What does receiver sales mean?
For first time buyers it can be daunting trying to buy a house, and without full knowledge of the process you may find yourself needing some advice, especially when it comes to receiver sales. Luckily, Mulroy and Company Solicitors are here to help make this process as easy as we can for you.
When a person is in the process of buying property, more often then not they are buying a distressed asset or a property that must be sold in order to pay off one of their debts. This asset/property is typically sold a competitive price and can represent a “bargin”.
When a buyer is purchasing a “bargain” they are usually expected to assume certain risks and carryout some of the due diligence which would otherwise have been carriedout by the receiver of that property.
It should be noted that the buyer is buying the property from an owner who has failed to make mortgage payments. Meaning the bank has obtained possession of the property and are using a receiver, as their agent, to sell the property so they can gain the money they lost.
The bank tends to suffer a loss from the property which is why in most cases they want to dispose of it as soon as possible to minimise their loss. Part of the receiver’s duty in selling the property, is to obtain the best price reasonably available so as to ensure that the bank gets as much of what they are owed from the property as possible.
Here is where it is important for buyers to be cautious. Once the sale is agreed and the vendor’s solicitors prepare and send the contracts to your solicitor you will be limited in your right to make standard enquiries. Generally speaking in an ordinary sale of property, your solicitor will send the vendor’s solicitor what are called requisitions on title which then must be answered by the vendor’s solicitors.
Further a receiver contact will contain a page of special conditions which are ordinarily not found in a standard contract. These special conditions are added to ensure there are not many warranties and represnetations. This is not normally what a purchaser would expect when buying a house by private treaty.
If you are first time buyer, do not fear, your solicitor will be in a position to try to resist these warranties and assurances to protect your position as the buyer.
It should be noted that the receiver and possibly the bank may not have any knowledge of the history of the property. This is different to purchasing a house from the property owners directly.
Another special thing about receiver sales is that Condition 36 of the Law Society Standard Contract of Sale contains a warranty whereby the vendor agrees that the property is in full compliance with all planning permissions and building regulations. This is proven by furnishing a certificate of compliance with the various rules that is signed by a qualified architect or engineer. It should be noted that there can be cases where there are no planning problems and this condition will be excluded in the contract.
However, because of Condition 36, where a buyer needs to obtain a mortgage to purchase the house, they still have the onus of proving to their lending institution that all the planning matters are in order. In this situation, most buyers of receiver sales will have to hire an architect or engineer to carryout an investigation into theses planning issues. The engineer will then furnish a certificate to the lending institution to fill in the buyer’s requirement of having this documentation.
The receiver also in the contract does not give a warranty as to the boundaries of the property because they have no personal knowledge of the property.
Therefore, it is vital for the purchaser to carryout a full survey of the property to take account of the boundaries. It will also be necessary for the buyer to instruct anengineer or architect to ensure that the map attached to the contract for sale comprises the property entirely on the ground and forms part of the vendor’s title to the property.
If due diligence is done to assess the risks involved in purchasing the property and these risks are accepted by the purchasers, you will be in a position to sign the contracts.
The final decision is up to you as the buyer whether you wish accept all the risks involved in a receiver sale, but professional advice will be there to help you along the way.