Introduction

Buying a property at auction can be a fantastic opportunity to secure a bargain, but it also comes with significant risks. Unlike traditional property purchases, auction sales are legally binding the moment the hammer falls. This means you need to conduct thorough legal due diligence beforehand to avoid costly mistakes. Failing to check key legal aspects can lead to unexpected expenses, legal disputes, or even the inability to complete the purchase.

This guide will walk you through the essential legal checks to perform before bidding at auction, ensuring you make an informed and confident investment.

Review the Legal Pack

Every auction property comes with a legal pack, which contains crucial documents that outline the legal status of the property. It’s essential to review this pack carefully before bidding. If you’re unsure about any aspect, consult a solicitor who specializes in auction purchases. The legal pack typically includes:

• Title Deeds: These confirm ownership and reveal any restrictions or rights affecting the property.
• Special Conditions of Sale: These outline specific terms set by the seller, including additional costs you may be liable for.
• Searches: Local authority, environmental, and drainage searches provide information on planning permissions, road proposals, and potential environmental risks.
• Tenancy Agreements (if applicable): If the property is tenanted, review any lease agreements to understand tenant rights and obligations.
• Planning Permissions and Building Regulations: If the property has undergone modifications, ensure all work has the necessary approvals.

Skipping this step can result in unexpected liabilities or legal disputes, so always review the legal pack with a professional.

Check for Restrictive Covenants and Easements

Properties can come with restrictive covenants, which are legal obligations that dictate how the property can be used. These may prevent you from extending, altering, or even using the property for certain purposes.

Additionally, easements grant third parties rights over the property, such as shared driveways or public footpaths. These can affect your plans for the property and should be fully understood before committing to a purchase.

Verify Outstanding Charges and Debts

Some properties at auction come with outstanding charges that the new owner will inherit. These may include:

• Unpaid service charges (for leasehold properties)
• Council tax arrears
• Utility bills and ground rent liabilities

Check with the local authority and the legal pack to confirm there are no unexpected financial obligations tied to the property.

Ensure the Property Has a Marketable Title

A marketable title means that the property is free from legal complications that could make it difficult to sell or obtain financing. Issues such as unclear ownership, boundary disputes, or missing title deeds can create significant challenges. Your solicitor should verify that the title is clean before you bid.

If the property has an unregistered title, additional steps may be needed to register it with the Land Registry, which could delay completion and add costs.

Investigate Leasehold Terms (If Applicable)

If the property is leasehold, you must carefully review the lease terms. Key factors to check include:

• Remaining Lease Length: Mortgage lenders typically require at least 70-80 years remaining on a lease.
• Ground Rent and Service Charges: These ongoing costs can add up and affect affordability.
• Lease Restrictions: Some leases have clauses that limit subletting, renovations, or business use.

Short leases or unfavorable lease terms can impact resale value and financing options, so always investigate before bidding.

Confirm Planning and Building Regulation Compliance

If the property has been altered or extended, check that all planning permissions and building regulations approvals are in place. Unauthorized work could lead to enforcement actions or costly rectifications. The legal pack and local authority searches should provide this information.

Be Aware of Special Conditions of Sale

Auction properties often come with special conditions of sale, which can impose additional obligations or costs on the buyer. These conditions might include:

• Buyer’s premium fees
• Short completion deadlines (often 28 days or less)
• Requirement to pay outstanding debts or charges

Read these conditions carefully to avoid surprises and ensure you can meet all the obligations after purchase.

Check the Auctioneer’s Guide Price vs. Reserve Price

While not strictly a legal issue, understanding the difference between a guide price and a reserve price can help you avoid unrealistic expectations. The guide price is an estimate of the property’s value, whereas the reserve price is the minimum amount the seller will accept. Some properties may have a much higher reserve price, making them less of a bargain than they seem.

Seek Legal Advice Before Bidding

Given the complexity of legal due diligence, it’s highly recommended to consult a solicitor who specializes in property auctions. They can:

• Review the legal pack for red flags
• Clarify any unclear legal terms
• Advise on potential risks and liabilities
• Ensure you’re fully prepared before committing to a purchase

Conclusion

Legal due diligence is a critical step when buying a property at auction. Reviewing the legal pack, checking for restrictive covenants, verifying debts, and ensuring the title is marketable can protect you from costly mistakes. By taking the time to investigate thoroughly and seeking professional advice, you can confidently bid on auction properties and secure a great investment without unnecessary risks.

If you’re looking for expert guidance on auction finance or legal due diligence, get in touch with our team today. We can help you navigate the auction process with confidence and avoid costly pitfalls!