Selling/Buying at Auction: A Quick Win or a Costly Mistake?

Selling by private treaty, i.e. via the “usual” conveyancing process, one might find a transaction may take longer than if selling at auction. Many sellers – often those with dilapidated premises or struggling to sell, those selling in their capacities as Executors, and those who need a quick sale for personal reasons, e.g. finances or relocation – therefore opt to sell at auction, instead. Whilst this may be quicker and easier (as exchange occurs when the hammer falls, and completion is usually fixed at 20 working days after the auction), auction sales and purchases are fraught with risk. An auction venture should not be considered without comprehensive legal advice. Below, we focus on some of the risks that can arise for both seller and buyer when transacting at auction.

Purchasing at auction: the risks

Lack of disclosure and onerous matters

Why is the property being sold at auction? The answer to this question may seem obvious: the seller wants to offer the property up to as many people as possible, perhaps start a bidding war, and sell the property as soon as possible. However, it is equally possible that the seller wants to avoid the standard conveyancing procedure for another reason.

Properties sold at auction are often “sold as seen” and, typically, sellers disclose less in an auction pack than they would do if selling via private treaty, leaning heavily on the principle of caveat emptor (buyer beware).

The property may be subject to:

• Title defects;
• A right of first refusal or option to purchase in favour of a third-party;
• Restrictions on title where evidence of satisfaction is lacking;
• Financial charges where no assurance of discharge is provided;
• A planning permission with unsatisfactory conditions, or a planning permission whereby No Letters of Reliance or assignment of copyright in plans and reports has been offered up;
• Overage / clawback / uplift provisions requiring further sums to be paid to A N Other in future;
• Lack of sufficient consents (whether that be planning permission for alterations or for use, building regulations, or listed buildings consents) or easements, e.g. rights of way;
• Restrictive covenants or rights of way in favour of third parties which could prohibit or interfere with intended use;
• Physical defects (think damp, subsidence, or a leaky roof);
• Leases (where purchaser will become landlord after completion) which may be defective or unsatisfactory;
• Enforcement notices (such as a Planning Enforcement Notice, Breach of Condition Notice, Conservation Area Enforcement Notice, Stop Notice, or Dangerous Structure Notice);
• Proposals for compulsory purchase, or registration as an Asset of Community Value;
• Ongoing disputes;
• Rent arrears;
• Excessively high service charges and/or insurance contributions,

Amongst other things, all of which could affect a buyer’s ability to register their interest at the Land Registry, market, sell, lease, or raise finance against the property in future, and/or ability to insure the property on standard terms and at reasonable premiums.

It is often the case that, due to the timeframes involved with auction sales, purchasers do not have sufficient time to commission and schedule a full survey, and/or to request a full suite of searches against the target site, and some sellers count on this!

Liability in the property will ordinarily pass to the buyer on exchange – as will the obligation to insure the property. As such, prospective purchasers are advised to, at minimum, appoint an impartial and qualified lawyer to review the auction pack and report to them on the content.

A lawyer will undertake checks to ensure the seller listed in the auction pack has the legal power to effect the sale, and will advise on any adverse entries or matters apparent from the pack or things which may be missing from it, as well as any hidden fees arising from the auction process. A good lawyer will work with you and assess your appetite for risk, advising on the implications of identified risks so you can determine whether they are risks you are willing to take.

Although we would never recommend bidding at auction without taking legal advice, purchasers should only do so where they are satisfied that they have the financial resources to rectify any issues post-completion, accepting that the associated costs cannot be quantified prior to auction.

Ensuring finance is in place prior to the contractual completion date

In a standard property transaction, a buyer’s financial arrangements – such as mortgage lending – will typically be dealt with simultaneously with the purchase. Failing all else, the parties can negotiate a gap between exchange and completion, allowing the buyer the necessary time to arrange drawdown or release of funds, e.g. from a lender or a pension pot.

With auction purchases, however, there is much less flexibility.

Many auction houses will utilise the Commercial Auction Conditions 4th edition (“CAC”), which stipulate that (in the absence of a Special Condition stipulating otherwise) completion will be 20 working days from exchange. Before placing a bid, a purchaser should ensure they will have the monies ready by the contractual completion date.

Should completion not take place on the contractual completion date, the sellers’ solicitor reserves the right to serve a “notice to complete” requiring the buyer to complete within a set timeframe (usually 10 working days, during which interest will accrue on the unpaid sums), failing which the seller may rescind the contract and the buyer will forfeit their deposit and usually have to pay a penalty fee and, perhaps, damages.

Selling at auction: the risks

Upfront and sunk costs

If the seller appoints a lawyer – as is recommended – to prepare an auction pack ahead of the auction, the legal fees for preparation of the pack will be payable up front, regardless of whether or not the property ultimately sells. Similarly, there are likely to be fees payable up front to the auctioneer. That being said, instructing suitably qualified professionals can side-step other, more costly risks, some of which are outlined below.

Breach of obligations

Sellers who fail to take legal advice prior to listing a property at auction may find themselves in a sticky situation if they inadvertently breach any of their pre-sale obligations. For example, the property may be subject to a historic right of first refusal in favour of a third party which the seller has forgotten all about, and contracting with a bidder could land them in hot water.

Caveat emptor vs common law disclosure

Caveat emptor places the onus on buyers to investigate title to the property prior to purchase. However, there is also a common law duty on the seller to disclose defects in title. The High Court case of SPS Groundworks & Building Ltd v Mahil [2022] provided guidance on how far a seller should go to fulfil that duty. The facts of that case were as follows:

• The property was sold at auction and was described as having “excellent scope for development”.
• The auction pack – which was freely available via the auctioneer’s website – included a copy of an instrument imposing overage obligations. Overage entitles the original seller to further sums (i.e. on top of the purchase price) if certain “triggers” occur. The triggers are usually the grant or implementation of planning permission which makes the property / land more valuable than it was at the time of the sale, allowing the seller another bite of the cherry.
• The buyer did not review the auction pack prior to bidding.
• Immediately after winning the property at auction, a representative at the local council approached the buyer informing her that the property could not be freely developed.
• The buyer then downloaded the auction pack and discovered the overage deed the council were referring to, and then refused to complete on the contractual completion date.
• The seller sold the property at a second auction for a lower price, and brought County Court proceedings against the original bidder for the shortfall.
• The seller’s claim was initially successful but, on appeal to the High Court, the Hight Court found in the original bidder’s favour. This was on the basis that there is an equitable principle that if there is a defect in the seller’s title to the property of which the seller is aware, the seller mist provide “full, frank and fair information” to the buyer or a fair and proper opportunity to become aware of the defect”. Reference to the standard conditions of sale and signposting to the auction pack is not sufficient, and the duty cannot be circumvented by a contractual condition deeming the buyer to have made all necessary searches and enquiries.

In light of the judgment in SPS Groundworks & Building Ltd v Mahil, sellers should be aware of their obligations and should take legal advice on any specific disclosures to be made.

Misrepresentation claims

It’s come to be known as “the moth case”, and the recent case of Iya Patarkatsishvili & Vevhen Hunyak v William Woodward-Fisher [2025] certainly highlighted the risks of making disclosures in any property transaction which aren’t strictly true, relying on syntax and naivety of a buyer.

In this case, the buyers purchased a property in Notting Hill for £32.5million, reliant on a representation given by the seller in proforma disclosures that the seller “wasn’t aware” of any vermin infestation or latent defects. However, evidence later showed that the seller had received pest control reports about a severe moth infestation and recommending removal of wool insulation prior to sale. The buyer brought a claim against the seller in the High Court, and the Court found the seller had made fraudulent misrepresentations and was reckless in his responses. The Court ordered the rescission of the sale, meaning the seller had to buy back the property, return the purchase price, and pay around £4million in damages.

Should I take legal advice before heading to auction?

Yes! A good seller will instruct a solicitor to provide a comprehensive legal pack to the auctioneer at least a couple of weeks in advance of the auction. A pragmatic buyer will instruct a lawyer to review that pack and prepare a report on it and will undertake a thorough visual inspection and perimeter walk prior to auction.

How can we help?

Our Commercial Property Department has significant experience in acting for both seller and buyer when it comes to auction properties. We offer fixed-fee pricing for both preparing and reviewing auction packs and can assist on as little as 72 hours’ notice. Our investigative expertise allows us to identify gaps in disclosure and associated risks with ease and advise on mitigation.

This article is not intended to constitute legal advice. If you require advice on a specific matter or transaction, please contact us for a no-obligation quotation at Advice@holmes-hills.co.uk.