Code of Practice

for the Sale of Real Estate by Auction

Annotations to Principles upon which the Code is founded:

Preserving the integrity of the auction process as an effective and efficient means of selling real estate.
Ensuring that the process of sale by auction complies with the law and conforms with the notion of fair trading.

(a) The full street address of the property including the city, or town or suburb;

(b) The date and time at which the auction will be held;

(c) The place at which the auction will be held and the address of that place if the auction is not to be held at the property itself;

(d) The means by which the property can be physically inspected;

(e) The contact details for the member and/or duly authorised representative instructed to conduct the auction;

(f) Where a physical description of the property is provided, such description shall be accurate in all respects. The responsibility falls on members to ensure that advertising and responses to inquiries will not mislead and deceive the public. There is nothing new in this, although particular care must be taken in giving price indications or estimates in the context of marketing auction properties.

2. Before the Auction

2.1 An auction is about creating competition in order to maximise the value of the property and this purpose must be balanced against the fact that a vendor is free to accept a suitable pre-auction offer. This clause is designed to ensure that advertising a property for sale by auction is not used as a tool by vendors wishing to sell the property by private treaty in advance of a forthcoming auction where there is no genuine intent to proceed with an auction.

2.2–2.3 These provisions ensure that a vendor is fully appraised of the terms of the Code and, therefore, the manner in which the auction will be conducted by the member. The acknowledgement serves as a form of protection for members in that a vendor cannot complain about a member’s conduct in relation to an auction provided that the conduct in question is in conformity with the Code.

2.4 –2.6 These provisions relate to the transparency of the auction process and the need to make disclosure of certain information to the public in advance of the auction.

2.7 Council has reservations over the use of the phrase “if not sold prior”. In Council’s view the onus is on the agent to ensure that prospective buyers are made aware that the vendor is considering selling the property by private treaty prior to auction. This is viewed as not only an appropriate disclosure to be made to interested purchasers, but also as part of the agent’s duty to attempt to obtain the maximum price for the property, as a person who expects to enter a bid at auction may wish to outbid any party seeking to secure the property before the auction.

3. At the Auction

3.1 This clause confirms the standard of conduct required of auctioneers.

3.2 This is, or should be, standard practice at auctions.

3.3 Again, this is viewed by Council as practice which should already be standard. The reserve should be confirmed in writing by the vendor in advance of the auction.

3.4 People in attendance at the auction should be advised whether the vendor has reserved the right to bid. The person who will bid on behalf of the vendor must be identified. This clause also requires that all vendor bids be declared in accordance with the decision of the Court of Appeal in the Grenadier case. A positive duty is placed on members and salespersons to protect the integrity of the process.

3.5 This clause provides that no vendor bids can be made unless a reserve price has been properly (i.e. by memorandum in writing) set for the property so as to ensure that the use of the vendor bid is legitimate.

3.6 This provision makes clear to prospective purchasers and the vendor that once the discretion to enter vendor bids has been placed in the auctioneer’s hands, then the auctioneer will exercise his or her discretion independently.

3.7 It is not unusual for salespersons to be requested to bid, either by people who are present at the auction, or on behalf of people who are unable to attend. So that there is no confusion between such bids and a vendor bid, the Code provides for this disclosure.

3.8–3.9 These are considered to be standard and proper practices.

3.10 Council is of the view that it is not possible to provide a comprehensive Code as to how disputed bids should be treated. Reliance must be placed on the experience and skill of the auctioneer exercising judgment and discretion in accordance with the terms and conditions governing the sale. If the terms and conditions are silent on the point then the provisions of the REINZ Particulars and Conditions of Sale are to be applied.

3.11. This clause is considered to reflect the current law.

3.12. This is standard practice and is provided for in the Code as it is an essential part of the process leading up to the creation of a contract by the fall of the hammer.

3.13 This provision repeats clause 2.2 of the REINZ Particulars and Conditions of Sale.

3.14 This clause relates more to post-auction practice than the auction itself. Council has taken into account various practices relating to the conduct immediately after an auction where a property has been passed in, and considers this to be the appropriate position. For this to be effective, however, provision will need to be made in the auction authority and an announcement must be made during the conduct of the auction.

4. After the Auction

4.1 This clause reflects the concern of the Court of Appeal that post-auction purchasers may be mislead if they are unaware that a property was passed in at auction on a vendor bid. Council considers that the simplest manner of dealing with the matter is to prohibit reference to any vendor bid in post-auction advertising.

5. General

5.1 Council considers that the provisions of this Code reflect “good agency practice” and as such a breach of the Code could result in disciplinary proceedings against a member. Members should also be aware that the Code presupposes compliance by members with all licensing requirements in respect of the conduct of auctions, and that members are held responsible under the Code for breaches committed by the auctioneer conducting the auction on behalf of the member.