Imagine winning what seems to be a steal of a deal for your dream house at a bank auction. That is exactly what Mukesh Singh thought when he acquired the property that was auctioned by the bank to recover a defaulted loan. However, his dream deal quickly morphed into a legal mess.
Instead of a move-in-ready house, Singh was greeted with piles of unpaid electricity bills, and maintenance charges, and old dues - all of which the previous owner had left behind.
The biggest surprise? The bank had not disclosed even one rupee of these pending payments.
Singh's question to the bank was met with a brief and chilly answer: the sale was carried out on an "as is where is" basis.
Basically, it means that you accept the property exactly as it is - whether it is in good condition or has some liabilities.
The Legal Battle
Dissatisfied with the outcome, Singh brought the bank before the Allahabad High Court. His point of view was simple: the bank ought to have communicated the liabilities to buyers before the auction.
However, the High Court did not agree with this. It held that buyers purchasing a property with the note “as is where is” cannot later complain about the conditions of the property whether these are obvious or not, or that they accept all the consequences of that area/thing/property in question. By extension, it means that the unpaid bills are now the buyer's problem.
The court rejected Singh’s application and did not grant any relief to him, reiterating that the purchasers of auctioned properties are responsible for doing their homework before sealing the deal.
The Lesson for Home Buyers
This is a pertinent example that serves as a call of attention to any home buyer looking for “economical” auction properties. The bargain that you may see could very well turn out to be a money pit.
There is no way around it - you must do the following before placing your bid:
Ensure that you consult with the regional government, electricity boards, and housing societies regarding any outstanding dues.
Ask for No Dues Certificates in every possible case.
Scrutinize each condition of the auction notice especially the “as is where is” parts.
Because that is when the liabilities will be yours if the deal is sealed.
Why It Matters
The court decision of the Allahabad High Court is an example of the implementation of an important legal concept: the buyer must be wary. Banks are not responsible for setting the records straight after defaulters when it comes to property auctions. Their work is to sell and recover the money that is owed - that is all.
Therefore, if the next auction property appears too good to be true, you should check it out further. In fact, there might be a heap of unpaid bills lurking under that shiny “discount” label, waiting for you.
