How to… buy risk-free at auction
Allsop and Knight Frank both recently reported record sales of property at auction, but auction investments are not risk-free. Here are some tips:
- Get your finances in order: once the hammer falls, a 10% deposit is payable immediately and will be forfeited if you subsequently change your mind. Also, you will probably have only 28 days between exchange and completion. Failure to arrange finance on time will delay completion and interest and penalties will be payable.
- Watch for title deficiencies that may only be revealed by physical inspection (such as occupiers of ‘vacant’ property) and ancillary land outside the seller's legal title (such as garages and parking spaces). Lack of access from public roads and footpaths is another common deficiency.
- Check the auction pack for special conditions of sale placing an obligation on the purchaser to bear the seller's legal costs and disbursements.
- For leasehold investments, pay particular attention to the seller's compliance with legislation. Are section 5 of the Landlord and Tenant Act 1987 notices required? Is an EPC available? Have rent and service charge demands been served correctly?
- Take taxation advice before investing to maximise available reliefs.
This article was published in Estates Gazette in January 2013.
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