In the spring of 2018, real estate company Foppen from Harderwijk auctioned a retail property in the municipality of Rhenen, via the auction website BOG Auctions. The Rotterdam real estate investor Dan Maasdam offered up to almost €350,000, but ultimately lost the auction battle to a bidder who was willing to pay more.
To his surprise, the Rotterdam investor heard a few days later that he was allowed to buy the retail property after all.
Maasdam felt wet and asked the auction house for clarification. According to the auction house, the seller had researched the two highest bidders and the choice fell on him.
Mandatory to buy
Maasdam was not convinced and asked for the investigation report. According to the auction house, the seller did not want to discuss this and Maasdam was obliged to buy the retail property.
The so-called ‘General Auction Conditions with Internet Bidding for Voluntary Auctions 2013’ applied to the auction. These stipulate, among other things, that bids are ‘unconditional and irrevocable’. Sellers may also ultimately award the object to someone other than the highest bidder.
Maasdam then contacted the seller and his lawyer. They did not respond to the question of why the retail property was not awarded to the highest bidder, but emphasized that he had to buy the property.
To the judge
Maasdam refused, because he had also heard from the auction house that the seller himself had bid during the auction. As a result, he suspected that the price had been artificially inflated.
To enforce the sale, Foppen went to court in 2019.
During that lawsuit, the seller admitted that he had indeed bid and that he had also been the highest bidder. That would just not matter because the Rotterdammer had simply been willing to pay his last offer and was bound to it according to the conditions.
After the Rotterdam court ruled at the end of 2019 that Maasdam did not have to buy the retail property in view of the circumstances, the seller appealed.
Because the shop had meanwhile been sold to another party, he demanded compensation for lost profits of almost 28,000 euros and compensation for his legal costs.
The real estate seller argued that Maasdam should have taken into account that the seller was bidding during the auction. In addition, the company pointed out that mortgage banks often also bid during foreclosure auctions, thereby driving up the price of properties sold on their behalf.
The Court of Appeal in The Hague made mincemeat of that argument. The comparison would not hold, because banks will actually buy the real estate they are bidding on if they are the highest bidder. According to the court, Foppen should have at least let it be known that he might be bidding.
That is why Maasdam should not have had to buy the retail property in Rhenen and the seller can whistle for his claims for damages. Apart from its own legal costs, the company now has to pay for the legal costs of the counterparty: a total of almost 25,000 euros.
Rotterdam real estate investor Dan Maasdam is happy with the verdict. “This didn’t feel right from the first moment. It was the trade-off between coming out commercially, or challenging the principle.”
According to his lawyer Frans van Oss, the Harderwijk real estate trader Foppen accepts the ruling. “I would have preferred it differently, but the court’s ruling is clear.”
More internet auctions
According to Van Oss, it is customary at real estate auctions for sellers to bid and that should not be a problem. “Such buyers are not private individuals, but professional parties who themselves know very well what price they want to go. But we were wrong, we have to deal with that.”
The lawyer suspects that the ruling extends beyond real estate auctions. “I think this ruling means that a lot of auction conditions have to be adjusted. In that regard, it is a relevant matter, because more and more auctions are taking place via the internet.”