Western Collison Center
Collector Cars and the Law.... Last month we began a look at the “live” auction process, focusing on matters from the point of view of the buyer and so now we will have a look at the process from the seller’s perspective and the legal obligations they have (and once again, we will leave auction systems such as ebay and other online alternatives out of the mix for now). As noted last month, while conducted throughout the year’s calendar, the summer months are typically the height of the collector car (live) auction season, with the zenith coming in August during Pebble Beach week where this year, over two hundred million dollars in vehicles changed hands at the various auctions that were conducted, evidencing the popularity and success of the “live” auction process for collector cars. So to begin this process as a seller, having chosen the auction house you wish to utilize, you will be required to sign a consignment agreement so as to start the process. is is a legally binding contract whereby you, as the seller, are retaining the auction house to serve as your agent to present your vehicle for sale to the public at the auction to be conducted. ere are several key terms to consider and address, including: 1.e commission (fee) you will have to pay to the auction house, which is typically a percentage of the nal high bid that is made for your vehicle. Some auction houses have set fees, others are open to negotiation. In addition to paying a percentage of the nal high bid, certain auction houses also require the payment of a fee for photographing and otherwise preparing the presentation of your car in the auction’s catalogue and advertisements. Often too, available for negotiation, is the day and time slot (lot number) of when your car will be sold, along with issues pertaining to the advertisement, if any, that your car might specically receive prior to the conduct of the auction. 2.Reserve or no reserve? is is the critical term under which you are willing to sell. A vehicle placed for sale without a reserve price will be sold for the nal high bid, whatever that might be. A vehicle placed for sale with a reserve price entails your agreement with the auction house as to a minimum dollar gure to which the car must be bid before it can be sold. For example if you set a reserve of $100,000.00 the car must receive a bid of at least that amount to be sold. Once the car has been bid to your reserve price, the highest bid then takes the car. If the bidding does not reach your reserve price the car is not sold. (You are typically permitted to lower your reserve, even during the course of the bidding so as to ensure a sale). Do also note that the reserve price is typically not revealed in advance of the sale nor during the course of bidding until the reserve price has been reached, at which time the auctioneer will typically let it be known that the car is now “in the market for sale” i.e. e Leagalities of Selling at Live Auctions that its reserve price has been met. 3.Setting an estimate. In keeping with the setting of a reserve, it can be of extreme importance to reach a realistic estimate gure/range as to the value of your car, to be agreed upon with the auction house for their use in promoting and advertising your car for sale prior to the auction. Although clearly a very subjective process, setting an appropriate estimate can be of great importance in attracting bidders to your car in advance of the sale or in the alternative of scaring away potential buyers if your estimate is not consistent with current market trends. Here, as with the setting of a reserve or placing your car at no reserve, it is important to work closely with the auction house and to take advantage of their expertise as to the current market and trends so as to maximize the most favorable outcome for the sale of your vehicle. Of course the auction house can make no guarantee or warranty to you as to pricing or results that can be obtained, but a carefully considered estimate and reserve (if applicable) will serve your best interests in maximizing a sale for you. As noted above, the auction house is your agent as the seller and is NOT the seller of the car. e auction house merely serves to present your vehicle as the seller to the audience of buyers for the buyers’ consideration and oer/bid to purchase. Typical to most any sale, unless otherwise stated, each and every car is presented on your behalf as the seller on an “as is” basis and without warranty. As a seller you are required to disclose all material facts that are known to you with regard to your vehicle but you are not required to conduct an inspection or other investigation beyond the actual knowledge you have of the vehicle; and the auction house need do nothing more on your behalf as your agent than pass on the information that you have provided as to the material facts that are known to you regarding the vehicle and its history and condition. Having disclosed the facts known to you regarding your vehicle, the burden then shifts to the potential buyers to conduct any further inspection, investigation or other due diligence in which they wish to engage. Further in this regard (as noted in last month’s article), catalogue descriptions, comments or opinions of auction personnel, condition reports, advertising and the like are not considered to be warranties or representations by the auction house or the seller upon which a buyer may rely as a basis for their purchase. Once you have made necessary arrangements to consign your vehicle to an auction house for presentation for sale at a “live” auction you still have further obligations to which you must attend, rst and foremost being that along with the vehicle you must provide to the auction house clear and marketable title to the car and you will typically be asked to sign neces- if you are reading this, log onto: by Jerey Brynan sary documents to allow the auction house to eectuate transfer of your car upon sale to the successful bidder/ buyer. In that regard the auction house typically holds a dealer’s license and is empowered if not required to handle all necessary steps to eectuate the transfer of your vehicle once it has been sold, to collect sales tax from the buyer, along with the sales proceeds and to pay you your share of the sales proceeds. Do note that along with providing proper title papers, it is typically your responsibility as the seller to arrange for delivery of your car to the auction site prior to the sale and at your own expense. You may obviously deliver the car yourself or utilize the services of a transport company and your consignment papers should provide for authorization for the auction company to accept delivery of your vehicle from the transport company at the auction site in your absence. Once again, remain mindful that the auction house is your agent as the seller to take possession of the car and maintain possession of the car through the auction process until its sale and transfer to the buyer. Having delivered your car to the auction site and provided the necessary title papers to the auction house, you are free to rely on the auction house to care for your vehicle now that it is in their possession and, as noted, they are acting as your agent to present the car for sale. In this regard, any reputable auction house will have insurance to cover your car for any loss or damage while in their possession and control but you would be wise to keep your insurance in place and allow it to remain until the auction has been conducted, your sale concluded and your proceeds are in hand. e payment of a few days extra insurance premiums can go a long way should problems arise. is is especially critical in the event your car does not sell for any reason and you are required to then once more assume possession and remove the vehicle from the auction site. Of course though having set a thoughtful estimate and/or reserve and revealed all material facts known to you about the vehicle and having allowed the auction house to carry out their duties as your agent in presenting your car for sale, it is most likely you will leave with funds in hand and a fond farewell to your former prize. In the upcoming months we will explore issues concerning title, transport companies, DMV issues among the many other things aecting the world of collector cars, along with any questions you may wish to submit. Jerey Brynan Jerey Brynan is a duly licensed attorney, practicing in Beverly Hills, California. e foregoing article is a general discussion and overview of the topics that are addressed and should not be relied upon in lieu of obtaining legal counsel for your specic circumstances, issues and facts. join our forums
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