Leonard Joel

Property & Trust

Leonard Joel Auctions 2 Mar 2018

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Following recent developments in the auction industry, I feel compelled to take the unusual step of commenting directly and in response to these events, to reassure Leonard Joel clients and to invite questions from any of those who may have concerns.

The recent collapse of an Australian auction house and their alleged mismanagement of vendor funds has naturally created concern amongst buyers and vendors about how auction houses manage client property and the client funds they are entrusted to protect.

As CEO of Australia’s largest auction house I feel it is my duty to comment and to reassure existing and prospective clients that recent events are the exception rather than the norm in the auction industry.

My hope is that, whether you are a buyer or a vendor or merely someone contemplating participating in the Australian auction market, you find the six principles I have outlined below helpful.

Firstly, Account Management within the auction industry in Victoria and NSW is not regulated by statute, unlike the legal and real estate industries. This means that auctioneers cannot operate a Trust Account in the legal regulated sense. What they can do, however, is operate a separate Client Account. Leonard Joel has operated a separate Client Account for 99 years and combined with the policy of extracting only our fees and charges from this account, it ensures client funds are both respected and protected.

Check 1: Before entrusting property with an auction house confirm that, as a matter of policy and practice, they maintain a separate Client Account.

Secondly, demand clarity on the Settlement Date. If it is longer than 30 days, ask why. And, ask the auction house how they manage buyers who request “delayed payment” or buyers who are “account clients” and how, if at all, this impacts settlement of your proceeds.

Check 2: My advice is to check the settlement date and insist an auction house does not accept delayed buyer payment terms without your authority.

Thirdly, beware of what I refer to as “high-balling” or sweeping statements about the value of your collection. Estimates or Values do not reflect enthusiasm or commitment. They should however, reflect specialist expertise, sound market knowledge and integrity.

Check 3:  Ensure that all estimates are clearly documented and agreed upon by both parties.

Fourthly, beware the auction house that does not clearly explain and calculate fees and charges. A lack of clarity leaves the door open for unscrupulous auctioneers to exploit this ambiguity.

Check 4:  Request all “fees or the sharing of costs” are clearly outlined. If there is to be a sharing of costs, identify what they are and insist that they form part of the signed consignment agreement.

Fifthly, once you have selected your auction house insist on an appropriate inventory before possession of the property passes to them. This is vital for insurance purposes and to ensure that your property is adequately documented.

Check 5: Do not accept the reassurance that consignment agreements and estimates will be dealt with at a later date. A responsible auction house should deliver consignment agreements before an exchange of property takes place and confirmed estimates shortly after.

Finally and perhaps the most old-fashioned check of all, and one that my experience tells me is not lost on clients less attracted by “bells and whistles” over substance; look at the trading history and stability of the firm.

Check 6: Look into the longevity and capacity of the auction house you are dealing with and ask yourself, can this business fulfil their promises and does their track record suggest that they can?

I strongly believe, and ensure that my business is run on the premise that, what happens after an auction is as important as what happens before and during an auction to ensure that clients’ property is not only successfully sold but successfully settled, at the agreed time.

My commitment at Leonard Joel is that my team and I are happy to be held to ALL of these check points as a matter of principle and responsible business.

John Albrecht
Proprietor and Head of Private Collections