Buyer Beware: What to look out for when buying at auction

Not so long ago, a buyer was left disappointed when the house he had agreed to buy at auction was demolished just before completion. The Local Authority ordered the demolition because the property had become unsafe, and as a result the buyer lost his deposit. While not all mistakes at auction are so calamitous, a property with a bad title can be just as unmarketable as one which is falling apart. What then should a buyer know about the auction pack? The consequences of missing something could be serious, so hopefully this guidance will help to steer buyers in the right direction.

Who owns the property?
The title register will show who owns the property. It will include a plan, which should be checked to ensure that it matches how the property looks on the ground. The register may also refer to filed documents, copies of which should appear in the pack. These may contain important rights such as of access to the property, or to the passage of utilities across neighbouring properties.

What restrictions should I know about?
The title register, or the documents referred to in it, may contain covenants by which the owner of the property needs to abide, such as using the property only for a particular purpose. It may also list mortgages or other restrictions, and although the special conditions will usually provide for mortgages to be paid off, you should always ensure that you can comply with any restrictions if this is necessary to register your purchase. Equally, if the property is occupied by a tenant, then details of the tenancy should appear in the auction pack.

What if the property is leasehold?
The title register will also say whether the property is freehold or leasehold. When a property is leasehold, the lease should appear in the auction pack and should of course be carefully reviewed, along with the landlord’s registered title. Information will also need to be given about such matters as the rent and service charge payable, insurance arrangements, and requirements for serving notice of your purchase on the landlord.

What other checks are needed?
Most auction packs will contain search reports, although the types of search will vary. Searches should be no more than six months old in order that you can rely on them. If not, it may be that you need to obtain insurance validating the searches. As standard, most packs will contain at least a Water search and a Local Authority search.

What will the drainage and water search tell me?
This will confirm, among other things, whether the property is connected to mains water supply and public sewers. It will also show whether there are any public sewers running through the boundaries of the property, which may have implications for development of the property, particularly if an extension is planned.

What will the local authority search tell me?
This will give information regarding the Planning history of the property, whether there have been any notices served which could affect the property, and whether the roads adjoining the property allow public access. This will be particularly important if the property does not benefit from any private right of access over neighbouring land.

What information will the seller give?
Auction packs may also contain answers given by the seller to questions which the average buyer would ask. The questions will differ depending on whether it is a commercial property or residential, but might cover such things as disputes with neighbours, fixtures and fittings to be included in the sale, and the VAT status of the transaction. These answers are unlikely to be available however if the sale is by a bank which has repossessed the property.

All counsel for auction buyers will focus on the need for diligent research prior to the auction. Checking the legal documents in the auction pack is a fundamental part of this, and the old adage that the buyer must beware is never more appropriate than in the context of buying at auction. If you are unsure of what you are taking on, you should therefore not hesitate to seek legal advice.