WHEN AUCTIONS GO WRONG 🤦😲 Jared Zak - Dott & Crossitt Solicitors

Summary: “When Auctions Go Wrong” (Jared Zak – Dott & Crossitt Solicitors)

The discussion focuses on common legal and contractual problems that arise during Australian in-room real estate auctions, what “triggers” those problems, and how lawyers/agents should respond in real time. A major theme is that while auction mechanics can feel informal, the hammer fall and the formal signing/contract requirements still control outcomes. Small deviations—such as incorrect party names, missing authority, GST wording errors, reserves not in writing, etc.—can create serious disputes, delays, and cost consequences.

1) “Panic button” calls: incorrect buyer details and last-minute changes

Zak says the most common emergency issue is when the buyer approaches the signing table and requests changes to the purchaser name, particularly switching to:

• a company name,
• an SMSF,
• a spouse/wife/nominee variation.

Key legal point: the contract should only be in the name of the registered bidder (the person/entity who won at the auction).

Zak explains that for companies, auction counterparties and the agent need certainty the company exists and that the signing party has authority (including ASIC matters, directors, and solvency/liquidation risk). If the entity didn’t exist at the auction time, there may be no valid contract, creating a “fix it later” nightmare.

Horror-story example: A developer asked to insert a company name at auction; the company didn’t exist until Monday. Zak’s search suggested it was solvent, but it didn’t exist at signing time—meaning the vendor had to rectify the situation due to invalid contract formation.

2) Nominees and stamp duty: “it might be contractually possible, but it can be tax-expensive”

A further issue raised is that nominee arrangements can trigger additional transactions for stamp duty (notably discussed in NSW). Even if nomination is feasible contractually, NSW revenue authorities may treat nomination as a second dutiable transaction (i.e., “double duty” risk).

Zak also discusses a practical workaround for close family (e.g., husband/wife) via transfer document variation/exemptions, while emphasizing that tax treatment is a major risk area.

3) The hammer falls—can parties change their mind?

The show breaks down multiple “hammer down” scenarios:

(a) Bid accepted, but buyer tries to “change something” mid-process

Zak emphasizes auctions have few rules, but the auctioneer’s role as the final arbiter is critical. Acting outside proper procedure (or fraud) is where the danger lies.

(b) Hammer falls, buyer refuses to sign (cold feet)

Zak’s advice is that a valid contract must be secured. If the bidder won’t sign, the auctioneer/optionee may be able to sign on behalf of the buyer to ensure a contract exists. The vendor can then pursue legal action for breach/damages.

He also notes that simply chasing the underbidder is wrong first—you need the primary contract in place. After termination (e.g., non-payment of the deposit/termination event), the underbidder can be used to mitigate damages.

Key legal principle stated: property dealings must be evidenced in writing, even though auctions involve verbal acceptance dynamics. The act of signing after the hammer is what creates the enforceable written dealing.

4) Disputes after the auction: “weren’t bidding / contract error / evidence”

A case discussed involves a buyer who paid a high price at auction but later claimed they weren’t actually bidding (then “the story changed”). Video evidence later supported that bidding did occur.

Zak suggests that while the vendor may have remedies, legal resolution can take months—forcing vendors into difficult settlement timing problems (especially when they are also buying another property and funds aren’t ready).

5) Classic auction precedent: hammer fall can “seal the deal”

Zak and the host discuss the historical “hammer fall” concept using Philips and Butler (1907). The argument is that the hammer fall, together with the requirement to pay a deposit “as soon as practicable,” can outweigh later arguments about exchange timing—i.e., the hammer’s legal effect is decisive.

6) GST at auction: what the price means can be litigated

A commercial example is provided: a vacant industrial property where GST applied. The auctioneer announced bids were “exclusive of GST” (so a bid of $3m meant $3m + GST).

However, the vendor’s solicitor later prepared a contract that marked the price as inclusive of GST. After the fact, the buyer claimed they could pay less (the GST “mistake” interpretation).

Zak says the court ultimately treated the auction terms/hammer outcome as controlling, finding the intended deal was plus GST, despite the contract wording error—reinforcing that auction guidance and hammer-defined price can trump later document mistakes.

7) Can a buyer retract a bid?

The discussion concludes that, while auction law is often unclear, bid retraction may be possible under general sale-of-goods principles. The key is doing it in good faith and promptly.

The host shares a practical example where bid retraction led to re-pricing and auction control adjustments.

8) Reserve prices must be in writing—and can’t be amended orally

Zak stresses reserves are regulated: a reserve must be in writing (NSW Property Stock and Business Agents regulations cited).

If the vendor wants to change the reserve while away/off-site, it can only be amended in writing (text/email is acceptable). Oral amendments aren’t sufficient and create breach risk.

9) Practical “takeaways” repeatedly emphasized

• Ensure the auction winner’s name/entity is correct before signing.
• Don’t rely on nominee/company name substitutions at the last minute.
• Understand stamp duty consequences of nomination/transfer structuring.
• If a winning buyer won’t sign, secure written contract position first and then pursue remedies.
• Treat the hammer and auctioneer’s announced terms (e.g., GST-exclusive bidding) as highly significant.
• Reserve must be in writing and amended only in writing.

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Presenters / Contributors

• Tom (host/interviewer)
• Jared Zak (Solicitor, Dott & Crossitt Solicitors)
• Teresa (asked a question during the session; name appears as a viewer/contributor)
• Brian (asked a question during the session; name appears as a viewer/contributor)
• SUSAN (credited as adding Jared’s contact details/info onscreen; mentioned by the host)