Hidden Fees in Auction Legal Packs

What it is: An auctioneer's fee charged to the buyer in addition to the hammer price. Also called an administration fee, buyer's charge, or buyer's contract fee depending on the auctioneer. It is typically either a flat fee or a percentage of the hammer price (1.5–3%), and VAT is almost always added on top.

The buyer's premium is paid on auction day — the same day as the deposit — and is non-negotiable and non-refundable if you later cannot complete. It is disclosed in the auction catalogue and usually in the special conditions of sale, but many first-time auction buyers simply forget to include it in their maximum bid calculation.

What it is: A clause in the special conditions requiring the buyer to contribute to or pay in full the seller's solicitor fees. This is perfectly legal and extremely common at auction. The clause typically reads something like: "The buyer shall pay a sum of £750 (inclusive of VAT) towards the seller's legal costs on completion."

The rationale is that the seller has already paid to have the legal pack prepared — sometimes months before the auction. Rather than absorbing that cost entirely, they pass it to the buyer via the special conditions. This is disclosed, but is easily missed by buyers who only skim the special conditions looking for major issues.

What it is: Separate from the auctioneer's buyer's premium, some sellers and their solicitors charge a separate fee for preparing or uploading the legal pack. This may be labelled as a "documentation fee", "legal pack fee", or simply an "admin charge". It sometimes overlaps with the seller's legal costs clause (fee 02) but not always — in some packs both appear as separate line items.

This fee is less common than it once was, as many auction houses absorb or waive it in competitive markets. However, it remains common with private treaty auction sales and online auction platforms where the administration costs are itemised differently.

What it is: Residential property sales in the UK are generally exempt from VAT. However, there are specific circumstances where VAT is chargeable on a property sale, and the consequences are severe if you do not budget for it:

Commercial property with an Option to Tax: If the seller has opted to tax the property (a formal VAT election), the sale may be subject to 20% VAT. This typically applies to commercial or mixed-use properties being sold at auction. A £150,000 hammer price becomes £180,000 if VAT applies.

New build residential: Zero-rated rather than exempt — generally not a buyer-side concern, but worth checking for conversions.

Land sales: Bare land is VAT-exempt unless an Option to Tax has been exercised. Always check.

What it is: Before the auction, the seller's solicitor commissions searches — local authority, water and drainage, environmental — to include in the legal pack. These searches have a cost. Some sellers include a clause in the special conditions requiring the buyer to reimburse these search costs on completion.

This is distinct from searches your own solicitor will commission for you. In auction transactions, buyers typically "rely on" the seller's searches rather than commissioning duplicates — saving time but meaning you inherit searches that may be weeks or months old.

What it is: For leasehold properties, the freeholder or management company must be formally notified when the property changes hands (notice of transfer) and when a mortgage is registered against it (notice of charge). The freeholder is entitled to charge a fee for processing each notice.

These fees are set by the freeholder or their managing agent and are rarely negotiable. Charges of £50–£250 per notice are typical, but in some cases — particularly purpose-built apartment blocks with large managing agents — fees of £300–£500 per notice are not unheard of. If you are buying with a mortgage, you may pay two separate notice fees (transfer and charge) to the same managing agent.

What it is: An engrossment fee is charged by the seller's solicitor for preparing the final, execution-ready version of the transfer deed or lease. In residential conveyancing, this fee is often absorbed into the seller's overall legal bill. At auction, it is common for the special conditions to require the buyer to pay it separately.

The name is archaic — it comes from the historical practice of writing out ("engrossing") legal documents in fair copy before signing. Today it simply refers to the cost of producing the final signed version of the deed.

What it is: On a leasehold property, the seller may have outstanding arrears of ground rent or service charges. In most auction transactions, the special conditions state that the property is sold "subject to" any outstanding charges — meaning the buyer inherits the arrears and is responsible for paying them.

Service charge arrears can be substantial, particularly if major works (roof replacement, external redecoration, lift replacement) were carried out recently and the seller has not settled their portion. The managing agent may also be entitled to charge interest on late payments and recover their administration costs — meaning £3,000 in service charge arrears can quickly become £4,500 by completion.

What it is: An overage clause (also called a clawback clause) is a contractual obligation requiring the buyer to pay the seller a percentage of any increase in value or development profit within a defined period — typically 5–25 years after the sale.

Overage is most common on: land with development potential (garden plots, paddocks), properties sold at undervalue from estates or local authorities, and redevelopment sites. A typical clause might state: "If planning permission for residential development is granted within 20 years of completion, the buyer shall pay to the seller 30% of the uplift in value."

On a plot bought for £100,000 that subsequently gains planning permission and becomes worth £500,000, a 30% overage clause means paying the seller an additional £120,000. This is a real and often life-changing cost that can turn a profitable development into a loss.

What it is: Indemnity insurance is taken out to cover defects in title or missing documentation — most commonly missing building regulations completion certificates, absent planning permissions, breach of covenant indemnities, or unknown chancel repair liability. At auction, the special conditions frequently require the buyer to take out and pay for indemnity insurance policies as a condition of purchase.

The cost varies widely depending on the risk being covered and the property value. Missing building regs on a small extension might cost £150. Indemnity for a breach of a restrictive covenant on a high-value property could cost £2,000 or more. These premiums are typically one-off and run with the land for the lifetime of the policy.