In an important ruling, the advertising watchdog has stopped a property auctioneer from advertising guide prices that are below the reserve prices.

The Advertising Standards Authority has said that the practice is misleading.

It upheld a complaint against Auction House – a national franchise network which partners with local estate agents.

The complainant said that for one of the Auction House sales in the north-east, lots were listed online together with a guide price.

However, the complainant said that several properties at a previous auction had had reserve prices higher than the guide prices, and could not therefore be bought at the guide prices.

The complainant said that the listed guide prices were misleading.

Auction House told the ASA that guide prices were set at the beginning of the marketing period, and reserve prices just before the auction day.

It said this ensured that the reserve “could properly reflect levels of buyer interest as well as seller requirements”.

Auction House said that reserve prices were typically kept confidential.

After the auction, if the property had not reached its reserve, the auctioneer could, with the agreement of the seller, sell at a lower figure – possibly at the guide price or even lower.

The organisation said that it operated within best practice RICS and NAVA guidelines, with reserve prices generally 5-10% higher than guide prices.

However, the ASA rejected these arguments, saying that consumers would understand a guide price to be a reasonable estimation of what they could expect to pay for the property at auction.

They would not be aware that a reserve price could be set which would affect the minimum sale price.

The ASA said that auctioneers should avoid misleading consumers, by explaining that guide prices were distinct from reserve prices.

It upheld the complaint and told Auction House that it must not continue to advertise properties in that way.

In future, it must explain its guide prices. The ASA suggested this should be with an asterisk to further text explaining the guide price’s distinction from a reserve price.

Prospective purchasers should be made aware at the outset that the property might not be purchasable at the guide price.

The ruling is in line with previous ASA rulings against estate agents’ advertising which uses “Offers invited above £…” when in fact the seller’s minimum price is some way above the price threshold given.