The purchase of auction properties and the principle of Caveat Emptor

May 10, 2017

When purchasing a property there a many different options to choose from. As the market becomes more and more competitive it is important to understand the benefits and draw backs of the options available.


Purchasing properties at auction is a popular option amongst prospective buyers due to the speed of the transaction and the fact that the entire ‘legal pack’ of documents is available for review in one place before the actual auction date.


There are some important factors to consider when purchasing a property at auction. This is because when your bid is accepted at auction you become legally obligated to complete the transaction within the timeframe that has been indicated, usually between 21 days to a month.


The principle of ‘Caveat Emptor’ has been used by British Courts since the medieval times and its origins date back even further. The Latin phrase translates to ‘let the buyer beware.’ The idea behind this principle is that the buyer alone is responsible for checking the physical condition of the property along with whether there are any legal issues surrounding the property or its owners. There is no obligation on the seller to provide any information unless specifically requested by the buyers or their solicitors.


The process of investigating the legal paperwork and advising you on when to check the physical condition of the property will be carried out by your solicitor. This raises an issue with auction purchases as bids are often made and accepted before a solicitor has seen the legal paperwork. Once a property has a bid accepted at auction, the contract you sign as confirmation is deemed as an ‘exchange of contracts’. The most significant risk here is that the seller is under no obligation to respond to any legal enquiries relating to the Title or regarding any physical defects after an exchange of contracts. This could mean that you are stuck with purchasing a property with potentially severe defects.


There are risks involved including a potential restriction on planning and usage or perhaps a defect in the roofing or an asbestos issue. These matters can be expensive to resolve therefore being aware of them before becoming legally liable  is essential and is a mark of effective forward planning.


The risk will also increase significantly if you are purchasing with the aid of a mortgage. A Lender will carry out  a valuation of the property and if  any defects are  revealed, then they could refuse lend.  By the time the lender does the valuation you will already be legally obligated to complete the transaction so this could prove to be a major problem  if you are unable to secure a mortgage to fund the purchase.


The legal pack of documents is made available by the auction company several days if not weeks before the auction date itself. This is a legal requirement and allows you; as a prospective buyer; to review the legal documents and also enquire as to whether a site visit can be organised before putting in a bid for the property. It is strongly recommended that you carry out these investigations before auction so that you are can enquire about any concerns you have before being legally obliged to complete the purchase.  These investigations form a large part of the principle of ‘let the buyer beware’ and if you are satisfied with the outcomes of your investigations it significantly lowers the risk of purchasing an auction property.


We strongly recommend that you to contact our team of lawyers who can provide you with a review of the legal pack which is provided before auction. Obtaining this legal advice will allow you to make a more informed decision as to whether a property is worth the risk.


Auction properties still provide for far quicker transactions that can be beneficial for property developers and first time buyers alike. The main thing to consider when bidding is to ensure you have carried out your due diligence prior to the auction date. The pace of transaction will make little difference if after your bid is accepted or on completion you come to realise that there are several defects that will need resolving before you intend to use the property as first planned.


As per the Latin phrase Caveat Emptor, it is essential to carry out your own investigations so you are indeed aware of any defects or legal issues that could negatively impact you.

The information provided in all of our blogs reflects only a narrative of some elements to consider on the topic. The blogs do not contain considered legal advice and should not be relied upon as advice. Please see our website terms and conditions for full details of our disclaimer. If you are interested in obtaining advice, please contact one of our lawyers who will be happy and able to advise you on your own particular circumstances.

By clicking “Accept All Cookies”, you agree to the storing of cookies on your device to enhance site navigation, analyse site usage, and assist in our marketing efforts. View our Privacy Policy for more information.