Buying a property from a receiver can be stressful. In this situation, the warning “caveat emptor” or “buyer beware” is very important.
Although appointed by the bank, the receiver acts as agent of the borrower. The bank will have suffered a loss on the property and will want to dispose of it as soon as possible to minimise that loss. The bank will want to sell the property as it stands and will not want to incur any expense if they can avoid it. The receiver has a duty to obtain the best price possible. A ‘normal’ vendor will have a duty to provide information about the property in relation to such matters, as boundaries, disputes, planning etc. A receiver can exclude many of these items from the Contract for Sale.
Here are some useful tips to assist you if you are buying property from a receiver:-
1. Instruct a solicitor who is experienced in conveyancing and has a good reputation. Chose a solicitor who has been recommended to you by family, friends or a business advisor. Remember, this may be the biggest financial decision of your life so the decision as to whom you should engage to act as your solicitor is a serious one. Also remember that this is a service, not a product, and service levels can vary dramatically from firm to firm.
2. Arm yourself with as much local knowledge as possible. Talk to the residents in the housing estate. Call to the neighbours. Make contact with the representative for the management company. Find out if there are any issues with the property. It is always a good idea to speak with those living in the area to gain an understanding of the history of the property and the locality.
3. Before you close the sale arrange a final viewing to inspect the property one last time to ensure nothing has materially changed with the property, there is vacant possession, there is no rubbish in the property etc.
4. Prepare a budget. List out all of the costs and expenses that buying the property will entail. Your solicitor will help you with this process. You will have legal fees and outlays, valuation fees, survey fees, life assurance premiums, building insurance, etc. If you address these issues in advance, then there will be no nasty financial surprises awaiting you as the transaction progresses. You will inevitably have increased expenses associated with buying a property in negative equity, so it is best to find out about any additional costs as early as possible.
5. Be realistic about the closing date. In the event that you are financing the acquisition through a lending institution then all of these qualifications and limitations listed in the contract must be brought to your lenders attention and their agreement sought and obtained in writing prior to the signing the contract. This can take a few weeks.
6. Check the position in relation to access to the property. Is the property abutting a public road? Does the property require access over a neighbours land? Is there a right of way in place? Are there any disputes with neighbours? What are the rights and obligations in relation to the right of way? Who maintains the right of way?
7. Instruct a competent engineer or architect to visit the relevant planning department, inspect the planning register, talk to the planning officials and ensure that there are no outstanding planning permission or building regulation problems of which they are aware.
8. Make enquiries with the management company. The major difficulty for buyers of repossessed houses or apartments in managed estates is that the receiver’s solicitor will usually not have up to date information from the management company. This information concerns the service charges for the management of the common areas, green areas, lifts, sinking funds etc. but most importantly, in the case of apartments, the insurance on the apartment block. Your solicitor will insist that this necessary information be supplied. If you require a mortgage to complete the purchase of an apartment, no bank will lend to you unless the position of the management company and in particular, the block insurance policy is in order. Any arrears of service charges will have to be paid by the bank out of the proceeds of sale before a change of ownership will be noted by the management company. Your solicitor will ensure that you do not have to pay the service charges, which should have been paid by the owner.
9. Check the position in relation to utilities. If the property has not been occupied for some time it may well be the case that the ESB and water is disconnected. Substantial reconnection fees could be payable.
Undoubtedly, distressed properties offer value. All major banks in Ireland have indicated that they still have a significant number of properties which they will dispose of through a receiver. However, they also pose risks for the unwary, risks that at the very least could come home to roost if you seek to sell the property at some point in the future. Making yourself aware of the pitfalls and carrying out effective due diligence with your solicitor, prior to signing on the dotted line could prevent you from making a costly mistake.
Karen Walsh, specialises in conveyancing and is a solicitor practicing in Walsh & Partners, Solicitors and Commissioners for Oaths, 17, South Mall, Cork.
Disclaimer: While every care is taken to ensure accuracy of information contained in this article, Solicitor Karen Walsh does not accept responsibility for errors or omissions howsoever arising, and you should seek legal advice in relation to your particular circumstances at the earliest possible time.