What is Auction
Is a place where the Seller sells something which may have considerable defects and this might inevitably come to light in a normal transaction. By these means the Seller is hoping that those will not be picked up by the Buyer at an auction, it is therefore necessary to be very careful when buying property at auction. There may be some other reasons why the Seller wants to sell the property, e.g. there is a need for a fast sale due to cash flow difficulties.
What is my statutory right after the fall of the hammer
The main benefit for the Seller is that on the fall of the hammer contracts are exchanged and you are legally bound to proceed with the transaction. The Seller has however in certain circumstances the right to avoid the contract. After the fall of the hammer the completion follows within 14 to 28 days. You must therefore be sure that you have the sufficient funds in place in order to buy the property concerned plus the required deposit. If you did not have them ready this could have a considerable effect on completion and therefore could cost you even more money. E.g. Standard Commercial Property Conditions namely condition 9.3 would apply on any default or delay as in a normal commercial transaction.
Standard Commercial Property Conditions
These are conditions which apply to commercial transactions. They can be selected to apply instead of tailor made conditions. They are a set of rules which regulate all aspects of commercial transaction e.g. who pays for the insurance, what happens in case of delay, when are you entitled to compensation, what is the position on VAT etc.
Auctioneer’s liabilities to purchaser
He may have liability on contract of sale, independent contractual liability, liability as a bailee and liability for misrepresentation, liability arising in relation to breach of warranty of authority and fraud.
Sales which give rise to criminal sanctions
These are misdescribed goods, land, unhallmarked gold, silver, platinum, unsafe and dangerous goods, unroadworthy vehicles, wild birds, animals, fire arms offensive weapons etc.
If an auctioneer pretends to accept bids which have not been made, you could have a claim against him in relation to the deposit and interest upon it. He can also be sued for fraud and if at the same time the vendor claims rescission of the contract, the auctioneer cannot be dismissed upon paying the deposit. Fraudulent acts in relation to dumping the sale will also invalidate the purchase. It is however allowed for you to agree with some other person not to bid against each other. Persons convicted under Auctions (Bidding Agreements) Act 1927 may be prohibited from entering the auction sale for a period of time.
Types of auction
All sorts of items can be sold at auction sale and there are many types of auctions. There are specific steps which has to be followed before the auction takes place. The auction should be advertised so that potential bidders know where and when it is taking place. The name and the address of an auctioneer should also be clearly stated. There should be an auction catalogue available in advance of the auction for the prospective bidders to review its contents. There can also be online or postal auctions. The following types of auction are a bit more complex and require specific steps to be carried out.
Auctioning a business
Your solicitor would have to carry out due diligence inspection and a report with respect to those properties owned by a business. Is different from a property auction; The Seller firs seeks competing bidders from prospective buyers. The Seller chooses the most competitive bidders and distributes sales pack they will review the packs and carry out due diligence investigation. There is then a second round of bidding and prospective buyers can mark up the contract, they will also get the access to data room, and site visits are allowed too. After this stage negotiations continue between the bidders.
The Seller’s solicitor will have to prepare a sales pack and this will be available to the Buyer prior to the auction so that the prospective buyers get the option to review the relevant information on the property in an auction catalogue. This pack usually contains all important information about the property including information about the state of the property searches that have been carried out. It is therefore important to firs instruct a solicitor prior to buying the property so that he could review this information and give you an advice with respect to the same, this will prevent any later regret relating to your purchase. After the fall of the hammer the Seller has no responsibility to rectify any defects on the property. There may be important restrictive covenants on the title which means that without knowing them you may end up purchasing the property for a certain purpose which in fact is prohibited to be carried out on that specific property. Moreover depending on the type of the contract there are often conditions to be fulfilled by the buyer in relation to the costs, this is also necessary to be spotted. E.g. paying the Seller’s fees or the auctioneer’s fees.