Most auctioneers don’t get involved after contracts are exchanged, citing them as legal matters
Rising numbers of investors face expensive battles and related costs to recover money from property auction purchases, due to vendors misrepresenting the legal pack, according to The Mistoria Group.
Most auctioneers don’t get involved after contracts are exchanged to resolve the disputes, citing them as legal matters. This situation results in the unfortunate situation for buyers, with no option but to resort to litigation and huge time lag to recover their hard-earned money.
As a result of the Coronavirus Act 2020, residential landlords need to give tenants six months’ notice of their intention to seek possession. To enable to service the correct notice, the tenancy information needs to be correct; the deposit protected with an authorised scheme; and the prescribed information served on the tenant(s) and any other ‘relevant person’ (i.e. any person who, in accordance with arrangements made with the tenant, paid the deposit on behalf of the tenant).
If an investor buy a property with tenants in situ without this assurance and further down the line, the tenants provide evidence that they have paid a deposit prior to moving in and it has not been registered in a government approved scheme, the new landlord will be penalised and forced to pay up to three times the amount of deposit.
Mish Liyanage, Managing Director of The Mistoria Group comments: Increasingly, we are hearing of investors that have lost significant amounts of money at auctions. After going through the purchase process, investors are finding that the development or conversion plans they have proposed to carry out are no longer possible as there are sitting tenants, with no evidence that the deposits have been protected with an approved scheme.
Liyanage said, we are aware of a situation, where an investor stands to lose £28,000, comprising the 10% deposit, auctioneer fees, conveyancing, legal and planning application costs. The intention was to convert the properties to HMOs, but the legal pack/AST failed to disclose the actual position on the rent and deposit. Essentially the vendor misrepresented the legal pack and is in breach of contract.
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