What you need to know before buying at an auction and your legal rights when things go wrong at auctions.

Special rules for auctions

Auctions can be a very popular way to buy or sell second-hand products such as cars, antiques or real estate.

An auction has a special meaning under the Auctioneers Act as a process where:

  • products and services or real estate are offered for sale by an auctioneer on behalf of a vendor
  • people bid against each other in real time – in person, by phone or by internet live streaming
  • the auctioneer says when the products, service or real estate are sold.

Under the Fair Trading Act, you are protected by special rules for auctions conducted by auctioneers. This includes rules for vendor bids. Vendor bids are bids made on behalf of the vendor by the auctioneer or an agent. An auctioneer can only accept vendor bids where:

  • the notice of auction terms specifies that vendor bids are permitted for that lot
  • the auctioneer clearly identifies each vendor bid, eg ‘seller is bidding’ or ‘vendor bid’
  • a reserve price is set and the vendor bid is below the reserve price.

Before you bid make sure you:

  • examine any products or real estate before you bid at inspection days before the auction
  • decide on your upper spending limit so you don't bid more than you want to spend
  • check the terms of sale before the auction starts or at the time of sale
  • check the auctioneer is registered
  • know the rules for vendor bids.

Online and charity auctions have different rules

However, online auctions like Trade Me are not covered by the Auctioneers Act or the specific rules in the Fair Trading Act that apply to auctions,  as there is no auctioneer controlling the bidding. Charity auctions are also not included, as there is usually no fee or commission paid to the auctioneer.


How auctions work

An auction house will ask you to register and sign their written terms of sale if you plan to bid. These terms must be easily available for you to view before and during the auction. The terms must tell you:

  • how you can pay
  • what the reserve price is
  • whether vendor bids are accepted
  • if the vendor is in trade.

The auction starts when the auctioneer invites the first bid (offer). You bid, stating the price you want to pay, in person at the auction or by phone. You can withdraw a bid at any time before the end of the auction for that item. The sale is complete when the auctioneer indicates the end of the sale, such as with the fall of a hammer. This is an agreement to buy the item, so you can’t change your mind.

See Buying and selling at auction(external link) on the Commerce Commission’s website to find out more.

Know your rights

When you buy new or second-hand products or services at auction from a trader, you have the same rights under the Consumer Guarantees Act (CGA) as when you buy from a shop.

Second-hand products are more likely to show signs of use and may not last as well as new products. Estate property auctioned in lots will vary in quality and won’t be in the same condition as new products of the same type.

Read Faulty products to find out more.

There are some exceptions where the CGA does not apply. See also:

You may be able to get a full or partial refund, or compensation under the warranties implied in the Contract and Commercial Law Act, if the CGA doesn’t apply. For instance, the product must:

  • be reasonably fit for the purpose you told the seller you were buying it for and the seller normally sells this product as part of its business
  • match either the sample shown or the description the seller gives you
  • be of merchantable quality if bought from a seller who deals in those kinds of product, ie the product should do what it’s supposed to do.

The seller also must have good title, which means the right to sell those products.

However, an auction house can opt out of the Contract and Commercial Law Act, so it does not apply (also called contracting out). To do this, they have to display a sign, include a statement in the auction sale catalogue, or make a verbal statement at the auction. Look out for a written statement that says ‘No other warranties either express or implied by law are made with respect to these products’.

Auctioneers must not mislead or deceive you about the service they offer or the products for sale.
Also, traders who are selling products at auction must identify themselves as being in trade.

See also:

Auctioneers must be registered

To check the auctioneers’ register and see what rules apply to registered auctioneers, see Auctioneers registration on the Ministry of Business, Innovation and Employment (MBIE)’s website. Only real estate agents and car dealers don’t have to be registered to auction real estate or vehicles.

If you have a problem with the products or services you bought at auction there are a number of things you can do:

Contact the auctioneer or seller

Complain directly to the auctioneer if:

  • products were damaged under their control
  • they misled you about the products or services
  • they did not follow the auction rules especially with vendor bids.

Contact the seller directly if you think the products or services are faulty as soon as you discover a problem. Explain what the problem is and how you would like it to be resolved. If the problem is minor then the business can choose to repair, replace or refund your money.

If the business fails to act or is unable to fix the minor fault or it is serious, you may then reject the products or services, and ask for a full refund and give your reasons for doing so preferably in writing.

If the seller is not in business you will have to rely on the Contract and Commercial Law Act to cancel the contract and get your money back.

Read Resolve a problem for more information.


Next steps

If you are unable to resolve your issue directly with the auctioneer, our Resolve It tool has information to help you take the next steps. These may include going to the Disputes Tribunal or District Court.

Resolve it: Faulty products and services


Need more help?

Contact us for more guidance.


Common situations

Binding contract

Max is at a household auction and wins the bid for a used lawn mower. He changes his mind after he has won the bid and the hammer has fallen on that auction item. It is too late to cancel the sale as he has entered into a binding contract and will have to pay for the motor mower.

Vendor’s bid

Janet is at a real estate auction. The real estate agent who is running the auction is doing so on behalf of the bank for a mortgagee auction. Janet is bidding for the property below the reserve price. The auctioneer increases the bid above the reserve price by stating “the bid is with me” on behalf of the bank. In the auction’s terms and conditions it is clearly stated the auctioneer will be able to make a vendor’s bid. However it is illegal to make a vendor’s bid above the reserve price so Janet can complain to the Real Estate Agents Authority to investigate.

Misrepresentation

Trish buys some antique jewellery from a second-hand dealer’s auction and later gets the jewellery valued for insurance purposes. She finds out the jewellery is not actually antique and is fake. Trish can complain to the Auctioneers Association and make a claim for misleading conduct against the seller and the auctioneer under the Fair Trading Act. She can also report the auctioneer and the seller to the Commerce Commission to investigate.