LAW FOR EVERYONE
BY BHAG SINGH

ITEMS can be bought or sold through bidding at an auction. This includes landed property, moveable property and other items that may fall under some other category.

In our country, auctions are more frequently in relation to properties – housing or commercial buildings, sometimes inclusive of the machinery inside.

Sometimes, a person buys an item at an auction because that is the only way in which the item can be purchased. In other cases, people buy items at auctions because they think that they are getting them at a cheaper price compared to arms-length sale and purchase. This is especially so when what is involved is a forced sale.

However, when it comes to the auction of a house or a building, it is not just a matter of going to the auction, paying the necessary deposit and thereafter successfully making the only or the highest bid. Much more is involved.

Properties sold in an auction are rarely in perfect condition. Nor is it likely to be a matter of bidding for the item and paying the full sum immediately, even if the bidder’s resources so permit. Walking away and taking over possession of the property is not what usually happens.

More frequently, an auction for such a property takes place after an order for sale is made by court pursuant to the application for foreclosure of the subject matter. But there are cases where properties have been auctioned without a court order.

This happens when there is no individual title and the property is absolutely assigned to the assignee with power to sell in the case of default. There would be the need to comply with any conditions that may be imposed for the purpose of such a sale.

In some such cases, disputes sometimes arise as to the manner in which the property is disposed. It is contended that even though there is no title and therefore no charge on the property, an order for sale from the court must still be obtained. Even where this proposition is denied, a delay will be caused.

More often than not, the properties that are auctioned are those that have been charged for a loan and the owner has defaulted in the payment of a loan. Thus, the applications for sale of property are more often made by banks and financial institutions.

There are cases where the owner may not be the borrower and yet his property is auctioned and sold. This happens where a person has allowed his property to be charged for a loan or credit to be given to a third party and the third party has defaulted in the repayment obligation.

Once an order for sale has been made by the court, central to the situation is the proclamation of sale. It is issued for the auctioneer, following the directions of the court where an order is obtained. It will be accompanied with the terms and conditions on which the auction is to be conducted and the property is sold.

Once a bid is made and it is accepted by the auctioneer, it becomes a binding contract to purchase the property on the terms stated.

The intending bidder can and should always obtain the terms and conditions of sale, study as well as understand them properly, and be aware what the effect of the terms and conditions of sale is. This is because the purchase at an auction upon the stipulated terms is not like an ordinary sale and purchase, where terms and agreements can be discussed.

It may be wise to seek advice or consult a solicitor as to any intricacies involved. A real estate agent who is experienced and familiar with purchases of properties at auctions could also help.

More often than not, the property is charged to a lender who would therefore be the chargee. Thus, it would be the chargee who will institute the foreclosure proceedings leading to the auction sale. At the time of creating of the security, the title deed would have been deposited with the chargee of the land.

At the time of commencement of the foreclosure proceedings, the title deed and other related documents would have to be deposited with the court. This is so that when the auction is over, the property can be transferred without any further hindrance. The successful bidder will no doubt have to settle the balance price within the stipulated number of days from the auction.

The bidder may have the cash or take a loan in part or full to pay the balance and thereafter deposit the whole balance with the court. The court will then take steps to pay out the fees and expenses and the sum due to the chargee and balance to the chargor if any.

Once the due payment has been made, including the refund of any excess fund to the chargor, the court will forward the duly executed document to the successful bidder so that all the successful bidder has to do is to execute the transfer to himself. If he has taken a loan, a charge will be registered at the same time.

At this stage, the legal situation is that the bidder becomes the legal owner of the property in all respects and the earlier owner, if at all his name is still on the title, is but a bare trustee. A person who has paid for the full purchase price becomes the legal owner. Even though his name may not yet be endorsed on the title, he acquires all the rights of the legal owner.

With all this done, the successful bidder is already on the road to have possession of the house. But the road ahead may not be always smooth and all the expectations which the bidder had may not be fulfilled, or at least not immediately.

This is because one of the common terms, apart from stating the reserve price, will be that the property is sold on an “as is and where is basis” and sold subject to the conditions of sale printed in the proclamation of sale.

Any comments or suggestions for points of discussion can be sent to mavico7@yahoo.com. The views expressed here are entirely the writer’s own.