Legal Perspective: How to buy an auction property?

Legal Perspective: How to buy an auction property?

An auctioned property can be very attractive in terms of its price. Still, it may entail certain risks and underlying conditions which must be carefully researched and considered by an interested buyer before getting the said property.

A.      TYPE OF AUCTION PROPERTY

Auctioned properties can be categorised into two types which are Loan Agreement Cum Assignment (“LACA”) properties/non-judicial auctioned properties (“LACA properties”) and non-LACA/judicial auctioned properties (“non-LACA properties”).

LACA properties are bank-auctioned properties without individual/strata titles, whereas non-LACA properties are properties with individual/strata titles auctioned at High Court.[1]

 

B.      PROCEDURES BEFORE AUCTION

 

1.               Research and Inspection:

Before participating in an auction for your property of interest, it is important to research and inspect the property thoroughly despite being unable to inspect the property’s interior[2].

 

You may seek legal advice to check the restrictions on the interest of the land, any existing property encumbrances and caveats, sitting occupants in the property and their rights to the property and any outstanding debts the property has which you will have to pay upon a successful bid of the property.

 

Checking the Proclamation of Sale Agreement (POS) or Conditions of Sale document (COS) of the property of interest before attending the auction will also be beneficial to you wherein you will be able to discuss the terms and conditions of the POS or COS with your lawyers and discover any unfavourable underlying condition (if any)[3].

 

2.               Loan Survey (if buying with a loan):

Please enquire before the auction about the available loan facilities you can choose from especially your loan eligibility and the requirements to be fulfilled for the loan facilities. This will help avoid missing the specified time frame given to complete the transfer of ownership after successful bidding.

 

3.               Registration:

To participate in an auction, it is necessary for you to register with the auctioneer or relevant authorities and provide your personal details. Depending on whichever type of auction method (online or physical) and/or type of auctioned property (LACA or non-LACA property), your registration method will vary. For example, the registration method for non-LACA property’s online auction is by way of registering in e-Lelong[4].

 

4.               Payment of Deposit:

You must also pay to the relevant authority (as will be advised upon registration) a deposit of usually 5%[5] or 10%[6] of the reserve price of the property (whichever the requirement is) prior to the auction by way of whichever method required by the said relevant authority which is usually either cash, cashier’s check or bank draft. The deposit is usually non-refundable unless you lose your bid.

 

5.               Enquire about Other Requirements to adhere to during Auction:

Before the auction date, check with the auctioneer or relevant authorities to know what documents are needed, attire (especially if physical attendance at High Court) and anything you should do that you may have missed out on so that nothing affects your property bidding process during the auction date.

 

C.      PROCEDURES DURING AND AFTER AUCTION

1.               Bidding:

During the auction, you must follow the auctioneer’s instructions and bidding procedures. You may bid up to the maximum amount you are willing to pay, but be aware that once you make a bid, you cannot retract it.

 

2.               Signing Proclamation of Sale Agreement:

If your bid is successful, you will be required to sign a POS or any similar sort of property sale agreement on the auction date itself. Thereafter, you must pay the balance of the purchase price within a specified time frame given, which is usually 90 days or 120 days (you are subjected to the same time frame even if paying by loan) from the date of signing the property sale agreement failing which may result in forfeiture of your deposit and cancellation of your purchase of the said auction property[7] [8]. You are advised to appoint a lawyer for a smoother completion of the payment and purchase process.

 

3.               Transfer of Ownership:

Once you have paid the balance of the purchase price, the transfer of ownership will be able to be completed. You will need to register the transfer of ownership with the relevant authorities, pay the necessary fees and taxes, including paying off outstanding debts of the property and obtain the necessary approvals.

 

Please reach out to Ng Law should you need any help and advice at +601154304970 or +6046024970. You may also email your enquiry to penang@nglaw.com.my.