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- Including out-of-date searches in the auction pack, which did not reflect the true position.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.
Hi,
I won an auction property of 9 garages.
I was digging for more information after winning the auction, and then I discovered the advertised garages did not match the legal paperwork provided by the auction.
Title number, land registry and address are different
I paid the deposit to the auction house, but I am not sure if I continue, I would end up buying the correct thing. The provided title number in the legal pack is for another property, which is a house that is worth plenty of money compared to the garages.
What are my options?
How do I know for sure that I am buying what was advertised and not part of it only?
Can I sue the auction house and the seller for misrepresentation?
Thanks
Abdo Sukari
Thank you for your comment.
Clearly there has been some sort of mistake here. However, whether or not it entitles you to bring
some sort of claim, or even rescind the contract does depend on a number of things.
We are not sure that we can provide even general pointers without understanding the position further.
It does strike us that fundamentally, the seller wanted to sell the garages and you wanted to buy them,
so there is no real mistake in this respect and presumably no misrepresentation (unless you were led to
believe you were buying garages but you were not).
We would have to spend some time understanding and investigating the position before we could
identify what the legal position was.
Hi, I won a property at auction singed contract and paid 10% deposit. The property had ‘special conditions’ attached which I do not believe were uploaded to the legal pack until the day of the auction so I was not aware of them as the property was one of the first lots.
I had spoken to the auctioneer the day before the auction to ask about the ownership of the property and was assured that the company who are effectively selling it deal with probate and take the house in return (thereby implying that probate had been granted), that the auction house do a lot of work with them and all is above board.
The special conditions state that completion takes place within 28 days of grant of probate, and that should completion not be achieved within 8 months of exchange the seller has the right to withdraw. However, on my side the contract is open-ended.
I have chased details on the probate and the auctioneer has repeatedly told me the vendors are ‘chasing the probate office’ however it has come to my attention through the vendors solicitors that the original sellers are still waiting on HMRC to confirm tax liabilities and so the probate application has not been made yet.
Can I insist on a variation to contract to ensure tthat the termination option is reciprocal?
Thank you for your comment.
The terms of any contract are formed by one party making an offer (the “offeror”) and that offer being
accepted by the other party (the “offeree”).
There is lots of historical case law on offer and acceptance but a particular aspect of what you refer to is
the “incorporation of terms”.
Parties can reach an agreement “subject to contract”, meaning that it is an agreement in principle
subject to agreeing the terms of the written contract itself later. If the terms of the contract cannot be
agreed, that is the end of the matter. This is what normally happens in “normal” property transactions.
Alternatively, and what appears to be the issue here, is when the offer is made subject to existing terms
and conditions. Those existing terms and conditions must be brought to the attention of the offeree
person before it can be said that those terms have been accepted. This can be done in various ways.
For example, they can be provided in full to be read. Alternatively, reference to them can be made and
the offeree can ask for them. It’s all too easy these days to simply tick the box when you buy something
online to confirm that you accept the terms and conditions.
We cannot provide specific advice on our website but if particular terms and conditions were not
brought to the attention of an offeree, they may not be binding or the contract may be void or voidable.
A void contract is one that is treated by law as never having come into existence. A voidable contract is
one that can be “cancelled” at the election of the aggrieved party. There are a number of
considerations to take account of.
What is often important is what happens after the omission is identified. A contract can be “affirmed”.
If there is a breach of contract or a right to bring the contract to an end by someone, if that person
affirms the contract or waives the breach, they lose the right to end to contract. Put another way, if the
party with a right to bring the contract to an end effectively gives up that right, either by saying “it’s ok”
or renegotiating terms, the their right to “get out of the contract” no longer exists.
Any party to a contract can look to renegotiate its terms. Normally, however, some “consideration” is
needed for this. It is effectively like negotiating a new contract. This could be an agreement to waive
the right to terminate the contract, in exchange for some new term that the aggrieved party wants to
now include.
Hi – I recently bought a property at auction but legal documents and thought that they are fine since there is an absolute title on the property register. However, aftee exchanged of contracts and paying for my deposit at 10%, I have received the copy of contracts and the seller is a limited company which I cannot see in the title. What are my options if I decided not to push through in the sale? Also had read the contracts and it is so onerous to me as the buyer as I cannot sue the seller if there are misrepresentations on the sale.
Thank you for your comment.
We can’t provide specific advice on our website, however, it does not sound to us that you do have the
option not to proceed with the purchase. If you do not proceed with the purchase, there is every
probability that you will be in breach of contract. Most of the time, if a buyer does not proceed, they
will forfeit their deposit. However, the precise contractual terms need to be considered, as there could
be additional sums or losses that the seller can claim from you. As you have noted, properties sold at
auction are often very heavily biased towards the seller and it wouldn’t be unusual if you also agreed to
pay the seller’s costs associated with auctioning the property, even if you don’t proceed with the
transaction.
A limited company can own property with absolute title. If it is not named as the proprietor, it may not
be entitled to sell the property. However, it is more likely that the company has purchased the property
and “flipped” it. It happens quite a lot in auctions. Flipping property means buying it and then selling it
on very quickly, with the aim of making a profit. Sometimes, the application to register the purchaser of
a property is delayed. The Land Registry is also quite slow generally. The company may very well be the
beneficial owner of the property and entitled to sell it, however it’s application to be registered on the
actual title as the legal owner has not yet been completed by the Land Registry. This is called “the
registration gap”.
It is also fairly standard to have a clause in most contracts, not just contracts for the sale of land, which
limits the ability for a contracting party to bring a misrepresentation claim against the other. This is
called a “whole agreement” clause or “non-reliance” clause. These are in fact reasonably sensible to
bring some finality to a transaction and to stop parties from trying to pursue claims against each other
later. If a particular point is important to a contracting party, they should be insisting that this point is
reflected in the contract itself. If that cannot be agreed, or a party is not given the opportunity to
negotiate terms, then it is generally up to them to decide whether or not to take the risk in proceeding.
My Property has been sold at Auction, my Lawyer produced the deed showing a Home rights charge by my ex wife, She said my ex will have to sign a release before she will complete .She contacted the divorce lawyer with no result, and informed me I would have to arrange removal or get another lawyer to do it
I contacted the registry office who told me to complete form HR4 attach a certified copy of the divorce final and it will be removed no signature of my ex necessery, which I have. As the contract period for completion is overdue and the removal could take 16 weeks I informed the Lawyer of it, I requested that she forward these details to the buyer so he is aware, as I need a quick result and the buyer needs to rent it out, She refused and further would not give me the solictors contact, is there any thing I can do ?
Thank you for your comment.
We do have some experience when it comes to removing Matrimonial Homes Act notices but yes, if you
cannot get a release from the beneficiary, it does take time.
We are not sure exactly on the position, but if the title deeds were included in the auction pack, and the
terms and conditions were such as to exclude liability or a requirement to remove the notice, this might
not be your problem but a problem for the buyer. If on the other hand you contractually agreed in
some way that the notice would be removed by completion, then you might be in breach of contract.
We are not sure why your own solicitor, if we have read your comment correctly, would not follow your
instructions to provide you with information you wanted.
Whatever the situation, the starting point would be to consider your contractual responsibility to ensure
that the notice is removed. If you do have a contractual liability in this respect, the the siautoln should
be discussed with the huger before matters become out of hand.
I won a bid for a property at auction, I have committed to the contract and paid a 10% deposit (£15K). My bridging loan provider found evidence of subsidence that requires under pinning. I had purchased building insurance before it was noted that the property required under pinning. I believe my insurance will not pay out should I fail to carry out the work and the lender wants to recoup their money. The lender is happy to provide the funds but with insurance.
I looked through the legal pack and there is no mention of subsidence. I have the seen some auction house that will stipulate that the property is for cash buyers only as it is mortgageable.
Although i can afford the repair i am not able to complete as i cannot get insurance on the property with subsidence issues. This is very stressful. I should’ve done my due diligence.
At this point I am not sure what to do:
1. Was this a misrepresentation for not declaring the subsidence?
2. Should i pull out of the purchase on the premise that there is subsidence issue and I cannot get a insurance, but what are the possibilities of getting my deposit back?
OR
Should I insist my insurance should continue to insure me since i wasn’t aware of the subsidence when i bought the insurance? Although the lender feels the insurance will not pay since defect were there before the insurance was instated.
I am devastated over this and have not slept or days.
Thank you for your comment and we are genuinely sorry to hear of this.
It does not help, and is not meant as insulting, when we say you are right regarding due diligence.
The basic position with any contract (subject to things such as consumer legislation and, in respect of property “latent defects of title”) is buyer beware.
It is generally down to the buyer to ask questions, make enquiries, undertake surveys and investigate before committing to a contract. If a buyer is not given the opportunity to do this, or a seller is not prepared to answer the buyer’s questions or enquiries, then the buyer proceeds at their own risk.
Auctions are often of particular risk. Often (but not always) an open market seller will provide information, answer questions and allow a prospective buyer to look at the property, with or without their surveyor. This is not often something that auction sellers accommodate and is often this is often for a reason. A buyer might feel that they are getting a “bargain” but this might be because the seller has tried to sell on the open market, or doesn’t want to take this risk. Sellers will often achieve a better price in the open market, but it usually means liaising with the buyer before a decision is made by the buyer to proceed. If there is a problem with the property, it might very well be discovered by the buyer, their surveyor or their solicitor. This is not invariably the case, of course, and there might be lots of reasons why a property is put into auction.
We cannot tell you want to do about your insurance position. We would need to consider the terms of the insurance contract and in particular, any assumptions or other preconditions that were relevant when you obtained it. Often, insurers will not insure against pre-existing or structural defects, but it does depend on your policy.
We also wouldn’t be able to tell you precisely what to do even if we were instructed. A solicitor’s role is not to make decisions for a client but to provide them with sufficient informed advice that they can make a decision for themselves.
We agreed a price for a property ‘post auction’ as it didn’t sell when online bidding opened in a traditional auction. We were sent an invoice for 10% deposit and the auctioneers fees of £2500, which were duly paid the same day.
The following day the auctioneer calls to say she had received a higher bid and they would not be able to proceed and wouldn’t sign the Auction Sale Document (even though they issued it to me and have accepted the deposit. I have not accepted their position, as my offer was accepted (under auction terms, not a private treaty sale) and the 10% deposit paid to them the same day, at their request.
I believe there may be (at least forthcoming) a breach of contract by the seller/auctioneers if they refuse to complete on the property. What would the options be in this case?
Thank you for your comment.
There may be a breach of contract, but we would not be able to advise you on that until we had considered the contractual documentation and facts of the matter with you.
In the assumption that a contract was formed when the “hammer fell” then options may include instructing your solicitor to serve notice to complete under the terms of any contract (so far as it applies) and then rescind (“cancel”) the contract, recovering your deposit and potentially the consequential losses you have suffered.
Whether or not there is a basis to claim specific performance as a remedy (i.e. to “force” the seller to sell to you) is subject to a number of factual and legal considerations.
Specific performance is an” equitable remedy”. This means that if damages (i.e. financial compensation) is an adequate remedy in the courts opinion, it would generally order this instead.
Hi
I purchased a property at an auction and in the completion statement, there was a rent arrears of about £5000 and service charges areas of about £3000.
My solicitors did their searches and discovered that the £3000 was a lie and brought that to the attention of the sellers solicitors and they apologised and removed it. After completion we discovered as well that the £5000 rent arrears is a lie as well as the tenant has been in the property for more than 10 years and has never defaulted on his rent payments.
We have contacted the sellers solicitor about this and no reply. Can I sue them to get my money back?
Thank you for your comment.
Firstly, well done for instructing solicitors prior to bidding. We receive so many enquiries where people have bid on properties who then find themselves in difficulties which may have been avoided if a solicitor had been instructed. It sounds as though your solicitor earned their fees.
This is rather an unusual query. Most of the time, a buyer might be put off by the idea of purchasing a property with a tenant in situ that does not pay the rent. Having said this, as the new landlord would acquire the right to pursue the arrears, we can see how this might factor into any decision making process. We suspect that you were relying on recovering the rent arrears in order to pay the service charge arrears.
In short, if you were led to believe by the seller that a certain set of facts existed, and you relied on that representation when entering into the contract (i.e. placing the winning bid), then there would be a basis of claim against the seller if that fact as represented was inaccurate and you have suffered a loss as a result. It is hard to see where there is a loss of there were no service charge arrears, but perhaps we have misunderstood the position.
Hi, I have sold my property at auction giving details of flooding on the TA6. The buyer has subsequently sold the property on (via normal selling, not auction) 18 months later and has not included the flooding details in her TA6. The new buyers have since been flooded and are asking for me to provide back copies of paperwork to aid them with a legal claim as they are unable to communicate with their seller of the property, who is refusing to speak to them.
Is this something I need to get involved in as this is part of the reason we sold at Auction for a quick sale and no come back?
Thank you for your comment.
In the most blunt of terms, this is not really your problem. It strikes us that you were quite right to point out the issues with the property and if the buyer decided not to do this and risk a potential claim, this is their problem.
You are not under an obligation to provide information to the new owner of the property but there is a large caveat to this. A potential Claimant in any claim is legally entitled to make an application for disclosure against a third party, if that third party has evidence that would assist in the cost effective disposal of the claim. Further, if the matter did proceed through the courts, either party can summons a witness to give evidence.
Generally, as it is clearly not the third party’s fault, the cost of complying with an order for disclosure would have to be met by the applicant. Likewise, when it comes to witnesses, those witnesses are generally entitled to their reasonable expenses.
We cannot really say what is best for you to do without understanding the matter in much more detail, but on the basis that there is “no skin off your nose” in supplying documentation, and on the assumption that you are not at risk of any claim (which is probably the case), it might be best to supply some documentation, rather than have to deal with the aggravation of responding to any applications or threats from the new owner’s solicitors. Sometimes the costs of a disclosure application can be ordered against a respondent third party that has behaved unreasonably. Whilst the risk is probably low, it again is probably not a risk that’s worth taking if you are not at any risk yourself.
Hello
I bought a House (Freehold) at Auction. When I looked at the House and the Photos of the house it had a pathway around the side of house and a gate into the back garden. Subsequently the next door neighbour complained that his Plans (Land Registry) showed his land went right up to the side of the house, and thus there could be no pathway to the Gate into my back garden as it would involved trespassing to reach the
gate. So the gate is there but I cannot use it. How on earth the pathway was made/laid (as it is tiled) before I won the house at auction is beyond me. Should this have been told to me by auction seller ? Should my solicitor/suveypr have pointed out that the Plans of my house and the neighbours both show
the land the path runs over to gate is not mine but the neighbours ?. Thanks
Thank you for your comment.
The basic position is that a seller does not have to provide the buyer with any information if they do not want to.
However, there is some limited case law which suggests that title defects, of which an issue of the type you describe may very well be, does need to specifically be brought to the buyer’s attention. Even clever contractual drafting is now unlikely to avoid such a requirement.
If you would like to explore the matter in more detail, do feel free to get in touch.
A property has been won at auction. The property is to be purchased with a bridge. The seller won’t provide a UN4. This is a reprocessed property and the lender solicitor is waiting on this. What position would this leave a buyer in?
Thanks
Thank you for your comment.
We are unsure if your reference to a “bridge” is reference to a bridging loan. On the assumption that it is, the seller would not be overly concerned with respect to your own financial arrangements.
As for a UN4, this is a Land Registry form used to cancel a unilateral notice. A “notice” puts a person that intends to have dealings with the property (such as a purchaser) of a third party claiming an interest in the property. If that claim has been disposed of, then if evidence is supplied of this, it is sometimes possible to apply to the Land Registry to unilaterally remove the notice.
A notice does not guarantee that the interest protected is valid. The basic position is that if the buyer purchased the property subject to the third party right that the notice is intended to protect, then it would be for the buyer to address the matter.
Hi, I won a bid on a property in online auction of 8th Dec 2022. Just before the completion date of 19th January 2023, I found through level 2 survey report that the property is not mortgageable and being built on non-traditional standard. I aborted the purchase 18th January 2023, due this issue, but my deposit was rescinded. Do I have any chance of getting my money back?
Thank you for your comment and we are sorry to hear of these circumstances.
From what you have written it sounds unlikely that you would be able to recover your deposit. This will, however, depend on the terms and conditions that you agreed. In most conveyancing transactions, whether by auction or otherwise, it is for the buyer to ensure that they are content with the property that they are purchasing and that their finances are in place accordingly. We do regularly see issues such as yours where a mortgage lender has made a conditional offer and then withdraws that offer on discovering that the property is not in a condition that they would be prepared to lend against. In essence it is hard to say that the seller is to blame for the current circumstances and of course in any claim it is necessary to prove that the other party is at fault.
Hi Mark, Thank you so much for the response. I wanted to buy the property cash not mortgage. However See below Overall opinion of the property based on the Home buyer Level 2 survey report:
“We must firstly highlight that this property is of non traditional construction, utilising a steel framework concealed by external brick finishes and internal finishes beneath an externally tiled roof. The type of non traditional construction cannot be definitively confirmed without disruptive investigation which is beyond the scope of this report. It must be brought to your attention however that due to the property being of non traditional construction the mortgageability and saleability of the house may be affected as some mortgage lenders would not find this acceptable thus reducing the suitability of this property for mortgage security and thus restrict saleability. You must satisfy yourself that this will not impact your decision to purchase the property prior to your legal commitment to purchase. This is essential.”
So after I had this information I aborted because this issue was not mentioned anywhere on the auction pack.
Is this something I should pursue to recover my deposit?
Thank you for your further comment.
We are not able to provide specific advice on our website, just general guidance as to the law. There is no general duty on a seller to provide information in relation to the property. The basic position is that it is up to the buyer to satisfy themselves. There is some limited case law that suggests that a seller is obliged to identify title defects, but this would not extend to the construction of a property, which would be a matter for the buyer’s surveyor.
If a seller has not made a misrepresentation, and merely stayed silent on a particular issue that is later discovered, it cannot be said that the buyer relied on anything the seller told them. In such circumstances, the prospect of there being a misrepresentation claim with any prospect of success is quite low.
You may have some recourse if you can identify the type of non-traditional property. If it was designated as ‘defective’ under the 1985 act, there may be recourse as that is a legal position affecting the property which was not disclosed to you.
I bought a property through a modern method of auction, paid a reservation fee. During legals, it came to light that there are several charges on the property and it could not be sold, therefore the seller pulled out. Do I have any right to get the reservation fee back?
Whether or not you have any right to recover the reservation fee will depend on the terms and conditions that you have entered into.
It is probably fair to say that the prospect is quite low, but not impossible.
Hello
I would like some advice on a property I have purchased through an online auction.
I believe they have misrepresented the property on the basis of cutting a part of the land from the garden and also cutting the garage from the property sale. As part of the house viewing we were shown the garage as part of the house as well and there are no clear indications in the auction pack to state there is retained land by the seller.
Secondly the 6 week mark has now passed and the seller has not completed as there is an issue with the Grant of Probate. I wanted to ask if I have grounds of misrepresentation for this case and is there anything I can do about the significant delay I have been put through when I was promised the 17/08/23 as the completion date.
Thank you
Thank you for your comment.
Much will depend on the terms and conditions that you agreed to when bidding on the property and whether or not you have contractually agreed not to pursue a claim for misrepresentation.
On the assumption that the terms and conditions are in your favour (or otherwise do not apply by reason of fraud, which is a complicated point) a claim for misrepresentation may arise if you have been expressly misled as to what it was that you were purchasing.
Often the Standard Conditions of Sale prepared by The Law Society will also be incorporated into a contract for the sale of land. These tend to provide a remedy if there is a material difference between the description of the property included in the contract and as represented to you.
As for the grant of probate, or the lack thereof, this is unlikely to give rise to any sort of claim apart from a breach of contract claim, but again it would be necessary to see the contractual terms.
If you would like to consider instructing us, please do feel free to get in touch.
Hello,
I sold a property at auction last Thursday and the buyer has not paid the deposit of £10k. What are a sellers rights in this situation?
Thank you.
Thank you for your comment.
If a buyer has not paid a deposit and is contractually liable to do so then they are in breach of contract. What the seller’s rights are in the circumstances will depend on the terms of the contract itself, but these could range from rescission (bringing the contract to an end), specific performance (forcing the buyer to comply with a contractual term) or simply breach of contract and a claim for damages.
We would need to consider the contractual documentation in detail before we can provide any advice. If you would like us to consider the matter in more detail, please feel free to get in touch.
6 weeks ago I sold my property at auction. The auction house congratulated me and said that the buyer’s solicitor would be in touch with my solicitor and I should sit back at wait for things to happen. I called my solicitor yesterday, as it was 6 weeks, and she didn’t even know I had sold the property. I contacted the very reputable auction house who said this was ‘not normal’ and they left messages for the buyer to contact them, and they contacted the buyer’s solicitor. I’ve heard nothing, from no one. I am in an absolute panic. Surely the auction house has a responsibility to check that things are progressing? My question is this, my buyer surely paid a deposit on the day, can you tell me who keeps this deposit money please, it is not in the legal pack I was given. No one wants to tell me about the deposit. Thank you
Thank you for your comment.
The requirement to pay any deposit, to whom this is paid and how it is held (stakeholder or agent) will depend on the terms of the contract.
We would need to read this before we could provide any advice.
It is of course quite usual for a deposit to be paid and it is also quite usual for a buyer to forfeit that deposit if they are in breach of the contract or fail to complete. It may very well be the case that the auction house does owe you a duty of care and therefore if they have not done things properly there may be a basis of claim against them. There may also be a basis of claim against them in contract depending on the terms you agreed with them.
If you would like to get in touch to consider the matter in more detail, please do feel free.
We purchased a property back in February in way of a modern auction. In the terms and conditions it states “ The purchaser will not be exchanging contracts on the fall of the virtual hammer but will be given 56 working days in which to complete the transaction, from the date the Draft Contract are issued by the seller’s solicitor”.
We are approximately six weeks after this date through no fault of our own, waiting on restrictions from the seller to come through. We believe the terms and conditions of 56 working days have been broken not by us but by the seller and the auction agent. After speaking to our solicitor, she commented that based on the restrictions,(seller has debt/financial issues) the house shouldn’t even been put for sale/ auction. We have waited almost 6 months now and thought by buying through auction, the process to exchange contracts and moving in would be Swift but we are still waiting with no clear expectation of how much longer to wait. No promise of when it can be completed. We would like to pull out now before our mortgage offer expires so we can attempt to search/buy another property. We are concerned that if our mortgage offer expires, we may not get such a good deal with the interest rates that have gone up since then and mortgage offer due to our age as we are in our early/mid 40s.
Thank you for your comment.
We are afraid we cannot provide any specific advice on our website. Whether or not you were entitled to rescind the agreement will depend on the terms of the contract itself, which is something that we would need to consider in a lot of detail before we could offer any advice.
I would suggest that you do place faith in your existing solicitors to give you advice and if they do not feel that they are able to do so they will suggest that you instruct a different firm.
Hi, my bid for a flat was successful during an auction however I misunderstood the service charges as communicated directly by the seller. Seller advised that the service charge is 2400 based on previous payment and provide proof payment to the property manager, but upon further scrutiny after the auction, the 2400 is per quarter, so I’m now on the hook for 10k service charge per year. I feel that the seller mislead me on this point. It’s tenanted at 800 per month so atleast covers the cost but as far as it goes for an investment, it’s not good at all. Thanks fully I’ve purchased it at 40% below previous properties sold in the block in 2021, but still leaves a sour taste in my mouth. I’ve paid the deposit but do you think there is grounds for misrepresentation on the basis the information shared was misleading and service charge was not disclosed on the legal pack?
Thank you for your comment.
If you misunderstood what was being communicated to you, then this is not something that the seller can be held liable for. If, however, you were actively led to believe that the service charge was something quite different to what it is, subject to the relevant terms and conditions you agreed, there could be a basis of claim for misrepresentation.
On the assumption that there was a misrepresentation and on the assumption that you have not contractually agreed that you will not pursue such claims (it is not unusual for auction terms and conditions to contain non-reliance clauses, which can prevent misrepresentation claims in the absence of proving fraud), your loss would likely be based on diminution in value. This is the difference between what the property was worth at the time of purchase (which may not be the same as you paid for it, if you purchased at below a market rate) and what it was worth had the information been made known to a buyer. It would be necessary to obtain input from a suitably qualified surveyor on this loss.
Never ever use an Auction Centre to sell your house!
My estate agent told me it would be quicker and easy. I should have got advice from a solicitor . Now I can’t sell my house because they ask the buyer for a reserve fee of 3.5% it shocked me so much and they put my house up for a very very low price. They are sharks and have no morals! I’ve lost at least 3 sales so far if not more.
Thanks for your comment.
There are a number of ways of selling property, and all of them can work out just fine. But all of them work a lot better if you have a property solicitor working for you.
We are sorry to hear about what happened to you, it sounds like a very costly lesson.
Hi
We purchased a land/ commercial via online auction. It was advertised as light industrial but its been in use as storage. There is no planning history and we cannot run a business we intended. We have not paid a deposit or holding deposit. My partner who intended to invest has walked out. I have no way to purchase it now. Now they are compelling me to finish the purchase else they attach my home. What options/ rights do we have to come out of it?
Thank you for your comment.
We cannot give specific advice on our website. However, the starting point is to consider what you contractually agreed and whether or not you are bound to complete the transaction. There could be a few points to rely on, depending on what the terms and conditions say and depending on whether or not it can be said that you were factually misled by the seller. It sounds to us that no planning history or statements of fact about what the property was capable of being used for was provided by the seller. If this is the case, then it would not be possible to say that the seller misled you; the basic position would be that it was down to you as a buyer to check that you were happy to proceed with the purchase and if you could not find the information you wanted, whether or not you were prepared to take the risk in proceeding further.
If you are legally obliged to complete the transaction, it will be necessary to consider the consequences of failing to complete. Normally, even if a deposit has not been handed over to a seller, the contract will provide that the deposit becomes payable once a notice to complete is served. Failing to make payment would be a breach of contract entitling the seller to issue a claim for the sum that should have been paid.
In a judicial sale where am the only bidder but after the successful bid, am not able to pay what are the implications
Thank you for your comment.
We are unsure precisely what you mean by a “judicial sale” but presume that you mean that a Court has ordered the sale of the property for whatever reason. The seller could be a mortgagee in possession, a trustee in bankruptcy or a liquidator, for example. Whatever the case, if you are deemed to have entered into a contract by making the successful bid but are now in breach of contract because you are unable to proceed with the purchase, the chances are that you would lose your deposit. There may be other consequences but this would depend on the terms of the contract. It is unlikely to make any difference legally if the seller has been appointed by, or authorised by the Court to sell the property.
Hi, I won a property at auction, I have committed to the contract and paid a 10% deposit (£16K). My solicitor had found a history of underpinning in one of the land searches (included in the local pack at auction, unfortunately I didn’t not make a meaning of this at the time of committing to the agreement as I did not spot this in the legal pack, my solicitor has now done). The lender has requested for a full structural survey given the history of underpinning, and to make matters worse the survey report has found evidence of subsidence on the property basement. The subsidence is considered significant, and ongoing movement and will require repair (to the quote or circa £25K), I have now gone past the 28days for completion and the seller’s solicitor has issued a notice to complete.
This is messy situation, as I am stalk, cannot get lending, neither can I afford £25K for subsidence repair. I did a physical viewing of the property and I accept the ignorance on my part for not spotting the subsidence issue.
At this point I am not sure what to do:
1 – whether to pull out of the purchase on the premise that there is subsidence issue and I cannot get a lending, but what are the possibilities of getting my deposit back?
OR
2 – should I just not complete and wait till seller rescinds the contract themselves ?
I have been stressed and devastated over this, been a learning curve but what are my best options please?
Regards
Thank you for your comment.
We are sorry to hear of this but cannot give specific advice on our website.
In short, if contractually you have agreed to purchase the property and now cannot do so, you will likely forfeit your deposit.
Unless it can be said that the seller has actively misled you regarding the factual circumstances of the transaction, and it is noted that they did point out the history of subsidence, there probably is not a basis to avoid liability under the contract that you agreed.
Just bought a property at auction, it is tenanted. Stated in legal pack that rent is £625pcm, tenancy agreement is included, but heavily redacted. After purchase, we have found actual rent is £450pcm . Can I do anything about this misrepresentation?
Thank you for your comment.
We have in fact dealt with a case historically where the seller stated in the auction pack that the commercial property in question yielded a certain rent. In fact the landlord/seller had in fact agreed a different, lower, rent with the tenant.
We proved that it was a fraudulent misrepresentation and the property was placed back into auction, with the balance of the damages for diminution in value being met by the seller.
A commercial property has different considerations to a residential property. Whilst the principles are the same, the financial loss to the buyer is likely to be lower and there are points to consider in respect of whether or not the buyer should mitigate their loss, which could be easier with a residential property.
In short, there may be a claim for misrepresentation but the loss may not be such that it is financially viable to pursue.
I am interested in buying a property at auction and the legal pack states that the Seller won’t make searches in advance of the auction however the sale is subject to any matters that could or may be revealed by any searches.
– Is this effectively saying that if anything untoward is discovered in the searches that I could terminate the contract?
They have also changed the Law of Property (Miscellaneous Provisions) Act 1994 2(1)(b) to:
that person will at *the Transferee’s cost* do all that he reasonably can to give the person to whom he disposes of the property the title he purports to give.
– Does this refer to the Seller’s legal costs?
Also, it states that anything recorded in registers open to public inspection are deemed to be in the buyers knowledge.
– Is this anything to worry about and what registers should I look at?
Thank you for your really helpful article!
Thank you for your comment.
Without seeing the precise wording of the clauses, we cannot say with any certainty, but if a buyer is contractually agreeing to be bound by any matters that searches would reveal, then what you are in fact saying is that you would not hold the seller liable for these. It is highly unlikely you are agreeing with the seller that you could terminate the contract on discovering something untoward. The same is true with respect to public registers, which are the buyer’s responsibility to check.
It is not unusual for a non-auction property to be sold subject to matters revealed in searches or in public registers. This is because it is the buyer’s responsibility to check all aspects of the property that they are purchasing. If for any reason the information or documentation is not forthcoming, then a buyer would have to decide whether to take the risk in proceeding in the absence of this. It is not generally possible to hold a seller liable for making an “omission” or failing to say something, only if what they say is factually inaccurate.
The transferor is the seller/vendor. The transferee is the buyer/purchaser. Contractual clauses requiring a particular party to cover the cost of doing something means that the cost is met by that party. Section 2 of the Law of Property (Miscellaneous Provisions) Act 1994 implies covenants, or terms, in the agreement between buyer and seller. Broadly, a seller would normally at their cost have to ensure that the property is transferred to the seller with the title (full or limited title guarantee) promised. In this instance, the buyer would be liable for the cost of this.
It is always advisable to instruct a solicitor to undertake searches and check the title to a property for possible legal problems before exchanging contracts or bidding at auction. A consideration of the contractual terms is also worthwhile. A surveyor should be instructed to consider any structural issues. This will significantly reduce the risk of unexpected problems and expenses arising in the future and whilst there is a cost to this, it is generally going to be cheaper than if problems do later arise. A typical situation that arises is when, after the winning bid is made, the conditional offer from bidder’s mortgage lender is withdrawn when subsequent searches or a survey reveals an issue, leaving the buyer to either find the balance to complete or lose their deposit. If a buyer chooses not to or is not given the opportunity to instruct their own solicitor or surveyor before an auction, then it would be sensible to think about whether or not they can afford to risk unexpected problems and expenses arising in the future, before bidding.
There is often a reason properties are being auctioned and why they can often be acquired more cheaply than on the open market. This might be because there is a problem of some sort with the property and attempts to sell it on the open market have failed because buyers discover a problem before exchange and decide not to proceed when they get their search results. With an auction, sometimes bidders are provided with very little information and are not given the opportunity to investigate in any detail; the property is “sold as seen” with warts and all and it is up to the buyer to decide whether or not to take the risk. The position can change when there has been a deliberate misrepresentation about the facts relating to the property, in which case there could be scope to rescind the contract before completion.
Hi,
I’m in the process of completing on a recent residential purchased at auction.
The legal pack showed the property had the benefit of a title with rights reserved to park 2 private vehicles on land it once owned, that was sold to a developer in 2005.
On further enquiries I have been told that the title was cancelled and closed, and have also checked the historical records and note that there is no copies of the Title Register held on file.
The title still appears on a search of land registry, on the deeds of both properties.
The property was sold by court order and was empty for 2 years, I believe the owner of the land has recently terminated the title.
Are there any grounds for me to appeal this?
Any help would be much appreciated.
Thank you for your comment.
We would struggle to provide even general guidance on the position without first having considered the titles and documentation in question.
The points you raise are legalistic and generally speaking, statements of law are not actionable; only statements of fact. Whilst the distinction is not always clear, this principle does still remain. Statements of opinion or someone’s views of the legal position of something are not generally considered sufficient to form the basis of a misrepresentation claim. Normally, a statement about the facts of a particular matter are required.
Dear Sir / Madam,
I bought a property in auction and paid 10 % deposit and their fees . By the contract , I have to complete mortgage in 28 days but my mortgage will complete in 8 weeks . What are the rights I have to extend the time for mortgage completion process .
Thank you for your comment.
We cannot provide specific advice on our website, not least because we do not have all of the relevant information and facts.
However, the basic position when any contract is involved, is that the right or obligation to do or not do something will be governed by the contract’s terms. If the contract is silent on the point, then the chances are you will be in breach of contract if completion does not take place by the agreed contractual completion date. Subject to the precise terms of the contract, unless something different could be agreed with the seller, the seller may acquire the right to serve a notice to complete and thereafter, if completion does not then take place, terminate the contract and forfeit any deposit.
Shiza Rani I am in same position as yourself. Please can you tell me how did your purchase go and did you get extra time to complete.
Kind regards
Mrs Khan
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.
Hello,
I recently won a property at auction and have paid a 5% deposit. However, my lender has pulled out following the mandatory survey (completed after the auction) as the survey revealed that the property had been previously flooded (due to the non-drainage of surface water) in 2020 and 2021.
The survey states that due to this the property would not be able to get adequate insurance against flooding at reasonable rates and that the property has suffered significantly diminished saleability.
However, the survey has missed the fact that there already exists current, fully comprehensive, and affordable insurance against flooding, has also missed the fact that there has been a water pump installed in the offending drain that caused the surface water flood, and has also missed the fact that removable protective panel protections (Environment Agency endorsed and British standard kite marked) have been professionally installed around the front door (where the surface flood water had entered the property).
Therefore, due to this array of protections having been installed, the property has not flooded in the past two years, nor is it ever again likely to, as can be demonstrated on the Environment Agency (.gov) website under a search for that address.
I feel strongly that this assessment is wrong having missed these highly significant facts and documents, and this has not only left me in limbo with a looming completion date, but also as I am told could possibly condemn the property in regard to future surveys (and therefore lender decisions) which could negatively affect the property value.
I would appreciate any advice as to how I should pursue this issue. Thanks in advance.
Regards
A
Thank you for your comment.
We cannot advise on specific circumstances on our website, not least because the contractual terms agreed between you and the seller would need to be considered in detail, as would the contents of the auction pack. Likewise, the chances are that the lender provided a conditional offer of a mortgage, contingent on their final agreement in all the circumstances and being satisfied that the property represents good security for them. We would also need to consider the mortgage documentation.
You have not said whether or not you have raised these points with the proposed lender or its surveyor. We would certainly think doing this might be worthwhile, if only to mitigate the potential loss you may suffer.
Hi
I have bought a property from auction which appears to be on a mineshaft. There were no searches included in the legal pack. I have paid the deposit and now don’t know whether to proceed. What are my rights
Thank you for your comments.
There is no requirement of a seller of property, whether by auction or by private sale, to include searches of any other information about a property.
In any case where a contract is involved, the terms and conditions agreed, in this case when you placed the successful bid, determine the rights and obligations of the parties. If there is a mechanism for terminating the contract in the terms and conditions and the trigger for this has been met, then you can terminate the contract. If there is no such term or the trigger for terminating the contract has not been met, you may be contractually obliged to complete and normally, if you do not do so, would forfeit your deposit.
Hi, I won a property bid on an online auction. contract said buyer will pay the rent arrears. Seller owned this property only for 6 months. seller sent completion statement just 2 days before the completion date. Seller asked me to pay £16000 of rent arrears. it was shocking as how such extortionate rent arrears can occur in just 6 months. My solicitor asked seller solicitor to provide any evidence of rent arrears. Seller solicitor has refused to provide any evidence or tenancy agreement. They made the contract in such way that seller is protected in any situation of misrepresentation. This is worst form of scam which is protected in legal cover. Don’t know what to do. Don’t want to complete this very unfair deal and will loose my deposit. Seller solicitor played dirty and made the contract the way that buyer doesn’t have any protection or rights to raise their voices.
Thank you for your comment.
Purchasing a property at auction is rarely without risk. The basic position in any contractual situation is “buyer beware”. This means that the buyer has to decide whether or not they are prepared to take the risk of purchasing the property in circumstances where they have not obtained information about something important to them.
It may seem unfair, but there is no duty on a seller to volunteer information or indeed respond to questions or enquiries if they do not want to. Likewise, a seller is entitled to set out the terms that they are prepared to contract on and will invariably look to protect their own position. If the buyer does not like them, they can negotiate the terms (if they are given the opportunity) but ultimately it is up to the buyer to decide whether or not they are prepared to agree to the terms offered to them; the seller does not have to agree to any specific terms.
Recently submitted an offer on a plot of land a day before the Scottish property auction my offer was rejected by email as too low. Some hours later that day I was informed by email that my offer had been accepted and If I didn’t complete the purchase I would be sued by sellers solicitor. Have they the right to make me purchase this land?
We cannot provide specific advice on our website and in any event, we are only able to advise on the law of England and Wales. You would need to locate a Scottish lawyer to assist you.