Workshop: Auction contracts

Hopefully at least once in your career as a conveyancer you will have the joy of dealing with a property which is being sold or bought at auction. ?More often than not the conveyancing process remains unaltered. However, the auction conditions can make things slightly different in such a way that to ignore these variations can leave you and your client exposed.

My experience when acting in the sale of a property which has gone or is going to auction has been twofold; either I have been asked to prepare the auction pack and special conditions to the contract or I am simply instructed after the auction has ended to deal with the sale.

Dependent

The first example given above does place more onus on the conveyancer to produce a full and accurate auction pack and contract quickly. It needs to be accessible to all, not just other conveyancers as it will be available for inspection prior to the auction. Usually, the pack will include the seller's evidence of title which, if registered, will include the title register, filed plan and any documents referred to within the register.

Depending on the circumstances you may also need to include copies of any planning permissions, guarantees, building regulation approvals and consents. So, if work has been done to the property without covenant consent, for example, you will need to advise your client to either get the consent or agree to provide indemnity insurance (a copy of the draft policy being made available in the pack). If the property is unregistered then you will need to include the full root of title and associated documents including an epitome.

It is safe to say that when constructing the auction pack it is best to put yourself in the position of the buyer and include everything which a prudent purchaser would need. In this way you can then avoid any situation which may put you and your client in an awkward position due to non-disclosure of some material fact which may lead to the sale falling through or a claim by the buyer.

Under pressure

In some circumstances the client may authorise the inclusion of standard property searches in order to speed the process along. It may then be possible to recover the cost of these searches within the special conditions of the contract.

If you are acting for the buyer of an auction property then you will find that you are under pressure to either complete or exchange on the transaction within 28 days depending on which type of auction it is.

As a conveyancer it is important that you take note of which type of auction your client is involved with. There are two types; option one conditions generally mean that on the fall of the gavel, exchange of contracts occurs immediately and the buyer has 28 days in which to complete the transaction. As the buyer's conveyancer this means that you have 28 days to complete your investigations including property searches where necessary. If the auction pack is not thorough and if searches are not included, then time can be tight. You also need to be aware of whether your client is obtaining a mortgage for the purchase as this can also add time to the transaction. Certainly, you should not take on such a matter if you do not have capacity to do so.

Option two conditions are where on the fall of the gavel a sale memorandum is produced requiring an exchange of contracts within 28 days and completion within 14 days ?after that. You may find that for ?option two auctions there is a limited auction pack, giving more time for investigations to be done.

For a conveyancer, auction properties can be troublesome and time consuming but, I think, if auction packs are produced correctly and instructions are only taken where there is capacity to take on such a matter then the process can be smooth and without incident. SJ

 

CHECKLIST ?  Check which type of auction you are to be involved with. ?  If producing the auction pack, include as much information as possible. ?  Take a note of the timescales. ?  Ensure you know how much deposit has been paid/received by the auction house.