Under the hammer: new standards for property auctions

Standard conditions are being imposed on auctions

by Keith Miller of thePublican.com's legal team of experts from London solicitors Joelson Wilson​

Selling and buying a property by auction should become a simpler process because of standard conditions which have been prepared by the Royal Institution of Chartered Surveyors (RICS).

Times and conditions vary, but selling a property by auction is sometimes the recommended method, for example where trustees or executors are selling and have a duty to get the highest price. Sometimes the state of the market decides that the auction method is the best way of establishing the true price.

Sale by auction is also a way to dispose of properties with difficult or unusual titles.

In the past, the general sale conditions prepared by the auctioneers were often quite different according to which firm was conducting the sale.

The special conditions prepared by the seller's solicitors could also be in any number of different forms. Properties in different parts of the country would be sold under the local law societies' conditions, completely unknown to outsiders.

In some areas, the seller's solicitors would provide full information about the properties, elsewhere none.

The special conditions of sale might not appear in the auction brochure but be delivered at the last minute for inspection in the auction room. Copy deeds might be available only at the seller's solicitor's office.

Now RICS has produced the "common auction condition", available on its website at www.rics.org/property_auctions.

It sets out the sale conditions in very clear language (possibly too clear for lawyers' liking!) and includes rules on the conduct of the auction, the general conditions applicable, the special conditions relating to the particular properties being sold and the memorandum of sale - the written contract recording the auction sale.

The general and special conditions are comprehensive enough to cover all sorts of properties, including freeholds and leaseholds; properties subject to tenancies; properties sold as part of a business and with provisions about VAT and employees; and sales by receivers or liquidators. Strangely enough, there are no provisions relating to licensed properties as such and so the aspects peculiar to pubs and restaurants will need to be included in "extra special conditions".

The advantage of the new conditions is that, once adopted throughout the property professions, they should be standard for the whole country, easily understood by buyers and sellers alike and less likely to lead to surprises for buyers.

That said, buyers at auction are notorious for not doing their homework before bidding. It will still be advisable to carry out searches, take legal advice on the special conditions and have surveys done. And of course the sale will not be subject to mortgage, so it is imperative to get adequate finance in place by the day of the auction. The fall of the hammer seals the deal.