Key topic: Traditional auction for several plots of land and misrepresentation
Award
- Refund the £24,000 deposit
- Pay £1,000 compensation
What happened?
The complainant said:
- they placed the winning bid of £104,000 at auction to buy seven plots of land totalling 5.4 acres
- the agent requested a £24,000 deposit which the complainant paid, even though the seller’s solicitor only required £10,400, which was a 10% deposit, believing the difference of £80,000 would be due at completion
- they would not have agreed to pay £104,000 plus a £24,000 buyer’s premium, as they only had £104,000 to spend in total
- the buyer advised the agent the memorandum of sale was incorrect, and the agent said they would amend the details and reissue the memorandum of sale, which never happened
- after a few weeks chasing for the amended memorandum of sale, the seller’s solicitors confirmed that the seller only had 2.1 acres to sell and not 5.4
- as far as they are concerned the contract for sale was void due to misrepresentation
The agent responded, saying:
- the complainant signed a proxy bidding form, showing they read and understood the legal pack
- the legal pack and proxy bidding form confirmed the buyer was responsible for a total payment of £35,500, being 10% of the cost of all plots, but they only paid £24,000
- the terms and conditions allowed the agent to deduct the buyer’s premium from any amount paid and forward the balance to the seller’s solicitor to go towards the deposit
What evidence was provided?
Emails, proxy form, remote bidding form, terms and conditions, memorandum of sale
What was decided and why?
- The communication shows that after the complainant bid £104,000 to buy 5.4 acres of land, the agent confirmed this had been accepted.
- On several occasions, the complainant queried the amount of land they were purchasing and each time the agent confirmed it was 5.4 acres.
- The complainant also asked about the buyer’s premium and were told they only had to pay it based on the total price agreed. The agent now claims that under their terms and conditions, the complainant was due to pay a buyer’s premium on each plot.
- The evidence showed:
- the sales pack was not provided to the complainant before the auction or within a reasonable time afterwards
- the sales pack was only provided over a month after their bid was accepted, which said the amount of land offered was less than two acres, and not 5.4
- based on the information the agent provided, it was reasonable for the complainant to believe:
- they were purchasing 5.4 acres of land and
- they would only be responsible for one buyer’s premium and not for each plot
Poor service
- The decision found the agent:
- provided the complainant with conflicting information
- fell short of the standard expected when carrying out their due diligence
- was unclear and lacked transparency in relation to the premium or the plot sizes
- This ultimately led to the sale falling through, after the complainant was misled into bidding, for a quantity of land which did not exist.
- Due to this serious breach of the agent’s duty of care and poor service, the agent was directed to pay compensation of £1,000.
Deposit
- It was unclear from the agent’s information whether the deposit was the buyer’s premium or a deposit, which would be paid to the seller. No evidence was provided to show that the £24,000 was requested by (or paid to) the seller.
- While the agent said in their rebuttal that the amount was for the buyer’s premium, the communication showed:
- the complainant was told this was the deposit for the purchase
- the memorandum of sale says the deposit due was £10,400 (10% of the total price)
- The seller’s solicitor also confirmed they could not commit to the contract (as they did not have 5.4 acres to sell) and the contract was void.
- The agent has consistently provided contradictory information to the complainant and us and provided no evidence justifying any reason for retaining the deposit or a buyer’s premium.
- The complainant was awarded a full refund.
How can you avoid this happening in future?
- Agents are responsible for:
- carrying out thorough due diligence to make sure what they are advertising for sale is correct
- providing their consumers with all material information they need to make informed transaction decisions
- making sure what they provide is accurate
- Buyers should always:
- review the contents of the legal pack provided and discuss any missing information with the auctioneer
- set your budget (including any fees) and stick to it
- take independent legal advice before bidding. A property lawyer will also be able to review the legal pack for you and while you will be charged for this service, they can point out any areas of concern
- National Trading Standards have released guidance on material information expected in property sales, which can be found here:
https://www.nationaltradingstandards.uk/uploads/Material%20Information%20in%20Property%20Listings%20(Sales)%20v1.0.pdf
Our ‘Buying and selling at auction’ guide offers facts and help with understanding the types of auctions available, what to consider before deciding to buy or sell at auction and the pros and cons of each.
