Legal pack red flags that make a cheap lot expensive
The legal pack is where a cheap property explains why it is cheap. It is also where most bidders stop reading.
A legal pack contains the title, the contract, the searches and the special conditions of sale. It is usually available for a couple of weeks before an auction, and it is the only place where the problems with a property are disclosed rather than hidden.
Bidders read the title and skip the rest. That is the mistake, because the special conditions are where the obligations are imposed and where the surprises live.
The red flags worth stopping for
Not every item on this list is fatal, and several are negotiable. But each of them changes what the property is worth, and each should be costed before you bid rather than discovered after.
- Restrictive covenants limiting use, alteration or subletting, which can defeat the plan you had for the property
- Short unexpired lease terms, or ground rents with doubling clauses that escalate alarmingly
- A title that is possessory, qualified or unregistered, which makes it hard to mortgage and hard to sell
- Rights of way across the property, or obligations to maintain shared access
- Chancel repair liability, still enforceable in some parishes
- Planning enforcement notices, or works carried out without building regulations approval
- Flood risk, mining subsidence, or contaminated land designations
- Special conditions requiring the buyer to pay the seller's legal costs or to complete within an unusually short period
The title, and what to look for
The title register is available from HM Land Registry for a few pounds and is included in most packs. Read the charges register, which is where covenants and rights are recorded, and the property register, which describes what is included.
Pay particular attention to anything described as excepted or reserved, which means it is not included in the sale. Rights of access, mineral rights and even the airspace above a property can be excluded, and discovering that after completion is expensive or impossible to remedy.
When to walk away
Some problems are uninsurable, unfixable or expensive enough that no discount justifies them. A title that cannot be made mortgageable, a covenant that prevents the property's only sensible use, or a structural defect that cannot be remedied are all reasons to stop.
The judgement is: if the problem has a known cost and a known solution, price it and decide. If it has neither, the property is not a bargain at any price, because you are buying an open-ended liability.
Common questions
- Do I need a solicitor to buy at auction?
- In practice, yes. Auction purchases are unconditional from the fall of the hammer, the timescales are short, and the legal pack frequently contains conditions that need professional interpretation. Instructing a solicitor before the auction to review the pack is far cheaper than discovering a problem after you have exchanged.
- What is a special condition of sale?
- It is a term added to the standard contract by the seller, and it can impose almost any obligation the seller chooses — including requiring the buyer to pay the seller's legal costs, to accept the property in a specified state, or to complete on an unusually short date. Special conditions are the part of an auction contract that differs most from a private treaty sale, and they should be read in full.