There may be various reasons why selling a property at auction may be appealing, for example:
a) The property may have been on the market for some time;
b) The property may require a lot of work; or
c) The property may be unusual and difficult to value.
Compared with a sale by private tender, an auction sale is a quicker process, may achieve a higher price and when a buyer is found at auction they commit to the sale by contract with a set completion date (usual 20 business days after the contract).
There are some useful points to consider before entering a property in to an auction, which may assist in achieving the maximum interest and price…
1) You will need to know how much notice the auctioneers require to be able to put the property in the auction and to prepare details for the catalogue. You will need to check the details to ensure they are correct.
2) If you currently occupy the property you will need to consider the length of time you will need to vacate the property.
3) There may be statutory notices you must give before the auction – for example a sale of a block of flats may be subject to a tenant’s first right of refusal and a notice of at least 4 months (but less than 6 months) before the auction is required.
4) You must arrange for an energy performance certificate to be prepared as this is a legal requirement when selling the majority of properties.
5) You must arrange for the legal pack to be prepared and sent to the auctioneers, so that it may be viewed by prospective buyers.
When your solicitors are instructed to prepare the legal pack, this will usually involve:
i) Drafting the contract special conditions and transfer deed. The auctioneers also have standard conditions of sale and you should read these carefully, as they contain the majority of the auction contract conditions, save for any special conditions prepared by your solicitor:
ii) Providing evidence of the seller’s title and any leases that the property may be subject to. Sometimes issues may arise with the title which can take time to resolve – for example, the property may be unregistered and deeds stored with a lender or the title may have restrictions require consents of third parties.
iii) Collating replies to standard pre-contract enquiries to enable the buyer to be provided with sufficient information regarding the property.
iv) Obtaining a full set of property searches – such as a local search, water and drainage search, environmental search, coal & brine search and chancel search. Often buyers will not want to incur this cost themselves, at the risk that they may be outbid and cannot recover this expense. The seller will usually ask that a buyer reimburses them for the cost of the searches.
The later the entry, the less time potential buyers have to review the details, carry out any searches or surveys of their own, prepare finance, check the contract pack with their solicitor and raise any enquiries. It is a good idea to involve your solicitor early on in the process to ensure the legal pack can be produced in good time and any issues uncovered as soon as possible.
For further advice for auction sales or purchases, please do not hesitate to contact Hillyer McKeown LLP.
Section 24 Finance Act – Follow up
Following my previous blog, I have spoken with Steve Bolton, one of the buy-to-let landlords fronting the campaign to challenge the decision, who has provided an update on the position in relation to the clause 24 case:
The legal team has now issued a Pre-Action Protocol Letter to HMRC calling for a Judicial Review of the Government’s policy change announced in the Summer Budget 2015 which restricts buy-to-let mortgage interest tax relief from April 2017.
Steve Bolton commented: “This tax grab is unfair, undemocratic and underhanded, and we believe it is unlawful on a number of points. In no other business are costs wholly incurred to fund the business liable for taxation. In addition there is no substantiation in the Government’s proposal that the changes will create a level playing field between homeowners and buy-to-let landlords. The change discriminates against the typically smaller landlord who may incur effective tax rates of over 100% while making an economic loss, and gives an unfair commercial advantage to many other categories of landlord unaffected by the change. We are therefore delighted that our legal challenge has progressed to the next stage and look forward to receiving the Government’s response.”