Be Careful Buying Property From A Receiver
Buying a property from a receiver or insolvency practitioner is different in many respects from a standard conveyancing transaction.
Receivers are normally appointed by a bank pursuant to a bank’s mortgage over a property. The receiver takes possession of the property and disposes of it by selling it. The receiver has a duty to obtain the best price possible, and although appointed by the bank, acts as an agent of the borrower, being the registered owner of the property. This is why many receivers sell the property through the auction process as it would be difficult to claim that the receiver did not receive the best price possible when they use this process.
Many think that buying a house in receivership means they are buying a distressed asset at a bargain, however this is not always the case. Back in the 2008 financial crash it was more likely that you would “bag a bargain” when buying from a receiver however these days, its less likely and you will more likely be paying market prices for the property AND assuming the risks that would otherwise rest with a vendor in a standard conveyancing transaction.
Receiver Contract for Sale
Virtually all contracts for the sale of land are in the form of the Law Society of Ireland Conditions of Sale (2019 Edition) however when buying from a receiver, many of the general conditions / formal warranties provided by a seller to the purchaser are excluded.
This means that the buyer is assuming far more risks that what they would have to do when buying from a third party in a standard conveyancing transaction.
Another important difference with a receiver contract is that the receiver will not accept any continuing liability.
As the receiver is not the registered owner of the property and is merely selling the property on behalf of the lender pursuant to the mortgage on title, they normally have very little practical knowledge of the property such as its history, boundary disputes and other matters. The receiver will therefore give no warranty as to boundaries or services benefitting the property and any statutory declaration provided by the receiver will be given to the best of his knowledge, information and belief; if the receiver will in fact even give one.
The buyer should carry out a full survey of the property and instruct an engineer or architect to ensure that the boundaries on the ground correspond with the boundaries on the title map.
Planning for the property in sale is another important area to focus on. The Law Society Standard Contract of Sale provides that the seller warrants that during his ownership of the property no works were done to the property that required planning permission or if works were carried out that necessary planning permissions were obtained. In addition, the seller is to provide necessary planning and building control compliance documentation. The receiver contract will typically look to exclude any this warranty in relation to planning in its entirety. Any planning documentation that a receiver does have will only be provided on a without prejudice basis.
Borrowing Money to Buy a Receiver Property
If you are borrowing monies to purchase the acquisition of the property, your solicitor will have to certify the title and planning to that property as being in order before the bank will release monies. This may mean that you might have to incur additional monies prior to completion of the property in rectifying any issues with the title or planning for that property being sold by the receiver.
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WHY CHOOSE ROE SOLICITORS?
We have extensive experience in dealing with all matters relating to conveyancing and buying and selling properties. For specific legal advice on buying a property from a receiver or insolvency practitioner,then please get in touch today.
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