Buying Repossessed Property
This fact sheet points out some legal and practical issues you need to be aware of when buying a property which has been reposed by the lender.
A lender who is selling a repossessed property has a duty to get the best available price. Even after they have accepted your offer subject to contract the lender would have to sell to anyone else who made a better genuine offer for the property. You need to get to the stage of exchanging contracts so the deal is legally binding on both sides as quickly as possible
Sellers do not have to volunteer information about defects in the property or other problems. The mortgage lender who is selling a repossessed property is unlikely to have any firsthand knowledge of it. There may be defects or problems the seller is not even aware of. They will have a term in the contract of sale to the effect that the property is sold as seen.
We, as your conveyancers, will see that you get legal ownership of the property and necessary legal rights. The physical condition of the property and valuation are outside our terms of reference so you need to carry out any inspections or surveys before getting to the stage of contract exchange.
Although sellers do not have to volunteer information about the property we would normally ask for legally binding answers from the seller to a questionnaire about the property. A lender selling the property is unlikely to have this information and will usually decline to provide answers to the questionnaire.
You will probably not get information about the following issues. You need to take account of these uncertainties when you decide about committing to buy the property.
Neighbour disputes and complaints -ongoing disputes involving neighbours can make property hard to resell and so lower its value. You may wish to ask around to see if people living nearby are aware of any problems.
Ownership of boundary fences and similar structures - often the title documents do not say clearly who is responsible for maintaining each of the fences and any other shared facilities (like guttering or downspouts on semi detached or terraced properties). Without information from the last occupiers, you may need to be flexible in establishing with neighbouring owners who is responsible for what.
Information about changes to the property is important because alterations or extensions to the property may have needed permissions. The seller of repossessed property may not have this information. You should check yourself whether the property has been altered or extended (this includes converting non-living areas such as the garage or roof space into living accommodation) particularly if the changes are less than 10 years old.
The changes may have needed building regulation approval and / or planning permission. In some cases the changes may have needed some other permission under a covenant in the title documents. This can be particularly important if the property is leasehold.
We would need to advise you (and your mortgage lender if you are having a mortgage) about steps to be taken if there have been alterations and there is no record of required consents being given.
Services: There may be no information about which companies were supplying gas and electricity. You need to check yourself that gas and electricity supplies are available at the property. It may be useful to check that normal meters are installed and to make enquiries of your proposed supplier if there is for example a pre-payment or card meter on the premises. We have heard anecdotal evidence of people incurring expense and inconvenience in getting such meters replaced with normal meters.
Things Left at The Property
It is very important for you to check the property before exchange of contracts to see that it is empty. Check the roof space, garage, and other storage areas as well as the living accommodation.
This is important for two reasons
You may be faced with having to dispose of rubbish at your own expense
You may be put in the difficult position of having to store items of value which do not belong to you and which you therefore cannot dispose of.
This is because the sellers have the right to sell the land and building to you but they dont have any legal right to items that have been left behind by the previous owners. The contract for sale will specifically state that no such items (chattels) are included in the sale and that you will not acquire any legal right to them. Equally the contract will often say that the sellers do not take responsibility for ensuring that all rubbish has been cleared from the property.
Some repossessed properties will have been secured against theft and vandalism by installation of metal screens covering the windows and external doors. This equipment is usually dealt with by independent contractors and you may need to give them access after final completion to remove it.
Seller May Have Right of Access After Completion
A contract for sale of a repossessed property often has a clause allowing the seller access to the property for a limited time (usually 3 months) after completion of the sale for the purpose of having it valued.
The seller of repossessed property has to get the best available price. It sometimes happens that the evicted owner claims that the lender sold the property below value. The seller therefore wants to be in a position to get a current valuation for a limited period after completion. Any such dispute between the evicted owner and the lender would not affect or threaten your rights in the property in any way.
Restriction on Immediate Resale
The sale contract sometimes contains a clause restricting your right to resell the property for a limited time (usually 3 months) after completion without first offering it back to the seller at the price you paid for it. Again this is to do with the sellers duty to get the best available price. If the property was resold quickly at a higher price the evicted owner may see this as evidence that original sale was below value.
When the specified time has elapsed there is no restriction on selling the property. If you did want to sell within the specified time you would have to offer the property back to the sellers first at the same price as you paid for it. If they did not take up the offer you could then carry on with sale on the open market.