The ingredients for a successful auction? Sellers and bidders ready to do deals. A charismatic auctioneer. And sale conditions that do more than merely set down the terms of contracts that will hopefully be concluded.
Sale conditions should also govern the relationship between the auction house and all those participating in the auction – the serious, those just looking, those in the room or on the telephone or online, and even the disruptive. These days, especially, sale conditions must be clear. They could never be described as “unputdownable”, but nobody can deny that they are hugely important.
I have been a member of the RICS Auction Law group for 13 years and worked on the second and third editions of the RICS Common Auction Conditions. Whatever you think of them – and you will soon have another chance to comment – they have made life easier for everyone involved in property auctions. They are easily accessible, for a start, unlike the old National Conditions (which could only be purchased from legal stationers and were set up primarily for private treaty sales). They lay down rules relating to the running of auctions that only the auctioneer can alter. And they are written in plain English.
All in all, the way we were in the property auction industry before the RICS Common Auction Conditions were launched in 2002 does not give me a warm and nostalgic feeling. How I wished, when doing due diligence for a prospective bidder (often against the clock) in the 80s and 90s, for a set of auction conditions that were comprehensive, custom built, easily available and clearly worded!
A fourth edition of the RICS Common Auction Conditions is now being prepared. The plan is not to make substantial changes to the structure of the conditions. However, there have been some key changes to the law since the third edition was published in 2009 – TUPE rules, capital allowances, land registration and protection of deposits paid under ASTs.
The RICS Common Auction Conditions have been used in thousands of sales and have stood up to judicial scrutiny. And the rights of consumers are being carefully scrutinised by specialists. Naturally, the comments of auctioneers, bidders, sellers, solicitors, consumer groups – indeed, anyone interested in property auctions – will be very warmly welcomed.
But it is the sellers’ lawyers who prepare auction sale conditions. Few auctioneers will have the expertise or resources to oversee the legal work. Some sellers’ lawyers disapply as many of the Common Auction Conditions as they can and then create their own sale conditions. Others stick to precedents prepared long ago. So, auctioneers have to accept that the terms of deals done at auction – other than the price, of course – are set by sellers and their solicitors, who may find the RICS Common Auction Conditions not to their liking. That’s fine, but I ask those sellers and solicitors who like to go off-piste when preparing auction sale conditions to join in the upcoming debate on the proposed fourth edition.
I embrace the vision developed 15 years ago by Richard Auterac, Paul Clark and Peter Taylor and now championed by the RICS. The benefits of having industry-wide standard terms of business are, to me, obvious: sellers, bidders and auctioneers become familiar with those terms and confident about their effect, leaving them free to focus on lot-specific issues.
There are still property players who regard auctions as a seller-friendly environment, a place where issues relating to a lot are buried in archaic wording. But I advocate an even-handed approach to auction conditions – issues such as arrears due under tenancies should be handled in just the same way as they would be in a private treaty sale. It is one thing for one tax-driven corporate vehicle to play hardball with another one in the settlement of a sale contract, but those drafting auction conditions need to recognise that the successful bidder may well be a consumer and so entitled to and aware of his or her rights.
I am happy to stand up and defend the RICS Common Auction Conditions, and just as happy to listen to and deal with criticisms of them. Got a wish-list for auction sale conditions? Then please get in touch: nicholas.redman@dlapiper.com.
Nicholas Redman is senior professional support lawyer at DLA Piper
