The complaint

A homeowner, Graham, raised a formal complaint against a property auction service provider after being charged penalty fees totalling £6,974 during the attempted sale of his property.

Graham first instructed an online estate agent in July 2023, with marketing beginning on in August 2023. The online estate later recommended selling the property via an auction provider, which was instructed in September 2023 under a sole selling rights agreement lasting a minimum of 90 days.

The initial reserve price was £187,000, and the auction provider understood the sale to be a probate matter.

A first sale was agreed on in November 2023, but the buyer’s mortgage lender refused to lend on the property. The property was relisted, and a second sale was agreed with a buyer, Adam, at £153,000. In early 2024, Adam informed the auction provider that his lender considered the property “unmortgageable and of nil value”. He was advised to try another lender.

Adam also told Graham directly that he was unlikely to proceed. Believing the sale would collapse, Graham instructed the first agent to remarket the property.

The investigation

The property auction service provider claimed Graham breached contract by remarketing during the reservation period and sought to charge the Buyer’s Premium and Withdrawal Fee.

Graham disputed liability, stating he had never been clearly informed about the auction process, the charging structure, or circumstances in which he might become liable for fees. He also said he had been led to believe the service would cost him nothing.

Evidence showed that the first sale collapsed due to mortgage issues, which should have alerted the auction provider to a material issue affecting future buyers. No evidence was provided that the auction provider updated marketing information to warn that the property might be suitable only for cash buyers or specialist lending. The Ombudsman found this to be a failure to disclose material information.

The property auction service provider later refunded Adam’s buyer’s premium of £6,972, despite being entitled to retain it under the auction terms. This decision contributed to the Graham being held liable for the same amount.

Outcome

The Ombudsman concluded that the auction service provider had not acted fairly or reasonably. The penalty fees were deemed unjustified, and a refund of £6,972 was directed, along with £300 compensation for aggravation. The total award for Graham was £7,270.

*Names have been changed to maintain anonymity.