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A Response for our Readers

By Lesley Saunders


Amid a maelstrom of controversy, the auction industry is struggling at present to preserve its reputation. With accusations of cloak and dagger dealings, a story more akin to that of a 1930’s mafia tale than that of a billion dollar industry has emerged and this is just the half of it, it seems. This week we look at some of the damage done and what the auctioneers themselves think is the way forward.

The public have come forward with many questions and we have approached the industry in try our best to answer some of them…

When asked what ghost bidding is and whether it’s legal, Henk Wright of Mudzuli Auctioneering responded, “Ghost bidding is the manipulation and the sole intention by individuals/auctioneers to drive selling prices upwards with no intention to actually purchase the asset.”In terms of what the law says, Alan Levy of Alan Levy Attorneys had the following to add, “Section 45 of the Consumer Protection Act (which commenced on 01 April 2011) deals with auctions. In terms of this Section, notice must be given in advance that a sale by auction is subject to a right to bid by or on behalf of the owner or auctioneer, in which case such person may bid at the auction. However if notice is not given, the owner and auctioneer cannot bid or employ someone to do so.

The Act further provides that the Minister of Trade and Industry may make regulations to be complied with by auctioneers regarding the conduct of the auction.

In terms of the regulations to the Consumer Protection Act, an auctioneer may not accept a bid from a person unless such person is registered in the bidders record -this is a register where every bidder must record his identity, before the commencement of the auction.

Further in terms of the regulations of the Consumer Protection Act, when concluding the auction, the auctioneer must sign the vendors roll which is kept by the auctioneer and contains all the details of the auction such as details about the advertising of the auction, the rule of the auction, the bidders record and the names of successful bidders, and certify that the proceedings of the auction were, to the best of the auctioneers knowledge conducted in accordance with the regulations of the Consumer Protection Act and other applicable law and the rules of auction. He further states, “Certain of the provisions of the Consumer Protection Act and the Regulations thereto appear only to apply to auctions of goods and other items and not to auctions of immoveable properties. It is important to establish which provisions apply to which auctions before any decision is reached by any affected party.”

It would appear that it is up to the auctioneers themselves to ensure good business practice and consumers can report what they may feel is unfair to either SAIA (South African Institute of Auctioneers) or the Estate Agency Affairs Board or turn to the National Consumer Commission.

Most auction companies will record the auction, not only to protect themselves when there is a query on whether someone has bid or not, but also to assist the consumer when unsure as to what transpired during the auction. If unsatisfied with what is on the recording, consumers should try to resolve this with first the auction company in question before taking it further. It may just be a misunderstanding – not all errors are ominous!

Ndali Michael James Auctioneers feels that while the industry has been tarnished the flip side of this coin is that consumers are now being made aware of their rights and can question what they may feel to be suspicious behaviour.

Mudzuli Auctioneering’s Henk Wright also feels that it is vital that those attending auctions or wishing to sell on auction make themselves fully aware of the auction process by attending a few auctions before engaging in the process. After that you, as the consumer, need to familiarise yourself with the different rules of auction, conditions of sale and term and conditions.

So too does Park Village’s Roy Lazarus who urges any bidder wanting to know who they may be bidding against to immediately stop the auction and ask there and then who they are bidding against. Very simply when the auctioneer points to your competitor and they nod or shake their head you will know who you are bidding against and what the bid amount is.

The South African Institute of Auctioneers (SAIA) is the body appointed by auctioneers to represent them in South Africa.  Members of this body must adhere to the bodies’ standards to promote professionalism within the industry. Alan Levy comments that SAIA has a constitution which aims to maintain standards to protect members of SAIA and the public including both sellers and purchasers at auctions.  In terms of its constitution, a person aggrieved by the actions of a member of the SAIA may address a complaint to SAIA.

SAIA is empowered to reprimand the member or to impose a fine of between R5 000.00 and R20 000.00 as well as to suspend any member or cancel any membership of SAIA.

Henk Wright of Mudzuli Auctioneering says that it is now up to the auctioneers themselves to ensure compliance with the law and perhaps now that it has been blown open, the regulatory bodies will take a closer look at the goings on at auctions. Perhaps the establishment of an independent, secondary body reporting exclusively to buyers, sellers and SAIA, or the enforcement of filming the auction becoming a legal prerequisite of all auctions.

In terms of limiting the damage done Jade Cahi of Cahi Auctioneers feels that the industry bodies should be actively involved in the investigation and they should give feedback to the public as soon as possible. The longer the industry waits, the further alienated the public is going to become.

Ndali Michael James feels that it is highly unfortunate that a number of corrupt individuals appear to be working within the auction industry and at banks and liquidators and have bypassed protocols for personal financial gain, however they do feel that SAIA is working hard to formalise the industry to do away with unscrupulous auctioneers. This might be just the impetus the DTI and Services SETA need to engage with SAIA to promulgate specific legislature regulating the auction industry.

Touching on the tender processes of how auction stock is awarded to auctioneers Vincent Tadden, Head of Collections at FNB Home Loans explained the workings. “Once an estate is sequestrated or an entity is liquidated; the Master of the High Court makes an appointment of a liquidator. The nomination of a particular Liquidator is supported by a requisition system where all creditors who have an interest in that estate; have a right to support the appointment of a Liquidator. It is usually the number of requisitions received from creditors or the highest capital value that the Master will consider in making an appointment.

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