My Amendment 82 is in this group. I apologise to the House for not being able to raise these matters in Committee due to my engagements in other proceedings.
I want to make it clear that I am not criticising in any way the actions of any particular property auction company in the United Kingdom. I also want to make it clear that my amendment is not lobby-driven: it is based on my own experience at property auctions.
Whereas most people’s measure of confidence in the national economy is based on news reports, share prices, unemployment and growth statistics, surveys of business confidence and a number of general indicators, my personal approach has been to measure confidence in what happens in the property market and, in particular, in property auctions. For almost every year over the past 20 years, I have watched the movement in regional property prices in London auction rooms, which I have attended—never as a vendor, never as a purchaser, but only as an observer. In my view, regional price movements excluding London are a real-world barometer of confidence in the economy.
However, there is one particular practice in the management of bidding processes that concerns me. I know that it causes a lot of upset among inexperienced bidders and particularly for young people buying their first home. Catalogues invariably show a guide price against the property description and lot number. I have a catalogue in my hand that shows the lot number of a property in Birmingham and the guide price.
As Barnard Marcus, a reputable company, says in its catalogue:
“The Guide Prices listed must not be relied upon by prospective purchasers as a valuation or assessment of value of the properties. They are intended to provide purchasers with an indication of the region at which the reserve may be set at the time of going to press”—
with the catalogue.
“Guide prices may be subject to variation … Prospective purchasers should be aware that eventual sale prices may be above or below guide levels dependent on the competition”.
That is the background against which people often judge whether they intend to attend an public auction.
Noble Lords should remember that I said,
“the eventual sale price may be above or below guide levels dependent on the competition”.
With that in mind, bidders often take time off work and travel great distances to attend property auctions. But what happens when they arrive and bid often comes as a shock. They presume, as per the quote that I read out from the Barnard Marcus catalogue, that the guide is an indication of the reserve. That is often not the case. The reserve is often substantially higher. The bidders are unaware that the guide is no guide at all as the reserve is not known to the bidder. As Countrywide Property Auctions states in its catalogue under the heading “Reserve Price”:
“Each property will be sold subject to a reserve price. This is a confidential figure agreed between the Auctioneer and the seller prior to auction and is a figure below which the Auctioneer cannot sell the property”.
In other words, the reserve price is unknown to the bidder.
What the bidder is witnessing is effectively a trade misdescription. The guide is no guide at all. Bidders are being attracted to property auctions on the basis of a guide that may or may not be exceeded dependent on bids received—the competition referred to in the Barnard Marcus quote. But the property is being sold on the basis of a reserve price known only to the auctioneer and unknown to the bidder.
Let us take an example. Property A has a guide price of £100,000. Bids received are £95,000, £100,000, £105,000, £110,000 and £115,000. The bidding stops at £115,000, £15,000 above the guide, at which point the auctioneer abruptly intervenes with the statement: “I am sorry but the property is withdrawn under instructions from the vendor because the reserve has not been met”. That reserve is £15,000 above the guide price.
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I have witnessed some pretty ugly and angry scenes on the floor of public auctions. What sometimes happens is that a bidder is drawn into a telephone discussion after the bidding is over, via the auctioneer, with the vendor on a price near the reserve.
On other occasions, bidders leave the auction room in disgust at the waste of time involved. What is really worrying is that it is possible for a vendor to welcome a low guide in the catalogue, in the knowledge that it will attract prospective bidders, and then spring a high reserve on the property on the day of the auction.
In one particular catalogue you will find the following reference: “The sale is subject to a reserve price for each of the properties and the vendor reserves the right to bid both up to the reserve price through the auctioneer at auction”. In other words, set a low guide and then bid your own property up to the reserve price at the auction. In those circumstances, if the guide is set lower than the reserve, we are experiencing nothing less than a deliberate deception of prospective purchasers.
That is the background to my amendment. I believe that reform is needed in this area. I am not expecting the Minister to give way at the Dispatch Box today, but I hope, following my conversation with civil servants last week on these matters, that we can have some legislative change in this area at Third Reading. I beg to move.