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The Perils of Incautious Auction Purchase

PLEASE NOTE: Information in this article is correct at the time of publication, please contact DFA Law for current advice on older articles.

A High Court ruling has underlined the dangers inherent in purchasing property at auction without taking proper legal advice. A disabled woman is facing a financial catastrophe after she made a successful telephone bid for a substantial property, without commissioning a survey and without previously viewing it, just a week before a landslide left it teetering on a cliff edge.

Sue Diamond successfully bid £154,500 for Ridgemount House in Torquay, Devon, in February 2010. A week later, a major landslip left the six-bedroom house just 50 yards from a vertical drop into the sea. She claims that the property is now uninhabitable and is worth only £3,500. Despite that, the Court ruled that the contract created when the auctioneer’s hammer fell was valid.

The auction particulars had warned prospective buyers that the property was severely structurally damaged and might be beyond economic repair. Ms Diamond was ordered to complete the purchase by a judge in July 2010.

The vendor of the house obtained a charge for the purchase price, plus interest accruing at 8 per cent annually, over Ms Diamond’s home in London, from which she was later evicted. An order was made for the sale of that property to enable the seller to realise his security and, in March 2012, a judge gave permission for the house to be marketed at a price of £650,000.

However, Mr Justice Norris has now given Ms Diamond the chance to get a better price for her home after she produced letters from local estate agents saying that a selling price of £1.1 million was ‘easily achievable’ in such a highly desirable location. The judge directed that offers be sought for the house in excess of £900,000 but dismissed Ms Diamond’s application to block the sale altogether or to reduce the amount which she must pay the vendor of Ridgemount House.

It is always sensible to take legal advice before entering into any property transaction or any other transaction of significance.

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