing. Again this wasn’t like this when I viewed the property.
The seller is refusing to make good the repair with professional contractors or reduce the price to reimburse me for the cost of the repair. The quote is £2550 for the repair.
I don’t know what to do and my reservation deposit is at stake here. I thought that the seller would have to maintain the property in the state I won the bid on.
Can a buyer pull out of the sell and get the reservation fee back based on the fact that the property is not as it was when viewed and won at auction? And given the seller can not guarantee the work done there are potential safety risks?
The basic position here is that the terms of the contract are going to be very important. As a starting point, we would need to consider these in detail as to what the position is with respect to subsequent events. Certainly in a “traditional” conveyancing transaction where there is an exchange and then completion, the terms of the contract will dictate who it is that needs to maintain the property and insure it.
There may be a basis of claim here for misrepresentation, but this would involve a good consideration of the facts of the matter. Sometimes there is an obligation to update the purchaser when there are significant developments, however this will depend on the terms of the contract. With respect to misrepresentation, sometimes there is a basis to claim this because the previous representation has become untrue. In context, if the seller gave you the impression of the property being in a particular state and allowed you to continue under this misapprehension, knowing that it was not true, there might be a basis of claim here.
What you should be aware of however is that if the value of your claim is below £10,000, it may end up being dealt with in the small claims case management track. This is colloquially referred to as the “small claims Court”. Generally speaking, it is not possible for the parties to recover the legal costs that they incur in the small claims Court. With this in mind, it would be important to consider whether or not it is cost effective to pursue a claim.
If you would like to consider the matter in more detail, please do feel free to get in touch.
Hi.
What if I bought a land and did not read the legal pack carefully and missed the fact the address and postcode on the
Groundsure homebuyer report and also the drainage report legal pack was different to address on the TR1 & the plot of land I bought ?
Thank you for your comment. Broadly, if anyone has made an error, it cannot really be said that this is someone else’s fault.
Having said this, sometimes the fact that the “truth” can be discovered had the contract or other documents been properly checked is not a defence to a claim for misrepresentation; much would depend on the context and factual matrix of the matter.
We can’t give specific advice on our website, but broadly, in any sort of claim “causation” is important to prove. Put another way, it is necessary to show that the defendant “caused” the loss to the claimant. If the defendant did not cause the loss, it’s hard to see how they could be held liable for it.
Hi.
Bought a house in GoTo auction. Paid nearly 6k buyers premium. Was a committed buyer and was waiting nearly 7 months to complete. Turns out seller didn’t have land registry sorted and sell fall through.
Lost over 10k for legal fees, removal, storage . Had to move abroad and our daughter wasn’t able to go to school due to lack of permanent address.
What are my rights? Who is eligible for damages?
Thank you for your comment and we are sorry to hear of this.
It is somewhat drastic to have to move abroad and likewise, it is difficult to see how any breach of contract or misrepresentation on the part of the seller, so far as there is any, would render them liable for such losses. Unless it was expressly made clear that this would be a consequence for you when you entered into the contract, damages for such losses might be considered too “remote” because it is difficult to see how the seller could have seen that happening.
In terms of your rights, this depends on the terms of the contract you entered into. Certainly most people would expect a seller of property to have the right to sell that property, if this was the issue. However, it isn’t clear what the issue at the Land Registry was. Much would depend on what the issue in question was and what contractual terms you agreed to.
Hi I won a bid for land in Glasgow Scotland , I had not payed a deposit and there was very little information from Future Property auctions the advert was for an area of land when the sent through the title deeds a large area of the advertised area was not on the title I have refused to pay anything and feel duped !
Anything I can do
Thank you for your comment. I am afraid we cannot advise you on Scottish law.
I put in an offer on a property which was up for sale via !I am Sold” Modern Auction, before there was an auction date. The offer was accepted. I needed to have a mortgage for the property, so was concerned about losing my reservation fee if I wasn’t able to secure a mortgage on it (it was a bit of a doer upper). The auctioneer assured me they couldn’t see any reason why I wouldn’t be able to get a mortgage on it, but suggested I put in a caveat clause. I did this and it was accepted by the vendor. The caveat stated :
The Seller agrees that if the Buyer has been unable to exchange contracts for the purchase of the Property within the Reservation
Period for any of the following reasons, the Reservation Fee paid under clause 1a of this Agreement is to be repaid to the Buyer
within 5 working days after the Termination Date:
a. Where the purchaser’s mortgagee values the property at less than the purchase price, or requires a retention from the
mortgage advance and where attempts to renegotiate the purchase price are unsuccessful, the reservation fee/deposit will
be refunded subject to evidence being provided in the form of the Mortgage valuation or survey.
So I signed the agreement and paid the reservation fee.
I tried 2 mortgage companies the first valued it a 0 until work had been done and then 10000 less than the agreed price. The 2nd mortgage company said a complete NO. I tried to renegotiate but the seller wouldn’t budge from the original agreed price.
I Am Sold are now refusing to refund me my reservation fee.
Do I have a case to claim this back. It’s a huge amount of money to lose and is now preventing me from purchasing another property.
Thank you for your comment.
Whilst we would need to consider the contractual position as a whole, if it was agreed and understood between the parties that in the event you are not able to secure finance your reservation fee would be refunded and there is a contractual clause which reflects this, then yes, there would be a basis to claim back the reservation fee.
Presumably you have put this point to the other side already and we would be interested to know what the response to is was.
Do feel free to get in touch.
Hi please can you advise me
We won a property and paid the deposit plus fees . We had the mortgage survey and was happy with the property . For some reason the mortgage company sent another surveyor on the 21st December. Where he noticed a substantial leak/ flood
Today is the 4th Jan
We have heard today that they work pay the mortgage until it’s been fixed and revalued due to damage.
We didn’t know anything about this leak until today. No one has contacted us to even prevent any more damage to the property.
We are due to complete on the 12th
The house is wrecked we don’t think they will give us the mortgage due to the damage . Where do we stand at pulling out fees and costs please
I Cant find anything about break of contract in my contract .
If we had know when they agents new in the 20th we could have prevented so much damage to the property . Instead it’s been sat for weeks full of water
Thank you for your comment.
We can’t advise people on our website, primarily because we do not know the full facts of any particular circumstance. However we are able to provide general guidance.
In respect of your position, much will turn on the terms and conditions agreed and who has agreed to be liable for the property from the auction to completion.
From what you have written, it is unclear whose “fault” this situation is, but we would be interested to know why the mortgage lender felt the need to undertake a further survey.
As mentioned, much will turn on who has agreed to be liable contractually for looking after the property from the auction to completion.
If you would like to explore the position in more detail, do feel free to get in touch.
Hi,
We’ve bought a property at a modern method auction and paid the reservation fee but not yet exchanged.
We’ve had a survey done and it states that there is evidence of flooding in the basement with standing water present. The exact cause if which is unknown, either high water table or a leak of some kind and is historical causing other issues including fungal decay and damp issues.
I’ve look at the sellers enquiries and where they were asked ‘Is the property affected, or does it contain: flooding? They’ve answered ‘no’
Do we have a case against the seller misrepresenting the property and so be able to claim back the reservation fee we’ve paid to the auction house?
Regards
Ben
Thank you for your comment.
The answer to your query is that you probably do have a basis to allege misrepresentation. If you were expressly informed that the property had never been affected by flooding but you have evidence that this statement was factually inaccurate (i.e. evidence to suggest that during the period of ownership, the sellers experienced flooding).
Also, we do not really understand how you have purchased a property but not exchanged. Normally the highest bid would be selected at the end of the auction and this would be accepted. In effect, this would be the exchange of contracts.
Do feel free to get in touch if you would like to consider matters in more detail.
A field was sold off in plots in a back to back sale. The completion date was bought forward with 7 days notice. Upon completion we discovered an Article 4 on field which we missed on searches as was a different road name and village. The article 4 means any fence or gate needs planning permission. 2 years later we are still trying to get land registered. The neighbours, who were very vocal about a planning application for fence and gate, never mentioned until 2 years later that they owned the entrance and track, which we were told was reserved land with a 6m track. The reserved land came up for auction and our neighbours have built a gate leg fence with a second gate right acriss the track leaving 3ft access, and keep taking our lock off of our gate and putting their own lock on. saying it is their gate. The track that they have built on is subject to the Article 4 map, but they keep referring to a 1950 land registry map with a different boundary line. Are we able to overturn the sales as we no longer have an unrestricted access 6 metres wide, or does this become a boundary dispute. We have contacted the council as we think they breached the Article 4. But why wait 2 years before speaking up. If we try and overturn the sale as misrepresented access, track and coordinates, how do we ensure that the seller does not just dissolve the company? Which they look like they do regularly as does the auction house.
Thank you for your comment and we are sorry to hear about this. Disputes with neighbours can become extremely stressful.
From what you have written, there are quite a number of points which we would need to look into in more detail. In respect of your particular query regarding “overturning” the sales (by which we understand to mean “rescinding” or “cancelling” this is a possibility but subject to the Court’s discretion. Ultimately, if the Court decides damages are a suitable remedy, this is what it will reward.
Turning to the substantive elements of your comment, it might be the case that there is scope to argue misrepresentation or perhaps a breach of duty. We suspect that this is less likely to do with the unrestricted access in itself being smaller than was (presumably) explained to you and more to do with the presence of something which is an incumbrance on the title (and a planning condition might be such). There is some recent case law on the point (SPS Groundworks & Building Ltd v Ms Satvinder Kaur Mahil [2022] EWHC 371 (QB)). In this particular case, the land was also auctioned. Despite the fact that the seller might have discovered the issue (an overage agreement) had they looked further, the Court, on appeal, said that the seller had failed to comply with their common law duty to disclose this particular issue, being an incumbrance.
Without going into more detail with you, we cannot be certain whether or not this case has any relevance to your matter, but please do feel free to get in touch if you would like to explore matters further.
I won a property in auction and I have send deposit which form the contract. Two weeks later the auctioneer called that the seller do not want to sell again because they feel that the property is been seller lower than current market rate of which i notice the seller is getting greedy. I have contact the seller solicitor and they are not willing to release information about the seller despite the fact that I am still one is going to pay for their services to the seller which is on the legal pack. My deposit is still the seller solicitor and I have already serve them Notice to complete without no response from them. I want know if I have a case with seller if I go through litigation process.
Thank you for your comment.
From what you have written, it appears that you have served notice to complete and the seller has failed to complete. In this case, the remedy would be to rescind the contract or alternatively, pursue a claim for specific performance, obliging the seller to transfer the property to you at the agreed contractual price.
A property was listed for an auction via I am Sold, the seller accepted our offer days before going live into the auction. The same auction rules applied, I paid a reservation fee to the auction as well as the 10% deposit, we were meant to exchange on 31/10/2022 but the seller and the auction misled the sale by saying the property came with operational CCTV and alarm covering the whole property and land. The seller started messing around making low offers, in terms of CCTV/Alarm and saying it wasn’t installed or working.
Nevertheless we wanted to complete, then go after the auction/seller for our losses, they agreed to meet on site today to do the key handover and complete at 1pm but no one turned up with the keys, called the auction they stated the keys with the seller who are in Scotland and cant complete until next Tuesday. I believe the estate agent, auction and seller are playing games, as we’ve seen people removing items from the property on a daily basis .
The property is costing us £1,000.000 and have been getting messed around, can we sue them for delaying the matter and lying around CCTV/Alarm?
Thank you for your comment.
What is or is not to be included in the sale is going to be a matter of what was contractually agreed. In short, if it was the case that a representation was made that the property included working CCTV, then there may be a claim for breach of contract.
As for any delays in completing, you should consider with your solicitor whether or not to seek to rescind the contract at the expiry of the period of notice given in the notice to complete or pursue a claim for specific performance, obliging the seller to complete.
Hi, I plan to bid at auction for a property that is part of a deceased estate. It is sold by the Government Legal Department with “no title guarantee”.
My understanding is that the freehold property is sold by Bona Vacantia and is part of an unclaimed estate. If I buy it, what happens if the estate is claimed? Will the Crown pay the claim? Would I be impacted in any way?
Any help you can provide will be greatly appreciated
Thank you for your comment.
We cannot give specific advice on our website, just general guidance, which shouldn’t be considered an alternative to properly considered legal advice.
Purchasing a property at auction is no different to purchasing a property from the open market in that checks, searches, surveys and enquires can help identify problems and assist the buyer to decide whether or not proceed.
The primary difference with auction properties is that often, the buyer is not afforded the opportunity to do this. There is no obligation on the seller to provide information, respond to enquiries or accommodate any other checks on the property. This means purchasing a property at auction is a high risk activity, particularly if relying on funding from a mortgage lender. A mortgage lender will not lend against the property unless it is satisfied that there are no problems with it. We regularly see situations where problems are discovered by the lender after the winning bid when the buyer is committed to the purchase, causing the lender to withdraw their offer of funding. The buyer is committed to the purchase and unless they can find the money elsewhere (and normally there is no time to do that, as there is a deadline for completion) they will lose their deposit because they are unable to proceed.
It is always recommended that someone considering bidding on a property at auction instruct a solicitor to consider the contents of the auctions pack and undertake as many searches as possible. Whilst there remains a risk to the buyer with any auction property, instructing a solicitor helps to minimise that risk. During that instruction, consideration can be given to the title guarantee.
No title guarantee means that the seller cannot say whether or not they are entitled to sell the property that they are in possession of. As to what happens if someone comes out of the woodwork, it would depend on the circumstances. It would also be worth considering whether or not this is an insurable risk, which in many cases it may be. This is something to consider with your conveyancing solicitor and we would always recommend doing so before bidding on a property.
Could I please get some advice .
My building plot has been sold on I Am Sold auction.
Auction pack clearly indicated that there is a council CIL demand notice issued for this property which is unpaid.
When the conveyancing process started my solicitor has informed me that I am, as a seller ,responsible for paying this fee.
This was not discussed with me before the auction.
I understood that the buyer will pay these charges as he had a chance to adjust his bid accordingly.
Are there any legal documents or regulations related to my problem?
I will appreciate your advice.
Thank you for your comment.
We cannot give specific advice on our website, not least for the fact that we do not know all of the relevant information and haven’t seen the documentation involved.
Community Infrastructure Levies (or CILs) attach to the land, in that it is the “landowner” liable to pay this charge. Who is therefore liable for the charge will depend a great deal on the contractual position between the parties.
If it is the case that the landowner is liable for the charge, and the contractual terms are such that this liability passes to the successful bidder, then your assertion that the buyer is liable for the charge is probably correct.
Do you know of any cases where an RTM claim has been served on the legal freeholders after they exchanged at auction to new freeholders but prior to their completion.?
The auction info specifically said the freeholders had the right to manage but the claim was served before completion.
Apologies if this is way outside your ‘comments’ brief.
Thank you for your comment.
I would need more details of the claim to advise properly, but I assume it has been made by the leaseholders and would need to be amended to name the new freeholders and re-served.
Please contact our Litigation department to discuss this further.
Hi, I brought a property beginning of May under auction. I was then told that because it was under shared ownership it needed to go through a process called staircasing. We then received draft contracts and the deadline for the 56 days to be up was 8th of September. It is now the 31st of August and I have been told due to Orbit and some other things that I will not be completing for at least another month due to complications at the sellers end. By the sounds of it the property should never have been up for sale via auction. What are my rights with compensation because I paid over £7k for an auction property that is taking a lot longer then it should take and is taking the same amount of time a normal property would take? How can I go about compensation? I need a bit of legal advise please
Thank you for your comment. Buying property at auction is first of all a very high risk activity and buying a property on shared ownership is also not straightforward.
Based on what you have said, and without having had sight of the contracts or the terms of the auction at which you bought the property, both of which may affect your position and so should be consulted in any event, it appears that it is the seller who has failed to complete. Being the top bidder at the time the hammer falls on the auction contractually binds you to buy and the seller to sell the property in question on the terms set out in the draft contracts provided. These are usually extremely restrictive and placed mostly in favour of the seller. However, if the seller fails to subsequently complete on the contract within the time allotted, and absent any variation between the parties of the contract to that effect, he is in breach.
You therefore will have a choice of remedies. Either you treat the failure to complete as a repudiatory breach and seek to pull out the contract and demand the repayment of any deposit together with the losses of and occasioned by the failure of the seller to complete, or you can serve Notice to Complete and, assuming you are ready, willing, and able to complete on the purchase, subsequently seek from the Court an order for specific performance of the contract requiring him to complete and also to pay your losses of and occasioned by his failure to complete. Essentially you therefore have to consider whether or not you want this property.
Of course, this all will depend on the terms of the auction and the terms of the contract of sale which will affect your rights in this regard. In addition to get the specific performance being “ready, willing and able” means having funding in place either in cash or a definitive mortgage offer that would in theory mean that if the completion date were to be set for tomorrow, for instance, you would be in a position to complete immediately.
Please feel free to telephone our litigation team at the Braintree office if you are seeking additional advice.
Hi – I recently bought a plot of land in an auction. I have since found that there are failed planning applications for the plot. The plot was named differently in the auction sale to the name used on the planning applications, and I have only become aware of them after my successful bid. Would this be a case of misrepresentation, and could I cancel the purchase on these grounds? I have paid a 10% deposit but not completed on the sale. Thanks.
We have not come across an issue like this before but fundamentally, if you thought you were purchasing a different piece of land than you were, there may be scope to rely on the terms and conditions of sale to rescind the agreement.
It may arguably be a misrepresentation if you relied on the description of the property to undertake enquiries to find out whether or not there were failed planning applications, but it is an arguable point. It was not so much the factually inaccurate description of the property which you relied on when entering into the contract, but the fact that you were unable to identify planning applications.
There could be a basis to claim negligent misstatement, but this could be difficult, as the terms and conditions of sale will no doubt look to limit liability in this respect and there would normally have to be some sort of duty of care between the auctioneer and the bidder, which is not ordinarily the case.
Do feel free to get in touch if you would like to consider the matter in more detail.
Thanks Mark – this is very helpful.
I am looking to auction a property however we are going through a tribunal for letting the property as a holiday let – we have stopped the holiday let to stop breach of the lease. Would this need to be disclosed at the auction ? Also there the windows are needing to be changed in the property with agreement of the land lord. Does this need to be disclosed?
Thank you for your comment. The starting point is that there is no duty to volunteer information to a buyer. However, if you are asked something for instance on a Property Information Form or another document that a buyer may be entitled to rely upon, you must answer it accurately and correctly, and any information that you do volunteer must be correct.
In this circumstance I think you may wish to seek advice from the solicitor who will be acting for you on the sale as they will be best placed to assist you in preparing an auction pack and advising on what you may want to disclose in the context of your transaction.
HI. I need your advice. The buyer (bidder at the auction) deposited 10% as per the term and conditions of the auctions. Buyer agreed to complete by 25th May 2022. However, on 25th there was no completion and my solicitor send a notice to complete to buyer. Buyer came back and asked for another 6 weeks and made some excuses. I felt sorry for him and allowed another 6 weeks to complete. finally, after 6 weeks his solicitors confirmed that they were not able to complete as buyer had some issues with the gifts he was receiving! (i was surprised to learn about the gift. they ask for another 6 weeks which I refused. The property is back on the market.
Now, as per the term of the contract with the auction, I should receive the deposit money. Action company told me I will get 5% and they keep 5% and that my 5% is with the solicitor who was representing me but was chosen by the auction company. I had no choice. At one point the conveyancer admitted that the 5% deposit is being held by them. Now the solicitors are neither giving me the money nor replying to my emails. I have sent multiple emails in the past few weeks but no reply. I guess i cannot for the solicitor to pay the money because my contract is with the auction company not the solicitor. I am thinking to report the solicitor to the appropriate governing bodies to seek help and get my money.
Please, what do you advise in this situation? Do I have to start a legal battle to get the money? I need that money because the process wasted 5 months of time and replying on the sale and at least the 5% deposit in the even the buyer dis not complete I have committed myself financially by purchasing few things and now I do not have the money to pay my debts.
Thank you for your comment. Auction sales can often be high risk for the buyer, but also for the seller as unless the buyer is able to purchase the property outright it is not easy to fund a purchase at auction with a mortgage and this can result in sales not going ahead due to a refusal of funding from the mortgagee.
The usual position, subject of course to the terms of the contract of sale and the terms of the auction, is that if a buyer fails to complete, the seller may either retain the deposit they have put down and seek to recover losses of and occasioned by the failure to complete, or, serve a Notice to Complete to the buyer and then force him to complete by way of order for specific performance application in Court. I can see from this that you were intending the latter but when he admitted he was unable to you went via the deposit retention method.
Whether the auctioneer is entitled to hold on to the 5% of the property price, will depend on the terms of the auction. However what is going on with that solicitor does require additional investigation. It does appear that they have retained this for no good reason from what you say, and indeed there is the possibility of both a claim against them for the monies or a complaint to the SRA or Legal Ombudsman. However we would need to see the terms of the retainer they entered into before we can properly advise on this. I am also suspicious of having no choice as to who would represent you on the sale as being dictated by the auction terms. Please feel free to call our Braintree office to discuss this further should you see fit.
My property sold at auction over four months ago but the buyer failed to buy in the end.now the auction house say I cannot remarket it with anyone else for 21 days.is this correct?
Thank you for your comment. Generally speaking, where a buyer fails to complete on a sale the usual remedy, should the seller not want to attempt to force completion, is that the buyer loses their deposit and is liable to the seller for the losses of and occasioned by the failure to complete, though this is of course subject to the provisions of the contract.
Whether you cannot remarket it for 21 days as the auctioneer is saying will depend on the terms of the auctioneer that you entered into with them. If you wish, we may be able to advise you further on your rights under that contract and also the remedies that may be open to you against the buyer. Please feel free to ring our Braintree office for a confidential discussion.
Bought a 16 rooms HMO , 2 houses, July 22
Had HMO licenses on the legal pack.
On the special condition it was stated, buyer can not dispute
Whilst visited the property as a successful bidder, a local contractor that was dealing with Green Deal and City Council, raised the concerns of the HMO License .
City Council confirmed by email that one property, 7 rooms does not have HMO License, the other property had just Initial HMO License.
Do we have a case against the seller or the Auction house for misrepresentation?
Thank you for comment.
In our blog Property Misrepresentation Claims: Example Cases and Advice, we refer to a case called Atlantic Estates Ltd v Ezekiel [1991]. This may have some application in your matter. It involved an auction sale of a property described as a wine bar. It also contained pictures showing the property being used as a wine bar. However, the property did not in fact have a licence. This was held to be a representation that the property could be used as a wine bar, which it couldn’t, because it didn’t have a licence.
There is a difference between a “statement of fact”, which can form the basis of a misrepresentation claim and a “statement of opinion” which cannot. It has been held that a “statement of law”, i.e. an explanation as to the legal position given by a seller, can sometimes form the basis of a misrepresentation claim, but not always.
The matter would probably turn on the question of whether or not a person, provided with the same information as you, would realistically have reached the conclusion that the seller was saying that property did have a HMO licence.
Bought a property at auction..on day of completion having paid the balance …informed that the auction was subject to back to back sale from existing owner to a company whose sale failed.
How do I get my money back including deposit and own sales fees and sellers fees
Thank you for your comment.
We are not sure precisely of what the issue is, but if it is that the seller was not the current owner, but is still able to transfer the legal and equitable interest in the property to you unencumbered, it is unlikely that you have suffered any financial loss.
If there is some sort of loss or damage to you, then there may be a claim on the basis that offering something for sale more than likely amounts to a statement of fact that they are entitled to sell it.
I have a question about falsely advertised rent from a property auction. I bought ground rent at an auction for 35k, with the rent generated being advertised at 2.5k per annum. However after I bought the ground rent I found out I would actually receive 1.5 k instead. Before the sale, I looked at the legal pack and this contained the income of 1.5k for flats, but the advert stated a shop pays 1k in ground rent. There was no way to confirm this with the land registry before the auction as they did not have the documents ready (the shop ground rent was a subsale). After 2 months, they finally sent the documents and it was apparent there was no ground rent for the shop. We found out the seller was dodgy, not only did he lie for the advert, he also sold the freehold without telling the leaseholders and so did not give them the notice he should have
Is there any way I can sue the seller for fraud? The auction house has said they can’t take liability as the seller also told them the income was 2.5k.
Thank you for your comment.
If it can be said that the auction pack contained misleading information about rental yields, there could be a claim for misrepresentation. However, there is a difference between stating something as a matter of fact and expressing an “opinion”. A seller’s opinion of something, namely that the property could achieve rental yields of a certain amount, is very unlikely to lead to an actionable misrepresentation. Broadly, the Court will only allow a misrepresentation claim if the representation is a statement about the actual, factual circumstances of the matter.
We are not sure precisely what the issue is, in terms of whether you sought to purchase the freehold or leasehold, but broadly if there was an express representation that the freehold yielded a specific rent when this was not the case, subject to the terms of any contract (which will affect the legal position) then there may be a claim for misrepresentation.
As for selling the freehold without first giving the tenants a right of first refusal, this can be actionable. There are exceptions to the requirement to give tenants notice but if there has been a breach of the requirement, then enforcement action could potentially be commenced against the new owner of the freehold.
We suggest that you get in touch with us to discuss further, as this is legally complex.
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.