290 thoughts on “Dealing with property auction issues”
Two weeks ago I bought a property at auction. I read the legal pack beforehand and signed a contract at the auction which had conditions included, such as to build a fence down two sides of the boundary. A 10 percent deposit and auction fees were also paid at the time. Once I had signed the contract I asked for a copy and instead was handed the sellers’ copy which had a memorandum included on the signature page, and a TR1 and 4 conditions of sale attached which I had not seen before. These conditions were not mentioned in the auction pack, or by the auctioneer, or the sellers’ solicitor dealing with the transaction before I signed the contract. Some of these conditions would affect my enjoyment of the property I would be living in, such as unlimited access to dig up the garden and lay or install further utilities now or in the future on the land and possibly under or over the property I would live in. Can I question and negotiate these conditions before the completion date? Susan
For a contractual clause to apply to a contract, it needs to be “incorporated”. This means bringing it to the other party’s attention. If the terms are not incorporated into the contract, they are not enforceable.
However, it is possible that the conditions contained in the transfer (TR1) were not “conditions of sale” but pre-existing restrictive covenants of some sort, which set out the way in which a property owner can or cannot deal with their property. We would need to consider what you agreed to contractually, and the extent to which any terms (so far as these are terms of the contract) were brought to your attention.
Purchased at auction via a limited company. Would I be personally liable for any additional costs/ damages to the seller should the transaction be unable to complete due to unforeseen circumstances due to no fault of my own?
Thank you for your comment, which raises two points.
Firstly, the basic position is that if a company, which has a separate legal identity in law, is a party to a contract, it is only that company that is liable for any breaches of it. However, sometimes, normally with some claims based on the law of tort, it is possible to “pierce the corporate veil” and target the officers of the company, if the officers have, for example, directed the company to breach its contractual obligations. There exists a tortious claim of “procuring a breach of contract” which is when a third party brings about a breach of contract by another party to a contract. This is, however, rarely straightforward. It would be necessary to consider the contractual terms agreed. Further, sometimes a personal warranty or guarantee is asked for from a company director or shareholder by the other contracting party.
The second point you raise relates to “force majeure”, “impossibility” or “frustration”. This is broadly when a contact becomes impossible to perform because of something out of the control of one or both of the parties. There may be a “force majeure” clause in the relevant contract which would need to be considered, to see if the events have triggered the clause. If there is no such clause, then the contractual principles of “impossibility” may be relevant to matters, this being a potential defence for failing to perform the contract. “Frustration” is unlikely to arise in a contract for the purchase of a property, as the basic principle is that for a defence of frustration of contract to arise it would be necessary to show that what the parties were asked to do was completely different to what they had previously agreed.
We often see situations where lenders withdraw offers from buyers, because their offer is conditional on the property representing good security for their loan. Once the bid is accepted and the contract is in place, the buyer then discovers an issue and the lender withdraws. This happens because a bidder often does not get the opportunity to inspect the property or send their surveyor to check it before placing bids, meaning that the buyer accepts all of the risk of this happening. There is some limited authority to suggest that if a transaction cannot proceed due to a lack of funding, the defence of “impossibility” will be available (North East Lincolnshire Borough Council v Millennium Park (Grimsby) Limited [2002]). However, this is likely to involve showing that there simply is no other prospect of securing funds from elsewhere. We are uncertain of any particular cases in an auction context.
I made an offer on a property without me carrying out my due diligence but then few minutes later, I emailed the estate agent I made the offer through to inform him that I would like to withdraw my offer, he then responded back to me that I cannot withdraw my offer, that was. Shock to me, why can’t I withdraw my offer, it was not like auction and the offer was not accepted yet at that time of my request. Few mins later the state agent send an email stating that the offer has been accepted and I need to make deposits ASAP.
Generally, for any contract to come into existence, there would have to be an offer and that offer must be accepted.
An offeror is entitled to withdraw their offer at any time up to the time it is accepted (Routledge v Grant (1828). However, it is necessary for an offeror to properly communicate the withdrawal, or revocation, of the offer. This would mean showing that the revocation of the offer had come to the attention of the offeree before the offer was accepted.
However, if you have agreed to something, such as auction terms and conditions, then there is a possibility that contractually, you may have agreed not to withdraw offers.
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Two weeks ago I bought a property at auction. I read the legal pack beforehand and signed a contract at the auction which had conditions included, such as to build a fence down two sides of the boundary. A 10 percent deposit and auction fees were also paid at the time.
Once I had signed the contract I asked for a copy and instead was handed the sellers’ copy which had a memorandum included on the signature page, and a TR1 and 4 conditions of sale attached which I had not seen before. These conditions were not mentioned in the auction pack, or by the auctioneer, or the sellers’ solicitor dealing with the transaction before I signed the contract. Some of these conditions would affect my enjoyment of the property I would be living in, such as unlimited access to dig up the garden and lay or install further utilities now or in the future on the land and possibly under or over the property I would live in. Can I question and negotiate these conditions before the completion date?
Susan
Thank you for your comment.
For a contractual clause to apply to a contract, it needs to be “incorporated”. This means bringing it to the other party’s attention. If the terms are not incorporated into the contract, they are not enforceable.
However, it is possible that the conditions contained in the transfer (TR1) were not “conditions of sale” but pre-existing restrictive covenants of some sort, which set out the way in which a property owner can or cannot deal with their property. We would need to consider what you agreed to contractually, and the extent to which any terms (so far as these are terms of the contract) were brought to your attention.
Purchased at auction via a limited company. Would I be personally liable for any additional costs/ damages to the seller should the transaction be unable to complete due to unforeseen circumstances due to no fault of my own?
Thank you for your comment, which raises two points.
Firstly, the basic position is that if a company, which has a separate legal identity in law, is a party to a contract, it is only that company that is liable for any breaches of it. However, sometimes, normally with some claims based on the law of tort, it is possible to “pierce the corporate veil” and target the officers of the company, if the officers have, for example, directed the company to breach its contractual obligations. There exists a tortious claim of “procuring a breach of contract” which is when a third party brings about a breach of contract by another party to a contract. This is, however, rarely straightforward. It would be necessary to consider the contractual terms agreed. Further, sometimes a personal warranty or guarantee is asked for from a company director or shareholder by the other contracting party.
The second point you raise relates to “force majeure”, “impossibility” or “frustration”. This is broadly when a contact becomes impossible to perform because of something out of the control of one or both of the parties. There may be a “force majeure” clause in the relevant contract which would need to be considered, to see if the events have triggered the clause. If there is no such clause, then the contractual principles of “impossibility” may be relevant to matters, this being a potential defence for failing to perform the contract. “Frustration” is unlikely to arise in a contract for the purchase of a property, as the basic principle is that for a defence of frustration of contract to arise it would be necessary to show that what the parties were asked to do was completely different to what they had previously agreed.
We often see situations where lenders withdraw offers from buyers, because their offer is conditional on the property representing good security for their loan. Once the bid is accepted and the contract is in place, the buyer then discovers an issue and the lender withdraws. This happens because a bidder often does not get the opportunity to inspect the property or send their surveyor to check it before placing bids, meaning that the buyer accepts all of the risk of this happening. There is some limited authority to suggest that if a transaction cannot proceed due to a lack of funding, the defence of “impossibility” will be available (North East Lincolnshire Borough Council v Millennium Park (Grimsby) Limited [2002]). However, this is likely to involve showing that there simply is no other prospect of securing funds from elsewhere. We are uncertain of any particular cases in an auction context.
Hi there,
I made an offer on a property without me carrying out my due diligence but then few minutes later, I emailed the estate agent I made the offer through to inform him that I would like to withdraw my offer, he then responded back to me that I cannot withdraw my offer, that was. Shock to me, why can’t I withdraw my offer, it was not like auction and the offer was not accepted yet at that time of my request.
Few mins later the state agent send an email stating that the offer has been accepted and I need to make deposits ASAP.
Do I have a case here?
Thanks in advance.
Thank you for your comment.
Generally, for any contract to come into existence, there would have to be an offer and that offer must be accepted.
An offeror is entitled to withdraw their offer at any time up to the time it is accepted (Routledge v Grant (1828). However, it is necessary for an offeror to properly communicate the withdrawal, or revocation, of the offer. This would mean showing that the revocation of the offer had come to the attention of the offeree before the offer was accepted.
However, if you have agreed to something, such as auction terms and conditions, then there is a possibility that contractually, you may have agreed not to withdraw offers.