When you buy a house at auction, before bidding begins it’s prudent for interested parties to take a look at the auction legal pack which is put together by the seller’s solicitors. This is an assortment of paperwork containing details that a prospective buyer would want to, and need to know, about a property before placing a bid.
At auction, purchasers run the danger of suffering significant financial losses if they don’t carefully read and comprehend the contents of the legal pack.
Depending on the particulars of the transaction, the documents in a legal pack will vary from property to property. The common types of documents you can expect in an auction legal pack are:
- Official Copy of Register of Title,
- Land Registry Title Plan,
- Property Deeds,
- Local Authority Search,
- Environmental Report,
- Water & Drainage Search,
- Coal Mining Search,
- Special Conditions of Sale,
- Property Information form,
- Fixtures and Fittings form,
- Management Information,
- Leases and lease information,
- Energy Performance Certificate (EPC),
- Warranties and guarantees,
- Tenancy Agreements,
- Planning Permission and Building Regulations documentation.
Please note that this list is not exhaustive.
Special Conditions of Sale
The ‘Special Conditions of Sale’ agreement is perhaps one of the most significant documents in the legal pack.
It indicates that the vendor disclaims all liability for any errors or inaccuracies discovered after the auction. The special conditions to watch out for are shorter completion times, higher seller premiums, and/or overage clauses. Overage clauses say that a seller will get extra proceeds from the sale, as well as the purchase amount (for instance, if the land increases in value).
It is crucial to have a conveyancing solicitor properly review the documentation before the auction because once you bid and the hammer goes down, you are obliged to go ahead with the purchase otherwise you may find yourself in breach of contract.
It must be noted that sellers may not want to disclose certain information in the legal pack as it might affect the saleability of the property, so it is important to carefully review the conditions. It is ultimately the responsibility of the buyer to ensure they are happy with the special conditions and the legal pack as a whole. In some cases, your solicitor can raise further enquiries with the seller’s solicitor about the contents of the pack prior to auction.
Missed Information
Information can be missed off the legal pack or disclosed later, nearer the time of the auction date. It’s a good idea to contact the solicitors acting on behalf of the sellers to ensure that everything is in place to assess the suitability of the property. A conveyancing solicitor will be able to advise which documents have been missed and the risks involved with not having sight of certain information.
Consequences of Not Inspecting an Auction Legal Pack
It is often the case that properties that won’t sell on the open market are frequently put up for auction. That means there can be challenges with the property that make it less appealing, prevent it from being financed, or otherwise diminishes its worth.
A buyer runs the risk of purchasing a property that may not be as financially viable or profitable as they thought if they don’t undertake enough “due diligence” (i.e., title investigations for example) before the auction.
SPS Groundworks & Building Ltd v Mahil [2022]
Despite reading an auction legal pack, many purchasers don’t fully comprehend its contents. The SPS Groundworks & Building Ltd v Mahil case highlighted the critical importance of informing buyers about factors that could impact a property’s future value.
In this instance, the buyer acquired a plot of land at auction, characterised as offering “excellent development potential, pending planning permission, making it an outstanding investment opportunity.”
Subsequently, the buyer discovered an overage clause applied to the land, detailed in the deed of covenant. The clause stipulated that 50% of any increase in land value due to obtaining planning permission must be paid to the Co-operative Limited. While the legal pack contained a copy of the deed of covenant, the auction brochure made no reference to it.
Initially, the court found that it was the buyer’s responsibility to comprehend the legal pack’s contents concerning the overage clause. However, in the High Court appeal, it was determined that the seller had a duty to fully disclose this information. Despite the buyer’s failure to scrutinise the legal pack, the seller was obliged to make the buyer aware of the overage clause through the auction brochure, sales particulars, an addendum notice, or via the auctioneer.
The rationale behind this ruling was that the buyer might have assumed that the deed of covenant contained no information significantly affecting the property’s value unless explicitly informed otherwise.
Although the ruling was in favour of the buyer in the end, it will not have been without significant cost, time, and stress. Undoubtedly no one wants to end up having to go through lengthy court proceedings. This demonstrates the importance of properly reviewing all the information that is disclosed in the legal pack and asking further questions about the absence of certain information before assuming it is not relevant.
BHW Conveyancing is the leading residential property law firm in Leicestershire and is ranked in the top ten real estate firms in the East Midlands by the Legal 500 guide. We pride ourselves on giving our clients a seamless and efficient end-to-end conveyancing service and adhere to high-quality industry standards. We work with many estate agents and financial advisors as their preferred conveyancing partner. Due to our proactive approach to progressing our clients’ property transactions, we are constantly being referred time and time again.
Whether you are a property professional, seller, or buyer, we can help with your residential conveyancing queries. To request a personal conveyancing quotation, or to discuss setting up a professional referral relationship with your business, please call us on +44 (0)116 289 7000 or send us an email at conveyancing@bhwsolicitors.com.
The content of our site is provided for general information purposes only and does not constitute legal or other professional advice.