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The Conveyancing Committee of the Irish Law Society has been made aware by practitioners that some of their clients have “signed” contracts online for the purchase of property before seeking legal advice.
Complaints arising from online auctions
Some clients were also threatened with forfeiture of their deposit monies when it was discovered that the title was not good and that the contract should not be completed. It should be noted that the body responsible for the regulation of estate agents and other property professionals is the Property Services Regulatory Authority (PSRA) and it is that body that people should contact in relation to specific complaints that they might have in relation to any such cases.
Variations from the standard contract for sale
The Committee has always promoted its standard contract for sale on the basis that it strikes a balance as between the respective rights and responsibilities of a vendor and a purchaser in a conveyancing transaction. However, it appears that in many online auctions, the standard contract is being altered to the extent that the balance of fairness has been shifted heavily against a potential purchaser.
Some of the matters that the online contracts for these sales typically include, that are of concern to the Committee, are as follows:
- The purchaser is bound to the contract terms and conditions when they click to buy, whether or not they have taken legal advice on the title to the property or on the terms of the contract itself.
- A 10% deposit is payable in order to secure the property in the online auction. This is not a normal booking deposit – it is a full contract deposit and is stated in the contract to be non-refundable !
- The online auction firm does not hold the deposit either as stakeholder or otherwise – it is paid over immediately to the vendor. It is not held by the vendor as stakeholder or in trust for the purchaser. There is no security given to the purchaser that the deposit monies are safe or will be returned in the event that the contract does not proceed for any reason. This is not usual practice. The usual practice is that an estate agent takes only a booking deposit (generally, 5% or €10,000, whichever is the lower) – not a full 10% contract deposit – and holds the booking deposit monies on trust for the purchaser until a binding contract is in place and as stakeholder after the contract becomes binding and the booking deposit monies are not released to the vendor until the sale has closed.
- The online auction firm takes its own fees out of the deposit monies before it pays the remainder over to the vendor and before completion of the sale. This is not usual practice.
- The purchaser is required to nominate a person in the online auction firm to sign the contract on his/her behalf. There is a similar requirement for the vendor.
Questions put to the PSRA
Such is the Law society’s concern with online auctions, the Committee has asked the PSRA:
- Whether it is their view that these practices are in compliance with regulations that the PSRA promotes and enforces.
- To confirm if it is satisfied that the practice of online auction employees acting as appointed agents or attorneys for both the vendor and purchaser in the same transaction is in order.
- To advise if there are any ethical standards set down by it or any regulatory requirements that would require that a licensee or its employees not act for both a vendor and a purchaser in relation to any matter to do with a sale of property, including the execution of contract documents on behalf of both parties that bind them in contract.
The Committee realises that there is little or nothing that members can do if their clients have already bought these properties by clicking to buy online before they are consulted for legal advice and would advise that solicitors direct their clients to the PSRA to make complaints in any appropriate case.