In South Australia, we’ve seen increasing interest in our residential property over the past year or two. Due to its relative affordability, SA is an attractive housing market to investors and purchasers interested in residing here. In addition, COVID-19 has taught us that we can work remotely quite successfully, so we see some expatriates returning to South Australia for lifestyle and affordability reasons as well as a new cohort of inbound residents from the more expensive eastern states of Australia.

The team at Eckermanns has spent some time recently looking at Remote Auction Bidding using FaceTime and Zoom and have outlined important information regarding the recommended requirements for remote bidders, so if you are interested in learn about remote auctions, then read on.

Overview:

  • Can a bidder bid “online” at an Auction?
  • Bidders in Person or Appoint a Proxy
  • Allowing a Remote Bidder
  • Zoom Video Bidding

Can a bidder bid “online” at an Auction?

Due to the COVID-19 pandemic (Pandemic), people have had to utilise technology more than ever in a variety of industries and for a range of activities. The Pandemic has changed things for the real estate industry; affecting the way property auctions and inspections are conducted as well as the signing of leases and signing of contracts for the purchase of property.

Across Australia, auctions have not been able to be conducted in-person during lockdown periods, instead they have been conducted remotely using online platforms where prospective purchasers register their interest with the agent prior to auction day and then proceed to bid online. Some advantages of this “virtual” approach to bidding has been the lack of pressure on prospective purchasers which can often arise with auctions in-person and being able to buy property online from anywhere in the world.

We note that in South Australia, the law does not contemplate FaceTime calls or Zoom linkups at auctions, so we are having to interpret, to some extent, the legislation and apply it to today’s technology, using the intention of the existing legislation and applying a “reasonableness” to it.

Bidders in Person or Appoint a Proxy

The best option is to comply strictly with the Land and Business (Sale and Conveyancing) Act 1994 SA (Act) and the Land and Business (Sale and Conveyancing) Regulations 2010 SA (Regulations).

Section 24I of the Act states that the Regulations may prescribe standard conditions of auction which will apply as contractual conditions to any auction conducted by an agent for the sale of residential land. These standard conditions will be binding between the vendor and the purchaser, the vendor and the auctioneer and the bidders and the auctioneer.

Schedule 6 of the Regulations sets out the standard conditions of auction:

 “(1) The standard conditions of auction for the sale of residential land (the property) are as follows:

     (a) any person may bid in the auction in person, or by their proxy or representative, subject to the conditions of auction:”

It is reasonable for an Agent to have a policy where they require that:

  1. Bidders be at the auction in person; or
  2. Bidders appoint a proxy or representative, who are at the auction in person.

However, if:

  1. it is not possible for a bidder to be at the auction in person or appoint a proxy or representative to be there in person;
  2. the bidder really wants to bid by FaceTime or Zoom (Remote Bidder); and
  3. the Agent and the Vendor want to allow the Remote Bidder,

then, there are some steps that the Agent should take to minimise the risk if they are challenged by a competing bidder or the risk that a winning Remote Bidder tries to pull out of the contract due to it not being binding.

Schedule 6 of the Regulations includes:

 “(2) In this Schedule – conditions of auction includes conditions displayed by the auctioneer at the auction as conditions of the auction, together with the standard conditions of auction set out above.”

From this abovementioned section of the Regulations, it is possible to have further conditions of the auction, in addition to those conditions that are prescribed by the Regulations. However, the issue is where those additional conditions potentially conflict with the prescribed auction conditions, which could render those additional conditions void.

The intention of the prescribed auction conditions is that the process is totally transparent, with “real” people registered and thorough records being kept for all registered bidders and bids, and clear declaration and limitations on “vendor” bids. So, one could argue both ways, that is:

  1. on the ‘for’ side: you can vary the auction conditions by clearly allowing remote bidding; or
  2. on the ‘against’ side: transparency is so key that any method other than the bidder or their proxy/representative being there in person conflicts with that absolute requirement of transparency, and so anything other than being there in person is prohibited.

Allowing a Remote Bidder

If an Agent and Vendor want to allow a Remote Bidder, they will need to comply with the prescribed standard conditions of auction, and make sure the remote bidding process is as transparent as possible, to counter the ‘against’ argument above should it come to a dispute.

The Agent should take the following steps to allow a Remote Bidder:

  1. The Auction Contract, Form 1 and Auction conditions are sent to the Remote Bidder prior to the Auction, who must acknowledge receipt and acceptance of them;
  2. Additional conditions of Auction drafted and announced, declaring that the Auctioneer is accepting bids by registered remote bidders over FaceTime, with the remote bidders having undergone the same registration process as other bidders in person, and confirming that these remote bids will be clearly communicated to the audience if made;
  3. The Remote Bidder is registered on the bidders register, is given a number to bid with, and has their identity verified as per the Regulations;
  4. An agency representative holds the phone so the Remote Bidder can see and hear the Auctioneer, and the agency representative can see and hear the Remote Bidder, so they can alert the Auctioneer when the Remote Bidder has made a bid, which the Auctioneer would clearly communicate to the audience;
  5. The FaceTime call is recorded on video with audio enabled, which needs to be set up on the agency representative’s phone. The Remote Bidder needs to be made aware they are being recorded. This acts as a back up should there be any claims about the transparency or legally binding nature by anyone at the auction.

We cannot guarantee that these steps will be found by the Commissioner or the Court to be satisfactory, and it will only be if a particular situation is challenged by someone that we will know for sure. However, with the steps taken above, it is reasonable that the transparency has been maintained while working with the new technologies that are available and optimising the sale price for Vendors.

Zoom Video Bidding

Online auctions conducted via Zoom work much in the same way as public, in- person auctions, except they are from the comfort of the prospective purchaser’s own space.

The Remote Bidder will need to register with the Agent before auction day and provide proof of identity etc. They are then sent a Zoom link and will be invited to join the online auction through this link.

The online auction commences only after the Auction prescribed conditions and any other additional conditions declared by the auctioneer are read out to the online bidders. The auctioneer will explain the online auction format and run through the online procedure.

Zoom is probably the most transparent as an online platform because each bidder can actually see who they are bidding against as their cameras are switched on unlike some of the other apps.

It is quite possible that moving forward, agencies will look to using a combination of both in-person auctions as well as online platforms.