More and more in South Africa, sellers are turning to auctions, as a ‘fast fix’ to dispose of their immovable properties. One issue that arises often at auctions, is that the seller or auction house has a representative bidding for the property.
Yet, this representative has no intention of buying the property.
Is such conduct legal?
Can the seller or auctioneer or their representative bid at the auction, even though they have no intention of buying the property?
"In terms of the law, the Consumer Protection Act actually allows the seller OR auctioneer to bid, but only if notice is given in advance that the auction is subject to, a reserve price and a right to bid by the seller or auctioneer," says Alan Levy of Alan Levy Attorneys Inc. in Johannesburg.
"What is also very interesting is that the person biding on behalf of the seller or auctioneer is not required to identify himself. He can therefore ‘hide’ and be assumed to be just another ‘genuine’ bidder there on the day.
In March 2015, the Supreme Court of Appeal ruled in favor of an auction house allowing the auctioneers bids in respect of the property up to the reserve price, which the auctioneer had stated could be done, in the auction houses advertisement, mandate and terms of auction.
It is unlawful to raise to bid in order to raise the sale price, even though Acceptance of a bid below the reserve price is within the control of the seller.
n auctioneer is the agent of the seller and the purpose of the auction is to obtain the best possible price for the benefit of the seller. The intention of an auction is not to provide the public with an opportunity to obtain bargains. Therefore a bid on behalf of the seller by the auctioneer is permitted as long as there is prior notice in the auction conditions that vendor bidding will be allowed."
"No one is compelled to bid at an auction nor to bid higher than any other bid, including a vendor bid up to the reserve price. A vendor bid does not deprive a bidder of a sale below the reserved price. That is the result of the reserve price itself.
"Vendor bidding is prohibited at auctions without reserve by the common law but is permitted by the Consumer Protection Act as long as there is proper notice in advance of the right of the owner or auctioneer to bid." says Bracher.
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