How do you prepare to make your first auction bid ?

Buying at auction is an attractive proposition as it avoids the drawn out conveyancing process and has the potential to save considerable sums. However, if you have never bid at an auction, it can be quite an intimidating prospect  and it may therefore be worth attending an auction before bidding to familiarise yourself. First time bidders especially should also prepare thoroughly by:-

• Reviewing the catalogue, viewing the lot (if possible) and satisfying themselves as to the condition of the property. 
• Consulting a surveyor or architect to determine if it is suitable for their intended use.
• Instructing a solicitor as soon as possible to:-
  • Review the auction pack. This will contain information on the legal title, a copy of the contract, searches and replies to enquiries.
  • Review the auction conditions and advise on their implications as they can differ significantly from a normal purchase and are often less favourable to Buyers.  Typical onerous terms can prevent enquiries being raised after the auction, prevent sub-sales, require the Buyer to pay arrears of service charge and require them to reimburse the Seller for search fees amongst other things. It is therefore important to be fully aware of any onerous provisions before proceeding.
  • Review the title to the Property and determine if there are any covenants which restrict the use of the site for certain purposes and whether there are suitable easements granted allowing, for example, necessary rights of access and passage of services to facilitate development. He will also advise whether there are rights over the Property benefiting other parties which may prevent development.
  • Advise on the planning history of the Property and any current permissions to determine if the current permissions allow you to develop as you intend, if there are any conditions under any current permissions which have to be fulfilled, if any permission is in outline only or whether full permission is needed and whether a new application for planning permission is needed.
  • Advise on any supplementary planning agreements and the obligations you will assume if you purchase.
  • Advise on the implications of purchasing land which may be classed as environmentally contaminated and any liabilities you will assume as a purchaser.
  • Advise on any existing agreements with statutory undertakers and highway authorities for the adoption of drains and highways or if you will need to obtain these to develop the site.
  • Help you form a view on the likely prospect of you being able to use the site for your intended use or any risks in proceeding. 

Buying at auction is a binding commitment and has the same implications as a signed contract as when the hammer falls the property is sold.  It is therefore very difficult and costly to pull out of a sale thereafter. Usually a 10% deposit must be paid on the auction day and the remaining 90% usually within 20-30 working days depending on the auction house.  It is advisable to arrange bank finance in principle before the auction as you could lose your 10% deposit if you fail to complete on time and under a breach of contract you may be liable for the Seller’s other consequential losses. Saying that you were unaware of the contractual provisions will be no excuse and it is therefore important that you instruct a solicitor to advise you before the auction. 

Often the Buyer must insure the lot as soon as the hammer falls. If you choose to buy without taking these precautions you do so at your own risk.  You also need to be aware that Seller’s solicitor, if attending, may answer your queries but he is supporting the Seller and not protecting your interests. He will also not be aware of the issues surrounding your intentions for the property, unlike your own solicitor would be.

How do you find a solicitor who can advise you ?

Buying property at auction without the help of a solicitor can be a minefield. It is therefore always important to instruct a suitably qualified solicitor to avoid potential problems and to protect your interests as soon as you think about purchasing as he can thoroughly evaluate the property and advise you on the auction’s terms.  Services and charges do vary between firms and its best to compare the services, experience and fees of a few firms. Remember the cheapest quote may not always be the best. When you instruct your solicitor he will write to you and will set out an estimate of costs (including details of any likely additional expenses), his terms of business and the firm’s client care and complaints system.

What happens when things go wrong?

There are various options if you encounter problems such as, for example, if the Seller has made a misrepresentation to you then you may be entitled to make a claim against the Seller and seek damages for any losses or, if there is a fundamental breach of contract, you may be able to rescind an agreement. There may even be a course of action against a surveyor or other professional adviser. However, your solicitor will be best placed to advise you on this.

If however, you feel that your solicitor is at fault you should first follow the firm’s internal complaints procedure (details of which will have been given to you when you instructed them), if you are not satisfied you may be able to make a claim against the solicitor or complain to the Solicitors Regulation Authority, which regulates the activities and conduct of solicitors. 

Andrew Brown and MS Law LLP

Andrew Brown qualified as a solicitor in 2007 and practices at Manchester based law firm, MS Law LLP. He specialises in all aspects of commercial and residential property and has a particular interest in advising property investors.

MS Law LLP was established in 2006 and specialises in providing high quality, competitively-priced legal services for property transactions combining specialised knowledge with practical experience of all aspects of property transactions and investments.

Contact Details:

383 Bury New Road , Prestwich, Manchester M25 1AW.
Tel: 0161 772 4500 Fax: 0161 772 4501.
info@ms-law.co.uk