Selling a property by auction?

With some potential purchasers holding out for better mortgage rates, selling properties by auction can be a favourable way to sell for many property owners. As purchasers who buy at auctions often don’t need mortgage finance, it is the ideal time for them to snap up a property with no chain and with a completion deadline.

There are many benefits for a property owner to sell a property at auction. Once the hammer falls at an auction, the sale is binding on both seller and buyer. As the auction pack prepared by the seller’s conveyancer will set the completion date by which the buyer has to complete, the seller can take comfort in the fact that the sale will complete within that period. If the buyer does not complete by that date, they stand to lose their deposit money and potentially other fees and costs. As there is the certainty that once that gavel falls, the buyer is legally bound to purchase the property, the seller can sleep easy knowing that there are not going to be any price negotiations, delays with a chain, or lost sales due to a buyer simply changing their mind.

However, a seller who is selling at auction should take care when selling a property with a title defect. Whilst the doctrine of Caveat Emptor (in short – buyer beware) applies at auctions, the seller does have a duty to disclose any title defects. These defects should be disclosed not only in the auction Contract but also via the auctioneer or their brochure. It is not enough for the auction pack to simply state “see title documentation”, nor is it enough to have the auctioneer’s brochure state that bidders must check the legal pack prior to bidding.

In the case of SPS Groundworks & Building Ltd v Mahil (2022) a title defect, in this case an overage provision, was not referred to in the auctioneer’s brochure, nor brought to the attention of bidders at the auction. When the matter went to court, although a Judge initially ruled that the buyer should have investigated the title prior to bidding, on appeal the High Court ruled that the buyer was not obliged to complete the purchase of the property as the seller had breached their duty of disclosure. The Judge ruled that there must be “full and frank disclosure” and the defect must be “specifically brought to a potential purchaser’s attention”.

Therefore in order to avoid an auction contract being rescinded, and potentially having to pay the successful bidder’s costs and auction fees, as well as refunding their deposit, a seller at auction should take advice from their conveyancer as to whether there are any such defects in the title which should be brought to the attention of the auctioneer, and referred to not only in the auction Contract but also the auctioneer’s brochure.

At Thomas Flavell and Sons we deal with a large umber of auction packs for sellers. If you would like more information please do not hesitate to contact us.