"damages" in non-completion Auction purchase

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    "damages" in non-completion Auction purchase

    I sold a property at auction and the buyer failed to complete. I am 10% of the property price up, less some auction fees- total £6700ish, which is nice.

    The auction general conditions say that the buyer is now liable for any damages. And I understand that these "damages" can include the difference between the price it sold for this time (£87.5k) and the lower value it may sell for in future. So if I re-auction it and it sells for £77k I can approach the seller for the £10k difference as damages.

    Can anybody confirm this, or talk me through the practicalities. "let you solicitor do it" is not really what I want to hear because I like doing this stuff myself and learning as I go along.

    As I understand it I should issue a notice to complete, and point out to the buyer's solicitor that damages may be due and that I intend to re-auction the property in February.

    Thanks all,


    Charlie

    #2
    And just in case anybody is interested in the RICS conditions of salehere they are:

    http://www.nava.org.uk/media/610773/...ug-2009-1-.pdf

    Charlie

    Comment


      #3
      From what I know of Auction Properties, your solicitor would have already issued the 'Notice to Complete' as soon as the 28 days were up. They are usually given a further 10 days to complete and you charge interest 8% above base rate.

      You really need to read up on the terms of the auction house before you proceed. Also, you can't ask for anymore in 'damages' until after you have sold the property. Only then, will you know what the 'damages' are (if any - it could sell again for a higher figure). Once you have a final figure, I believe you would write and ask for the money. If it doesn't appear, you will have to sue through the small claims court.

      Comment


        #4
        Whatever your contract says, your damages cannot exceed your loss. Your loss will be the difference if you sell at a lower price plus costs. However, the deposit is taken on account of damages. Accordingly, if the difference plus costs is less than the deposit you have nothing to claim.

        Not sure why you should pay the auctioneer's fees since they did not achieve a sale. What does your agreement say? Whether you claim those fees (if payable) is a tricky question.

        Comment


          #5
          Thanks both. The28 days is up tomorrow so I will issue the notice tomorrow. Yes, I have read the auction terms. After 10 days from the notice to complete I can claim damages. Next auction is mid feb so if the property sells for less then I may claim but I dislike the prospect of a legal fight so not sure if I would take the claim all the way to the county court.

          Thanks Lawcruncher - I take your point that I am already £6.5k up so if the property sold for £10k less then I can only claim for damages totalling £3.5k.

          I hadn't considered the auction house' fees - will research that now.

          Cheers,


          Charlie

          Comment


            #6
            And if I put the catalog fee and auction fees together and call them "damages" I don't think I can get them back from the auctioneer, and because I am £6.5k up there is no point in trying to claim them from the buyer.

            As I understand it, an auctioneer's job is not to sell a property, but to act as an agent for the seller and therefore fees are not refunded in a situation where a buyer does not complete.

            Anyway, why would someone bid on a property at auction, pay £8750 deposit and then not complete? Even if you didn't want the property, surely it is worth a gamble to buy it anyway and sell it straight away at auction. You might make a profit, you may make a small loss but by walking away you are nearly £9k down!!! I asked the buyer's solicitor why and he said his client hasn't told him anything.

            Charlie

            Comment


              #7
              Originally posted by charliem View Post
              Anyway, why would someone bid on a property at auction, pay £8750 deposit and then not complete?
              If you watch "Homes under the hammer", it's usually because they couldn't get a mortgage in time for completion.

              Comment


                #8
                Do you know the reason why the buyer isn't going to complete? Is it because it needs to be a cash sale only, i.e. can't get a mortgage?

                Comment


                  #9
                  Originally posted by charliem View Post
                  As I understand it, an auctioneer's job is not to sell a property, but to act as an agent for the seller and therefore fees are not refunded in a situation where a buyer does not complete.
                  In the absence of specific agreement, it is generally considered that an agent only gets his commission if he finds a buyer "ready, willing and able to complete."

                  Comment


                    #10
                    Yes but surely one could consider that every person who attends an auction to bid, and pays the deposit must be considered to be a buyer ready, willing and able to complete.

                    I don't know why the buyer is pulling out.

                    Charlie

                    Comment


                      #11
                      Originally posted by charliem View Post
                      Yes but surely one could consider that every person who attends an auction to bid, and pays the deposit must be considered to be a buyer ready, willing and able to complete.
                      I do not think so. This page explains in some detail. Although it deals with both US and English law it keeps the two separate.

                      Consider the following scenario: You instruct an agent to find a buyer. He finds one who exchanges contracts paying a nominal deposit. The buyer fails to complete and disappears so that there is no prospect of suing him. Would you be happy to pay commission? The essence of a commission paid service is that you pay by results - no result, no commission. Some agents charge a lower rate of commission but charge for advertising. That is fair enough so long as it is made clear. Paying a contribution to the auctioneer for the expenses of the auction is fair enough, but having to pay full commission when the buyer defaults is something which needs specifically to be provided for in the clearest possible terms - even then it may be an unfair term or fail Lord Denning's red hand rule: "The more unreasonable a clause is, the greater the notice which must be given of it. Some clauses which I have seen would need to be printed in red ink on the face of the document with a red hand pointing to it before the notice could be held to be sufficient."

                      Comment


                        #12
                        Lawcruncher, talking hypothetical examples is not as useful as real world experience. I assume you have not encountered this situation before. I'm happy to take advice from someone who has successfully recovered fees from an auctioneer where this has happened.

                        Thanks all,

                        Charlie

                        Comment


                          #13
                          Originally posted by charliem View Post
                          Lawcruncher, talking hypothetical examples is not as useful as real world experience. I assume you have not encountered this situation before. I'm happy to take advice from someone who has successfully recovered fees from an auctioneer where this has happened.
                          I have been involved in the odd dispute about whether an agent is due commission, but not where the matter did not proceed to completion. In a legal career of thirty odd years I only had one case where a buyer did not complete. The agent did not claim any commission. If you are looking for someone who has experience of a situation similar to yours I think they are going to be thin on the ground and the chances of them dropping by fairly remote. A retired experienced conveyancer is, I fear, the best you will get for free.

                          What will help here is if you let us know the relevant terms of your contract with the auctioneer. My knowledge of the law of agency is adequate but not detailed. My opinion, for what it is worth, is that if the contract says nothing about what happens if the buyer defaults then the agent gets nothing. If the contract says commission (as opposed to expenses) is payable then it needs looking at carefully.

                          Comment


                            #14
                            This sort of situation is probably very rare.

                            Worse case scenario in my eyes would be to pay the fee 'for the time being' and then take the Auction House to the small claims court and see if a judge rules their terms as unfair.

                            Comment


                              #15
                              I wonder if auctioneer will take his commission this time, but sell free of charge at the next auction. That sounds fair enough in my book.
                              To save them chiming in, JPKeates, Theartfullodger, Boletus, Mindthegap, Macromia, Holy Cow & Ted.E.Bear think the opposite of me on almost every subject.

                              Comment

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