Is it safe to buy auction property? Six things a buyer need to keep in mind!

Agama Law Associates Partner  Nitin Jain shares his views on the purchase of auctioned property, explaining key aspects for buyers including payment plans, statutory payments and available remedies in an article by The Economic Times titled “Is it safe to buy auction property? Six things a buyer need to keep in mind.”

Payment plan of an auction property

Nitin Jain, Partner at Agama Law Associates, says, “Usually, the payment plan for stressed assets is given to the preferred successful bidder. It is mentioned in the auction notice itself. Usually, 10 to 25% is to be deposited while applying to take part in an auction and the balance payment is to be paid within a period of 15 days of winning the auction which can be extended up to 90 days at the discretion of the bank as mentioned under Security Interest (Enforcement) Rules, 2002.”

Possession of auction property

Jain of Agama Law Associates says, “While buying the house in an auction done by a bank, a purchaser needs to look at whether the auction is via symbolic possession or the bank is having physical possession of the property. In case there is only a symbolic possession, the purchaser needs to wait for some time for the bank to give physical possession by obtaining it through a court procedure.”

How a buyer a can ensure that there are no dues pending on property?

Jain from Agama Law Associates says, “When an auction takes place, it is usually done “as is where is”, “As is what is” and “Whatever there is” basis. Therefore, it is prudent for the buyer to do due diligence directly from the government authorities for the statutory payments which are attached to a property – such as property tax, municipal tax, electricity dues – to assess what could be the potential additional liability if the property is bought.”

What if the borrower does not vacate the property?

Jain says, “In case the borrower does not vacate the premises, the bank is entitled to initiate the proceeding under Section 14 of the SARFAESI Act and take physical possession of the property with the help of the relevant courts in the jurisdiction where the property is situated.”