I am acting for a young couple in a purchase of a property. They have had two previous purchases fall through, one due to survey results and one due to the sellers just changing their minds.
They had already lost a considerable amount of money. I was therefore hoping for third time lucky when they told me they had found another house to buy.
They told me they had signed a reservation agreement and paid a deposit. I must admit I felt somewhat disappointed they had not asked me about this.
When I asked them if they had thought about checking with me before, they told me the estate agent had advised them that it was not necessary, and that it was a common arrangement which helped to secure the property for them and made the process quicker.
Imagine my surprise when it transpired they had agreed to buy the house through the modern method of auction (MMA), without knowing what this entailed.
Fast forward to Friday afternoon at four o’clock. I received an email from the auction house advising me the deposit was being forfeited and my clients could no longer buy the house. I was furious.
I had been in discussion with the sellers’ conveyancer about extending the 56 day deadline and, as far as my clients and I were concerned, this had been agreed.
Not so, according to the auction house. I emailed the sellers’ conveyancer only to receive an out of office.
I sent a very strongly worded email to the auction house, in which I told them that this was unacceptable at four o’clock on a Friday afternoon, that they knew I was waiting on documents from the sellers’ conveyancer and if this had been the seller’s decision, why had they not advised me earlier?
The email back confirmed the seller will extend the deadline, but not before my devastated clients faced losing over £5,000 in a reservation fee agreement, which in my view, is not worth the paper it is written on.
My difficulty is that the title is not mortgageable; there are missing documents relating to an unregistered leasehold interest. I am told by the sellers’ conveyancer that my clients were given the opportunity to take legal advice on the documents prior to making their offer and signing the reservation agreement.
But my clients had started the process twice before. They had not experienced this way of buying a house before and why would they have thought it would be any different from the previous two occasions? They were told the reservation agreement was to make it quicker and easier for them and, after two failed purchases, of course they were going to agree to that option.
I have a lot of issues with MMA and it is not the first time I have found myself in an argument with the auction house and their chosen conveyancers (who I understand are in fact all part of the same organisation as the auction house).
My advice is to warn clients in these circumstances as there is a great deal of misunderstanding in my experience, and many have signed and paid a fee before they get to us.
This column is written by a real high street conveyancer who wishes to remain anonymous. The views expressed are those of the author and not those of Today’s Conveyancer.
Read more in Today’s Conveyancer every week.
2 responses
The issue was highlighted recently on LinkedIn, where a conveyancer described being told that buyers were only permitted to raise legal enquiries within five working days of receiving the contract pack, despite completion having been agreed for 56 days (eight weeks) after reservation.
Under the Modern Method of Auction, buyers are typically required to pay a substantial non-refundable reservation fee, often amounting to several percentage points of the purchase price, before contracts are exchanged.
The conveyancer explained that they were acting for an elderly client who required a Lifetime Mortgage and had additional background considerations, meaning enquiries could only be raised around two weeks into the eight-week process.
Despite raising only three specific enquiries, they received the following response:
“Your comments are noted, and our stance remains the same. While we sympathize with your client’s situation, it is not our responsibility to afford them more time than is necessary.”
The solicitor stressed that they were not submitting lengthy standardised enquiries, but simply seeking clarification on a small number of points.
“I am all for efficiency and progressing transactions quickly, but dictating when buyers are able to raise enquiries pre-exchange is simply wrong,” they wrote, adding that if their client had not already paid a substantial reservation fee they would have advised her to withdraw.
The post prompted a significant response from other conveyancers, many of whom reported similar experiences with Modern Method of Auction transactions.
One practitioner recalled being told to accept responsibility for delays:
“They actually told me to tell my clients that I had failed to meet their timescales and it was my fault. It wasn’t, as it happened, but they were brutal about it. They also wrote to me four weeks in saying we want to complete now and our client sees no reason why we can’t. I wrote back saying no, it’s not your decision to make as we are within the prescribed period. We will complete once we are ready.”
Another questioned the entire structure of the process:
“I advise all clients not to buy through this method. The contracts are awful and I’m not even sure they would stand up in court if challenged. The auction packs are generally poorly drafted and they don’t deal with enquiries properly. Personally, the government should step in and ban this whole set-up in my opinion.”
A further conveyancer said that even enquiries raised within the five-day period were not always addressed:
“I had very similar issues. I managed to raise enquiries within five days, but they simply refused to respond to one concerning a title issue. They said my clients had access to the legal pack before making the reservation, so they were not willing to address it. Needless to say the transaction is now significantly delayed because the property is currently unmortgageable.”
Others highlighted cases where the advertised timetable was not met by the seller:
“Modern auctions are a joke. I was easily ready within the 56-day period, but the seller wasn’t. It took around four months to complete. At the time of the auction they didn’t even have the client care letter signed. Yet my client still couldn’t walk away without losing their hefty reservation fee. Disgraceful.”
One solicitor who previously acted regularly for sellers in MMA transactions said refusing to answer enquiries after five days was unnecessary:
“I used to deal with acting for sellers on Modern Method of Auction files all the time and never once did I refuse to answer enquiries that came in after five working days, and it didn’t cause any extra delays. If you don’t want to answer enquiries, put the property on the traditional method and be done.”
Another argued that many sellers are unaware of the consequences for buyers:
“Dreadful. I have never enjoyed dealing with Modern Method of Auction. The majority of sellers have no idea how difficult they end up making things for their buyer, and how many potential buyers don’t even bother viewing once they realise it’s MMA. They’re simply sold a cheap sale and a fantasy of eager buyers competing to purchase their property.”
The discussion has added to wider concerns about whether the Modern Method of Auction strikes the right balance between speed and consumer protection.
Supporters of the model argue that it can provide greater certainty and momentum in transactions. Critics, however, question whether buyers who have already paid significant non-refundable fees should face restrictions on when they may raise legitimate legal enquiries during a transaction period that still has several weeks remaining.
As the use of Modern Method of Auction continues to expand across the property market, the profession is increasingly debating whether clearer standards, or greater regulatory oversight, may be required to ensure that efficiency does not come at the expense of proper legal due diligence.
I write as a traditional in-room property auctioneer. The “Modern Method of Auction” is not an auction at all, in my opinion.
Under MMA the property (or an interest in property) is not sold on the fall of the hammer. Rather, for a hefty non-returnable fee, the buyer acquires some sort of right to pursue a contract for the purchase of the property, subject to unhelpful rules of engagement. If the rules are deemed to be broken, the agent can take the fee in forfeit and they can offer the property again, for a further fee.
Legal packs are often absent or incomplete and accordingly difficulties with properties can remain undisclosed. This does not properly protect buyers. Sellers are often lured in by 0% commission, failing to appreciate that hefty fees taken from buyers will simply be chopped off the price – there is no such thing as a free lunch. Furthermore, sellers are not well served by a process which alienates buyers – a successful sale relies on maximising interest from as many buyers as possible.
Of course MMA was invented by those who wanted to offer a pretence of the professionalism and advantages of a real auction, without covering the hard yards. They wished to earn a large fee for minimal effort. MMA was not invented for the benefit of sellers and buyers and it encourages a lack of professional responsibility, in my view.
A real auction requires that a full working legal pack is available prior to the day of sale and that buyers have every opportunity to investigate and ask questions. A real auction requires that any difficulties are exposed to the light prior to the day of sale. A real auction requires that the interests of both seller and buyer are respected. A real auction requires that the property is sold on the fall of the hammer. A real auction requires that the seller pays the sale commission. Above all, a real auction requires transparency. Sellers and buyers must have every confidence in the process.
Those offering MMA are very welcome to join us in the real auction space, if they can. They will find that it requires proper professional diligence and a proper regard for sellers and buyers.
I would not be frightened of an investigation of MMA and of auctions generally. I would not be frightened of regulation. Those doing the job properly have nothing to fear and everything to gain.