Important advice if you are thinking about purchasing property on auction

An auction is the sale of goods or property to the highest bidder. Banking institutions often make use of auctions where a court order has authorised an execution sale of a property. Increasingly, private sellers are also turning to auctions as they believe that it could attract more interest from prospective purchasers.

This month, we thought we would highlight some pitfalls and important aspects. The first, is that property sold on auction is usually "voetstoots", meaning it is sold "as is" with its visible and invisible defects.

Purchasers therefore seldom have recourse after the fact. Section 55 of the Consumer Protection Act, which provides that consumers have the right to "safe, good quality goods" also does not apply to goods bought on auction, including property.

It is therefore recommended that the purchaser undertakes a detailed inspection before making a bid. You should also have sight of the conditions of sale and check whether the property is currently being leased. If the property is in a Sectional Title Scheme, be sure to check up on how much the monthly levies and rates are.

You should also obtain a copy of the title deed and approved diagrams and check on potential servitudes on the property. While these are seldom made available to prospective buyers, you can attend to web searches, alternatively ask the auctioneer in advance on the availability of these documents or approach your conveyancer.

An upfront deposit as a percentage of the purchase price is usually required. You may also be liable to pay the auctioneer's commission and any outstanding rates and taxes. Auctions usually have a reserved price and if the property sells for below that price, the sale will be made subject to confirmation by the seller.

You should also note that if in breach of contract, the seller has the right to legal recourse. General breach clauses include allowing the seller to cancel the agreement upon written notice and claim damages as a result of the breach, or to immediately claim payment of the full purchase price and specific performance. If damages are claimed, the deposit and agent's commission that was initially paid could be forfeited.

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