Auction Legal Pack

What is an auction legal pack?

An auction legal pack is a set of documents containing important information relating to the property being auctioned. It’s usually compiled by the seller’s solicitor and helps prospective buyers decide whether or not to bid on the property. Enabling you to do your due diligence, it provides essential details of the property’s condition and legal status as well as additional information that you should be aware of before bidding. 

It’s important to ask your solicitor to check the legal pack too. They may notice issues that you are unaware of, including important information that may be missing. They will also ensure that you’re fully aware of any special conditions of sale and the implications they may have. For example, there may be additional fees to pay or the seller may have specified a completion time that’s different from the standard auction timescale.

Reviewing the legal pack before the auction ensures that you can buy the property with confidence. If there are issues you’re unhappy with, you can choose not to bid on the property or to lower the amount you’re prepared to bid to. If you don’t check the legal pack before an auction, however, you risk facing serious financial losses should you win the bid and then discover issues with the property that you were previously unaware of.

The importance of auction legal packs for buyers

Auctions are legally binding and time-sensitive. Once the hammer falls, you either have to exchange contracts immediately or sign a reservation agreement. This depends on the type of auction sale you have participated in. Therefore, before bidding on a property at auction, you need to do your due diligence. It’s recommended, for example, to view the property in person rather than just looking at the property details provided. It’s also advisable to instruct a surveyor to check its physical condition. As well as that, it’s essential to check the legal ramifications of buying it.

Containing key information on the property, the auction legal pack provides you with details of its legal status. It can draw your attention to any potential risks and financial consequences that may be encountered if buying it. For example, there may be arrears on the property or restrictions in place as to what you can use the property for. Therefore, it’s important not to underestimate the importance of reading and understanding the legal pack. Its contents can help you make an informed decision as to whether you should bid on the property or steer clear of it. If you decide to bid, it can also help to determine your budget. You should ask your solicitor to check the legal pack too as they may notice details you haven’t and be able to advise you of any missing information.

The types of properties sold at auctions

You can find all types of properties at auctions but many sell much better that way than via estate agents. This can include properties that are:

• Hard to mortgage: There are various reasons why lenders may be reluctant to offer a mortgage for a property. For example, it may have a non-standard construction, a unique structure, a short lease, punitive service charges, Japanese knotweed on the grounds, planning issues, restrictive covenants, no formal property registration, be uninhabitable or located in an area prone to flooding.
• Structurally unsound: Structural problems with a property may be too overwhelming and costly for the owner to deal with. Selling it at auction is a way to get a quick sale without having to tackle the structural issues first.
• Repossessed: Lenders often sell repossessions via auctions. They need a quick sale whereas selling via an estate agent can be a lengthy process. A repossessed property also needs to be sold as is because the lender doesn’t have the budget or time to change the property’s condition from that left by the previous owner. Lenders are obligated to get the best price possible for the property, which is more likely to be achieved in an auction setting with competitive bidding.
• Tenanted: Properties sold on the open market usually offer vacant possession. This isn’t always a possibility for landlords so auctions solve this problem.
• Inherited: Beneficiaries who want a quick sale of a property they’ve inherited often turn to auctions instead of estate agents. This is especially the case when the inherited property needs work and the beneficiary doesn’t wish to carry out the work needed or doesn’t have the ability to do it. Properties in need of work are popular among investors at auctions, taking the problem out of the beneficiary’s hands.
• Commercial or mixed-use: These properties can be tenanted, have vacant possession, be ready for immediate use or be empty shells or dilapidated. Land and development sites are also sold at auctions. These may or may not include planning permission.

Be fully aware of what you’re buying

As so many properties are sold via auction that you wouldn’t find on the open market, you need to be sure exactly what you’re buying before you bid. If you don’t check and fully understand the auction legal pack, you risk having to deal with serious financial repercussions. There may be issues that make it difficult to finance the property, for example, or problems that can be costly to resolve and may affect the property’s value. There may be restrictions on its use so that it’s no longer viable for what you intended or an overage clause, reducing your overall profitability. An auction legal pack provides transparency and gives you the opportunity to check for such issues. It enables you to buy a property with confidence rather than being faced with nasty, and expensive, surprises at a later date.

Is an auction legal pack a legal requirement?

Despite the ramifications mentioned above, auction legal packs aren’t a legal requirement. Having said that, many auction houses insist on one, both to inspire a feeling of trust and confidence in buyers but also to preserve their reputation. Aside from that, auction legal packs are an important part of property auction transactions. It’s considered to be standard practice for sellers to prepare comprehensive legal packs for their properties.

Sellers understand that by providing a comprehensive auction legal pack, they are offering transparency, which creates trust with potential buyers. The risk of legal discrepancies is negated and they are also more likely to achieve a realistic sale price. Auctions are, by nature, competitive. If trying to sell a property without a legal pack or with one that contains very few documents, the pool of interested bidders will be small. When potential buyers have been able to check a well-prepared legal pack, however, they are going to be more willing to bid on a property.

From a buyer’s perspective, they feel more confident knowing that the seller has disclosed the required legal information. This allows them to carry out their due diligence and make an informed decision regarding bidding on the property.

Who prepares the auction legal pack?

An auction legal pack is usually prepared by the seller’s solicitor or conveyancer. A seller can compile it if they prefer but a legal professional can make the process much easier. They can also ensure that the contents are accurate and the legal requirements have been met. Legal professionals know which documents should be included and the disclosures that need to be made. The special conditions of sale, in particular, need to be drafted carefully and any complex issues have to be addressed correctly. With a solicitor or conveyancer compiling the auction legal pack, the risk of any legal implications is minimised.

How can you access the auction legal pack?

A property auction legal pack is obtainable from the seller’s solicitor or the auction house. You can usually download a copy of the legal pack from the auctioneer’s website, allowing you to review it carefully before the auction start date. You’ll need to register an account online with the auction house first and then go to the relevant property details listed on their site. You’ll see the auction legal pack and other documentation related to the property ready for you to download. Some auctioneers may charge a nominal fee before you can access the legal pack.

What is included in an auction legal pack?

The contents of auction legal packs vary for each property but, generally, you can expect to find the documentation detailed below.

Land Registry title deeds

The title deeds confirm who the current registered owner of the property is. This provides proof that the seller has the legal right to sell the property. Details of whether there is a mortgage or any other secured loan registered against the property will also be included. As well as that, there may be information relating to any restrictive covenants, negative easements and other issues relating to rights, such as ransom strips and third-party consents.

Land Registry title plan

This is a plan detailing the property’s registered boundaries.

The terms and conditions of sale

Reputable auctioneers generally adhere to the Royal Institute of Chartered Surveyors Common Auction Conditions (4^th edition). These conditions set out the standard terms and conditions of sale. For example, the process and legal responsibilities if the property is sold via a conditional auction or those that apply for an unconditional auction. The terms and conditions of sale apply to the contract except for any variations detailed in the special conditions of sale or an addendum.

The special conditions of sale

These conditions of sale are specific to the transaction relating to the particular property. It’s essential to check these carefully and ask your solicitor to review them. Examples of what the special conditions of sale can include are:

• A different completion date than the one specified in the general terms and conditions of sale
• Whether the property will be sold with vacant possession or be occupied
• Any issues with the title that cannot be dealt with until after the transaction has been completed
• Whether VAT will be applied to the purchase price
• Additional payments to be made, such as commissions, fees or costs for the seller or a person/company dealing with the property in some way

Conveyancing searches

These searches relate to the property’s immediate area as well as the surrounding vicinity. Local authority searches provide information on proposed developments in the area, building regulations, planning permissions and other factors that may affect the property. The other main searches include an environmental report, a drainage and water search, a chancel check, a flood risk search, a coal mining report and a canal and river search. Other searches may be carried out depending on the property’s location, such as a commons search or a contaminated land search.

An Energy Performance Certificate (EPC)

Anyone selling a property in the UK is legally required to provide an Energy Performance Certificate (EPC). This certificate includes details of the property’s energy efficiency, approximate energy costs, energy-performance-related information and recommendations on how to make the property more energy efficient, if applicable.

Planning permission documents

Any documentation related to planning permission, building regulations and indemnity insurance for the property should be included.

The Property Information Form (TA6)

This contains varied information about the property, such as its boundaries, any disputes, rights of way, notices or proposals, parking, alterations to the property and environmental matters.

The Fittings and Contents Form (TA10)

This form details what items will be left inside the property as part of the sale. It includes information relating to basic fittings, kitchen appliances, bathroom suites and fittings, fitted units, carpets, blinds/curtains and curtain rails, light fittings, television and telephone equipment, a stock of fuel, such as wood, oil or liquefied petroleum gas, as well as outdoor furniture, accessories, trees, plants and shrubs.

Details of warranties and guarantees

Guarantees and warranties relating to the property show that work has been carried out to a particular standard and that other aspects of the property are in good condition. These documents provide a level of confidence that any relevant issues are covered once the purchase of the property has been finalised.

Additional documentation that may be included

Other documentation may be included that’s specific to the type of property or its use, as detailed below.

A Leasehold Information Form (TA7)

This provides details relating to the lease agreement, such as the freeholder and managing agent contact information, ground rent, service charges, notices and consents, insurance documentation and leasehold obligations.

A Leasehold Property Enquiries (LPE1) form

This gives information on who collects the ground rent, service charges and other payments and who deals with the maintenance of the building and managed area. It also includes details related to the ground rent, service charge, deed of covenant, buildings insurance, disputes and enfranchisement. As well as that, it identifies whether there are any existing issues and potential costs for the future.

The Buyers Leasehold Information Summary (LPE2)

This summarises the key financial points detailed in the LPE1 form. At a glance, you can see the leasehold costs associated with the property purchase, the regular payments to be made once you own it and any additional payments that are planned.

The Leasehold Management Pack

This contains all of the documentation relevant to the leasehold property. For example, the ground rent and service charge statements, details of planned future works, 3 years’ accounts, an ESW1 form (an External Wall System Fire Review certificate), an asbestos survey, a copy of the buildings insurance policy, any costs that you have to pay to the freeholder after completion, such as deed of covenant fees or notice fees, and disputes and enfranchisements.

Tenancy agreements and relevant tenancy information

If the property you want to buy is tenanted, details and documentation need to be provided. For example, a copy of the Assured Shorthold Tenancy (AST) agreement or copies of the individual contracts if it is a house in multiple occupation (HMO) as well as general information about the tenants and, if it is a group or family, which tenant takes financial responsibility for paying the rent. Other information can include details of any arrears or void periods, previous notices served, the deposit held, safety confirmation details, references and an inventory report.

An HMO licence

If the property has an HMO licence, a copy should be provided.

A Commercial Property Standard Enquiries (CPSE) form

This includes various information relating to a commercial property, such as the property’s condition, title checks and lease details. The information can also include proof of compliance, maintenance costs, notices or disputes, planning permissions and building regulations, environmental issues and comparables of commercial rents as well as legislation or regulations that may affect the property, either immediately or in the future. There are seven sets of CPSEs but they don’t all apply to every property. Therefore, the inclusions will vary depending on the commercial property that you’re looking to buy.

What to look for in an auction legal pack

The contents of auction packs vary depending on what the seller has chosen to include and the type of property they’re selling. As a buyer, your intentions for the property may be different from another potential buyer’s intentions and your circumstances will be different too. As such, there’s no specific list of what you should look for in a legal pack.

However, the title deeds provide proof of the seller’s legal entitlement to sell the property. As well as that, the special conditions of sale include crucial information that you need to check carefully. For example, the seller may have specified a completion time that differs from the auction house’s standard completion time. The terms in the special conditions of sale supersede those of the auction house. As well as that, you need to be aware of any additional payments that may have to be made upon completion, if there’s an overage clause or if there are any arrears on the property, for example.

Not all sellers include all of the information in an auction legal pack as detailed in the list above. This may be because they don’t live in the property and it involves too much research to gather the necessary information. Or they may be unsure about something and don’t want to commit to a statement about the property in case they are fined for misrepresentation at a later date. Another reason may be that the seller believes some information may affect the saleability of the property. Sellers also aren’t obligated to carry out searches and buyers often arrange for these to be done themselves. Some sellers do include searches in the legal pack but then the buyers may have to reimburse them for the costs upon completion.

Think twice if there’s little or no information

Although an auction legal pack isn’t a legal requirement, it’s better to avoid a property with no pack at all. You should also think very carefully before bidding on one with little documentation. Legal packs provide transparency and it’s important to be able to carry out your due diligence before bidding on a property. You should always ask your solicitor to check the contents on your behalf too. They will pick up on any missing information and draw your attention to any potential risks.

We can help you prepare for your auction purchase

Carefully reviewing the auction legal pack gives you peace of mind that you’ve done your due diligence and can confidently bid on the property. If you don’t have a solicitor who can check the legal pack on your behalf, we can recommend one for you. At Trinity Finance, we are experienced in dealing with auction purchases and can guide you on how the process works. We can arrange your finances, whether you want to use a mortgage to buy a property at auction or prefer an alternative, such as a bridging loan.

Just give us a call on 01322 907 000 and our mortgage brokers can discuss your needs. If you wish to arrange a mortgage, we work with lenders specialising in auction purchases who work as quickly as possible to meet the short auction timescale. Alternatively, bridging finance ensures that you have the funds in place before the auction. That way, you can comfortably bid on the property knowing that you can immediately cover the purchase price and costs.

If you’re unable to speak with us by phone, send an email to us at info@trinityfinance.co.uk or an enquiry via our contact form. One of our mortgage brokers will reply to you as quickly as possible with more information. As well as arranging your auction finance, we can arrange buildings insurance for the property and contents insurance if needed.