A property auction service provider has been ordered to refund £6,972 in penalty fees and pay £300 compensation after an ombudsman ruled the charges were unjustified.
The case involved a homeowner, Graham, who was charged fees totalling £6,974 during an attempted sale through the auction platform. The property was initially listed with an online estate agent in July 2023 before being transferred to the auction provider in September 2023 under a sole selling rights agreement with a 90-day minimum term.
Failed sales and mortgage issues
The property, a probate sale with an initial reserve price of £187,000, attracted two buyers, both of whom encountered mortgage difficulties. A first sale agreed in November 2023 collapsed when the buyer’s lender refused to provide financing on the property.
A second buyer, Adam, agreed to purchase at £153,000 but subsequently informed the auction provider that his lender considered the property “unmortgageable and of nil value”. After Adam indicated directly to Graham that he was unlikely to proceed, Graham instructed his original agent to remarket the property.
Dispute over fees and transparency
The auction provider claimed Graham breached contract by remarketing during the reservation period and sought to charge a buyer’s premium and withdrawal fee. Graham disputed the liability, stating he had not been clearly informed about the auction process, fee structure, or circumstances that could trigger charges. He said he believed the service would cost him nothing.
The ombudsman’s investigation found the auction provider failed to disclose material information after the first sale collapsed due to mortgage issues. No evidence was provided that marketing materials were updated to warn potential buyers that the property might only be suitable for cash purchasers or specialist lending.
Refund decision
The auction provider had refunded Adam’s buyer premium of £6,972, despite being contractually entitled to retain it under auction terms. This decision contributed to Graham being held liable for the same amount.
The ombudsman concluded the auction service provider had not acted fairly or reasonably. The penalty fees were deemed unjustified, resulting in a directed refund of £6,972 plus £300 compensation for aggravation, totalling £7,270.
The case highlights the importance of transparency in auction processes and the disclosure of material information that may affect a property’s marketability. For property investors and sellers, the ruling underscores the need for clear communication regarding fee structures and potential liabilities when using auction services.
