Property Auctions – Sellers Legal Guide Property Auctions – Sellers Legal Guide

Contents

Seller’s Legal Guide – Introduction Sellers Legal Guide - Introduction

Thank you for using our property auction service. We certainly appreciate your custom and very much look forward to working with you.

You can rest assured that Property Solvers have many years of experience in helping all kinds of homesellers achieve quick sales.  Our auction service is no different.

To be read in conjunction with our Property Solvers Auction Sellers Guide, what follows are some of the key legal aspects you should be aware of when selling your property in this way. Please also check out our blog posts on selling your property at auction and in-depth guide to selling at Modern Method of Auction.

We’re here to help every step of the way and are excited about getting you an excellent outcome…

Auction Conveyancing Auction Conveyancing

The legal process when selling a property through an auction is not especially different to an estate agency sale.

However, due to the purchase being confirmed upon the auction’s conclusion (i.e. a winning bid), much of the legal work – also known as conveyancing – often gets completed before listing and allowing people to bid on your property.

In addition to actively marketing your property, dealing with bids and ensuring you get the best possible price, our job here at Property Solvers is to make sure all the legal aspects of the transaction are undertaken in the correct manner.

For this reason, although it’s not compulsory, we generally suggest instructing a conveyancer / conveyancing solicitor to prepare a series of legal documents surrounding your property. This enables bidders to be better-informed on the legal specifics of the transaction which, in turn, will boost your chances of a successful sale.

Firstly, you’ll need to instruct a good conveyancer (solicitor) to produce the auction legal pack for us to upload to the Property Solvers online auction platform.

This will involve completing the property information forms; drafting any Special Conditions of Sale; undertake any necessary searches and ensuring you work with a good conveyancer who can deal with any enquiries raised by potential bidders/buyers.

Once, the winning bid and buyer is in place, your conveyancer will need to undertake a series of other processes, including:

  • Receive the sales memorandum from Property Solvers Auctions;
  • Approve the Transfer Deed and requisitions on title;
  • Forward replies to requisitions to the buyer’s conveyancer;
  • Post the Transfer Deed for you to sign;
  • Request the title deeds and a final redemption statement from your lender and secured charge lender (where this is the case);
  • Draft and forward the completion statement to the buyer’s conveyancer;
  • Handle the completion of the transaction (working with Property Solvers Auctions);
  • Redeem (repay) any mortgages / secured loans held over the property;
  • Transfer any proceeds of sale to your bank account;
  • Forward new Title Deeds to the buyer’s conveyancer.

The Auction Legal Pack The Auction Legal Pack

What is an Auction Legal Pack? What is an Auction Legal Pack?

A suitably qualified conveyancer / conveyancing solicitor will need to download and prepare a series of documents related to your property highlighted below, called the legal or property information pack.

Property Solvers will then make this publically available as the property is promoted alongside the property particulars, photos, floorplan, Energy Performance Certificate (EPC) and other relevant documentation.

Note that, as it’s not always feasible to have the full legal pack prepared instantly, we may gradually add further elements as they are passed on from the conveyancer.  We may also allow conveyancers we work with on a regular basis to add the documentation directly on to our auction platform.

It will be down to the buyer to comb through the documentation before deciding to bid. They may also make enquiries and seek other clarifications (principally through the conveyancer, but we will help where we can).

It’s worth observing that any bid becomes legally binding should it end up being the highest amount for your property. It’s for this reason why we (as the auctioneer) have to run through so many checks and before allowing buyers to participate.

Preparing the Legal Pack Preparing the Legal Pack

Although auction legal packs are not a legal requirement, selling without one in place is never really a good idea.

For a start, buyers will often be sceptical and wary about bidding on properties.  They may also think that there’s something wrong with the property that you (the seller) are keeping from them.  Those that do move forward, will often bid low in order to factor in the buying risks.

Ultimately, it comes down to transparency and (together with the excellent marketing exposure we’ll provide). Having the auction legal pack in place will position your property in the best way.

Why do You Need to Prepare the Legal Pack Beforehand? Why do You Need to Prepare the Legal Pack Beforehand?

Normally, when a house is sold through an estate agency (known as ‘private treaty’), the buyer’s conveyancer will undertake the necessary legal checks only once the sale is underway.

However, as auction buyers will be committing to the sale once the hammer falls, most (but not all) will want to have these checks complete before bidding. Having the legal pack in order also means that multiple potential buyers can see view the specifics whenever they need to (rather than each requesting information separately).

Although it may seem like a pain to have to organise things in advance, once you have a winning bidder in place at the close of the auction, things are a lot more plain sailing compared to an estate agency sale.

How to Obtain an Auction Legal Pack? How to Obtain an Auction Legal Pack?

When selling at auction, we would recommend finding a qualified conveyancer / conveyancing solicitor – preferably one that has solid experience in dealing with auctions.

Note that some sellers choose a DIY conveyancing approach and prepare the legal pack themselves – particularly those that already have some experience in the industry or perhaps have recently bought the property (and have up-to-date documentation to hand).

We would, however, generally recommend the conveyancer undertake this part of the process due to them being familiar with what is necessary and can ensure that no stone is left unturned.

They will also be able to respond to prospective buyers’ enquiries quickly which, in turn, should encourage solid bidding.

How Much Are Legal Packs? How Much Are Legal Packs?

Much will depend on the type of the property and the expected workload, but you can generally expect to pay between £500 and £700 (+VAT) for the legal pack. Please note that you will also need to pay a similar amount once the sale is complete (i.e. £1,000 and £1,400 + VAT in total).

Is it Possible to Pay for the Legal Pack Upon Completion (i.e. with the Proceeds of Sale)? Is it Possible to Pay for the Legal Pack Upon Completion?

Sometimes it is possible, but it will be at the conveyancer’s discretion. Understandably, they are often concerned about taking on the work and clients potentially pulling out during the auction sales process.

The conveyancers that do offer a completion-based fee will probably charge a premium to cover their extra risk.

If you were to pull out of the sale, the conveyancer may reserve the right to charge you a set ‘abortive’ fee (although you can retain the legal documentation in such circumstances).

Note that, if you were to use our sell house fast or we buy any house service, we would take care of the whole legal process (and cover all associated costs).

How Long Does it Take for the Auction Legal Pack to be Ready? How Long Does it Take for the Auction Legal Pack to be Ready?

Good conveyancers should be able to prepare the legal pack within 3 weeks of instruction.  However, with much of the delay being due to the searches (particularly the local authority document), it’s possible to get the vast majority of the pack ready for buyers to look at / examine within a week. At Property Solvers, we call this a ‘preliminary legal pack’.

Generally, due to the extra information requests, leasehold property legal packs are going to take longer. For this reason, it’s often worth approaching the freeholder and/or management company to see if they can expedite things a little quicker for you.

What Would Happen if the Legal Pack Isn’t Ready on Time? What Would Happen if the Legal Pack Isn’t Ready on Time?

It’s usually better to have the entire legal pack viewable on the property listing within at least a few days prior to the start of the bidding. This means that buyers will have all they need and the chances of any ‘low ball’ bids due to a lack of information are minimised.

Many auction buyers take out indemnity insurance such as ‘no search’ or ‘absent freeholders’ policies that effectively protect them against associated risks.  If just a couple of searches are missing, it’s usually ok. However, if the essentials such as title documents, plans or leases or not in place, we often suggest delaying things until they are.

How Long Is The Auction Legal Pack Valid for? How Long Is The Auction Legal Pack Valid for?

Although certain elements of the legal pack would last for longer, search requests would usually have to be reissued after 6 months. It’s highly unusual for an auction property we sell for clients not to sell within this period.

What Would Happen if an Acceptable Pre-Auction Offer Was Made? What Would Happen if an Acceptable Pre-Auction Offer Was Made?

If your property generates a lot of interest during the marketing process, we may receive offers from buyers that are happy to move forward under auction conditions even with no legal pack in place.

In such scenarios, we will call you to discuss any offers that have been made. Should you accept the offer, the buyer will need to agree to our terms + conditions, register on the portal and pay the non-refundable buyer’s fee. Even without a legal pack in place, the buyer is financially committed to completing on the sale (particularly with the unconditional or 28-day auction).

Whilst a pre-auction offer often means that the sale will complete sooner, you may wish to decide to continue with the auction bidding process (especially if there are a lot of potential buyers interested in the property).

Title Register (also known as the Title Deed) Title Register

You may have this document already but most conveyancers will download an up-to-date copy from the HM Land Registry (at a cost of £3).  We also have a copy we can forward.

The Title Register will confirm that you own the property, the amount you originally paid, any charges (such as mortgages and secured loans).

There may also specific information related to restrictive covenants, negative easements, third-party consents and ransom strips. Your solicitor will highlight and explain any issues that you may not be aware of.

Title Plan Title Plan

This document is a graphical representation of the boundaries of the land surrounding the property and complements the details in the Title Register. This will also be downloaded from the HM Land Registry (at a cost of £3).

Conveyancing Searches Conveyancing Searches

Normally undertaken by the seller’s solicitor before the auction sale, conveyancing searches contain a range of information related to the surrounding area. They form an essential part of the auction legal pack and your conveyancer will make a series of requests to local authority and other public bodies.

The main searches include Local Authority (which takes the longest), Environmental, Flood Risk, Water, Drainage, Boundaries, Commons Registration, Land Charges, Chancel Repair, Canal and River, Mining and Solar Panel Approvals.

Buyers will look at these documents to make sure there is nothing out of the ordinary.  However, some will take out specific ‘no search’ indemnity insurance policies to protect against any risks particularly as it’s common to hear of delays for searches to arrive prior to the auction.

Energy Performance Certificate (EPC) Energy Performance Certificate (EPC)

Having an up-to-date Energy Performance Certificate (EPC) in place is a legal requirement when selling a property.

If the property has been put on the market in the last 10 years, it’s likely that it appears on the EPC register (you can check here).

If not, as part of the auction set-up process, Property Solvers can organise the certificate (often when we take the photos and floorplan for the listing).

Terms & Conditions of Sale Terms and Conditions of Sale

These will appear on our website and follow the Royal Institute of Chartered Surveyors (RICS) Common Auction Conditions (4th edition).  See our conditional and unconditional documents for England and Wales.

It’s important for buyers to understand how the auction will be run, understand our auction team’s role and responsibilities

For example, if we run a conditional (56-day) auction, a deposit will be payable once the electronic hammer falls and the bid is won. The buyer then has 28 days to exchange contracts and a further 28 days to complete on the sale.

With our unconditional (28-day) auction, the overall time frame is limited to 4 weeks. This means that the buyer will exchange contracts at the fall of the electronic hammer and pay the 10% deposit into our client account. The sale must then complete within 28 days.

Special Conditions of Sale Special Conditions of Sale

The Special Conditions of Sale is a separate document that clearly states any contractual variations on the transaction that the buyer should be aware of.

These may include:

  • Any extensions to the period between payment of the reservation fee and exchange of contracts and/or completion (often the case with commercial property and land sales);
  • Additional sales commissions payable to property dealers or asset management companies;
  • Issues on the Title that can only be resolved post-completion;
  • If the property has been inherited and is still going through probate, any associated financial conditions that could affect the buyer post-completion are highlighted;
  • Any Land Registry restrictions (RX1s) that are still in place (these will need to be cancelled prior to exchange of contracts, unless agreed otherwise);
  • Any unusual charges against the property or surrounding land that will remain against the property post-completion;
  • Any sellers fees or commissions being covered by the winning buyer (due on completion).

Law Society Forms Law Society Forms

These forms will be sent as part of the ‘Seller’s Pack’ for you to complete to the best of your ability.

Property Information Form (TA6) Property Information Form (TA6)

This contains a range of information regarding boundaries, disputes / complaints, notices / proposals, alterations / planning / building control, guarantees / warranties, insurance, environmental matters, rights / informal arrangements, parking, other charges, occupiers and services. Download a specimen here.

Fixture & Contents Form (TA10) Fixture & Contents Form (TA10)

Another Law Society form completed by the seller that identifies what will and will not be included as part of the sale. This includes basic fittings, appliances across the property (particularly in the kitchen and bathroom), carpets, curtains / curtain rails / blinds, light fittings / switches, fitted units, outdoor items and television receivers.  There’s also a question regarding fuel supply.  Download a specimen here.

If you do not have all the information about the property you are selling at auction – say it’s an inherited property that you’ve never lived in or a tenanted property – you can simply state ‘sold as seen’ (or your conveyancer will).

Leasehold Information Form (TA7) Leasehold Information Form (TA7)

If you’re selling a leasehold property, you will need to supply specific details using this form.  The questions essentially confirm what’s contained in the lease documentation.

Note that you will also have to supply copies of the lease, supplemental deeds, contact details / correspondence from the landlord / management company, service charge / ground rent confirmations, invoices, audited statements, payment (receipt) confirmation, notices, consents, history of any complaints, documentation on alterations, details on any enfranchisement applications. Download a specimen here.

Leasehold Property Enquiries (LPE1) Leasehold Property Enquiries (LPE1)

This form is completed by the landlord or freehold managing agent. It contains key information regarding transfer, registration, ground rents, service charges, building insurance, maintenance agreements, fire safety certificates, any deeds of covenant / certificates of compliance, licences to assign, restrictions, permissions, disputes / enfranchisement issues amongst other finer details.  See a specimen here.

Buyers Leasehold Information Summary (LPE2) Buyers Leasehold Information Summary (LPE2)

This one-page document summarises what’s contained in the LPE1 form and management pack (that will be forwarded to the seller’s conveyancer). The costs ground rent, service charges and insurance premium costs will all be stated alongside details of the sinking or reserve fund.  The management company may also include bank statements.  See a specimen here.

Leasehold Management Pack Leasehold Management Pack

Only necessary if you’re selling a leasehold flat (although some houses are leasehold too), the leasehold management pack will be sent with the LPE1 form and typically contain the following:

  • Insurance policy documents
  • Health and safety policies
  • Service charge estimates and accounts
  • Fire risk assessment(s)
  • Asbestos survey(s) (or confirmation of no presence of asbestos)
  • Forfeiture documentation (if applicable)
  • Deed(s) of Variation (if applicable)
  • Deed(s) of Covenant (if applicable)
  • Certificate(s) of Compliance (if applicable)
  • Licence(s) to Assign (if applicable)
  • Any permission(s) to alter the property
  • Notices served on the lessee (if applicable)

Tenancy-Related Information Tenancy-Related Information

If you’re selling a tenanted property (with tenants in situ), auction bidders will often want to see all the necessary information.

This would typically include:

  • The current Assured Shorthold Tenancy (AST) agreement or licences in place;
  • If you’re selling a House of Multiple Occupation (HMO), it’s better to show the individual room tenancies;
  • Related to the above, remember to include any HMO licence agreements where applicable (issued by the local authority);
  • Information about the occupants at the property.  This can include who pays the rent and if there is a head tenant or specific family / household member that takes financial responsibility;
  • Any evidence of voids and/or arrears (alongside any established resolutions);
  • Confirmation of any notices served in the past;
  • Proof that the deposit has been correctly transferred into the appropriate custodial scheme (Deposit Protection Service, Tenancy Deposit Scheme or MyDeposits).  In most cases, the conveyancer will transfer these funds directly to the buyer (who will need to place it back into one of these schemes);
  • An up-to-date Energy Performance Certificate (EPC);
  • Evidence of the mandatory completion of the annual gas checks (CP12);
  • A minimum ‘satisfactory’ Electrical Installation Condition Report (EICR);
  • Evidence of a working smoke / carbon monoxide alarm;
  • Proof of Right to Rent checks;
  • Evidence that the tenant has received a copy of the Department for Communities and Local Government (DCLG) ‘How to Rent’ Guide;
  • Confirmation that any furniture sold with the property is fire retardant;
  • Confirmation that there are no other health and/or safety hazards;
  • Credit referencing reports (Experian, Equifax, Call Credit);
  • Character references from employers and/or previous landlords;
  • There is no evidence of outstanding works or tenant complaints;
  • A detailed inventory report from when the tenant first moved into the property;
  • Evidence of a Legionnaire’s disease risk assessment.

Please note that the above is an exhaustive list that, in reality, is not always provided at auction sales. We would recommend focusing on gathering as much as you can (the last 7 ticks above are not completely necessary).

If you do not (or cannot) supply the majority of the above, buyers may make cautious bids due to the perceived risk that could be involved when buying the property.

Commercial Property Details Commercial Property Details

Auctions have long been a well-recognised way to sell commercial property. The often complex nature of these types of sales tends to limit the buyer market to professional investors.

Indeed, you’ll often find that commercial property buyers regularly check out the auction portals for opportunities. By and large, they tend to adopt a more technical approach and will often request detailed information.

Much of what is necessary to provide can be supplied through conveyancers in the legal pack.  You may also need to consult with an accountant in relation to any tax-related issues.

In terms of what you should supply, the following is a good starting point:

  • Commercial property leases, rental receivables, proof of income stream stability and other associated documentation;
  • Information on termination dates, break clauses, rent reviews, transfer or charging restrictions, service charges, ground rents, business license / rates schedules, no evidence of criminal activity on premises, insurance provisions, forfeiture (termination) rights;
  • Good covenant strength – including financial status (solvency) and creditworthiness of occupational tenants (through independently audited accounts / financial assessments / payment records / net cash flow breakdowns);
  • Guarantor information – including Authorised Guaranteed Agreements (AGAs) and any confirmation of sureties;
  • Proof of compliance with covenants / consents / permits / easements / rights of way;
  • Title checks (ownership, boundaries, 1st/2nd/3rd charges, encumbrances);
  • Confirmation of no defects on title;
  • Confirmation of type of lease – such as full repairing and insuring (FRI);
  • Maintenance / defect resolution costs and any major works undertaken
  • Current ownership structure (personal, company or trust);
  • Profit and loss of any existing companies or special purpose vehicles (via balance sheet provision);
  • Any evidence of comparable commercial rents at other similar properties in the local area;
  • Demand for the specific type of commercial property.  For example, retail property is currently witnessing decreasing popularity relative to industrial and warehouse space.  At the same time, there are many buyers who are exploring opportunities to convert commercial properties into residential under Permitted Development Rights (PDRs);
  • Vacancy rates for the last 5 to 10 years;
  • Any evidence of local cap rates / local commercial property valuations;
  • Local planning and redevelopment proposals – particularly transport, schools, hospitals and other core infrastructure;
  • Conveyancing enquiry responses;
  • Condition of the property (we will take photos and floorplans but most buyers will want a closer look);
  • Planning and building regulation documentation (including any lapsed permissions / change of use applications);
  • Evidence of enforcement notices / actions;
  • Surveys (building, structural, site, mechanical, electrical, measurement, environmental / ground / rights of light);
  • Insurance policies in place (+ payment confirmations / any claims made in recent years);
  • Current or pending legislation that could affect the property (including the Land and Tenant Act, Law of Property Act, Climate Change Act, Energy Act amongst others);
  • Current or pending regulation that could affect the property (health & safety, fire / asbestos risk);
  • Tax liabilities – particularly related to VAT;
  • Whether the sale will be a transfer of ongoing concern;
  • Potential capital allowances.

Land Details Land Details

Similar to commercial property, land buyers usually request to see a range of details.  Indeed, many of the due diligence processes overlap.

Information to provide includes (but is not limited to):

  • Size of plot, boundaries and details regarding any existing buildings;
  • Any evidence of hazardous land use;
  • Previous planning consent details (recent or lapsed);
  • Proof of compliance with covenants / consents / permits / easements / rights of way;
  • Title checks (ownership, boundaries, 1st/2nd/3rd charges, encumbrances);
  • Confirmation that ground conditions are favourable for development / redevelopment;
  • Related to the above, confirmation that there’s no evidence of mining or contamination;
  • Drainage and flood surveys (check flood risk here);
  • Any archaeological or ecological surveys;
  • Connection to utilities – gas, electricity, water, sewage disposal (typically via a service consultancy report);
  • Any reviews of mineral, oil and gas rights;
  • Access – i.e that the property is not landlocked or there no other issues;
  • Cross-reference acreage of the plot against HM Land Registry data;
  • Insurance-related documents.