Why do I need to review the legal pack – Reviewing the legal pack:
An auction purchase is legally binding and you only have a small window of opportunity to arrange your mortgage funding (after the auction you are required to complete 28 days later). If there are any problems with the property, this can hold up the release of funds or prevent you from getting a mortgage.
Even if you have access to an auction legal pack there may be important information missing. Attwells can check your auction legal pack and identify anything that might have been left out. You also need to be aware of any special conditions such as specified completion timings, additional fees, etc and we can help with this.
Buying a Property at Auction
1. Conditions of Sale
This is the biggest indicator of a problematic property. Though with regular property conveyancing the standard conditions protect both buyer and seller to a more equal degree, the special conditions which govern an auction contract practically always favour the seller. The responsibility lies with the buyer to ensure they have carried out thorough examination of the property so they don’t trip up to unpleasant surprises after exchange.
The special conditions will usually refer to other aspects of the pack, and where there are limitations enforced on a buyer for example whether enquiries can be raised, problems may arise. This is because a seller would want to limit the information it has to provide with regards to any aspect of a property that may negatively affect the saleability of the same.
This is why taking a professional opinion is vital, as only solicitors will be able to interpret the conditions of the contract and apply it to the remainder of the pack to be able to give you an overview of whether the title to the property is good and marketable.
2. Additional Financial Obligations
Most auction contracts will also add other financial conditions to a contract to limit their costs. This could be fees they have paid for: – searches, – auctioneer fees, – leasehold pack fees etc. However, there may also be financial conditions that are not specified but left purposefully vague.
Any financial conditions which are not specified with a specific sum is a red flag. This is because there is no limit to what they could then ask from you on completion. Particularly where there are potential arrears for rent or services charges on a leasehold property, the sums payable could be significant. A legal review will bring these conditions to light as well as the likelihood of these looking at the rest of the pack, and you will then be able to make an informed decision.
3. Legal Title
When it comes to auction properties, it cannot be assumed that the seller is the registered owner of the property and in turn, there won’t be any problems when your interest is registered on completion. A legal review will reveal any risks which may be existing in this regard, e.g. sale where the owner is deceased and is being sold through an executor, where there is a sub-sale and the current owner has not been registered against the title, etc.
These won’t usually be an issue as long as the relevant promises have been made within the contract. Having a legal review carried out will give you the certainty that the seller’s solicitors hold the relevant pieces of evidence needed to prove ownership and in turn that they will provide any documents which may be needed for your registration. If these promises are not made within the contract then this could delay your registration and legal ownership of the property.
4. Missing Documents
When it comes to legal packs, though every pack is different, we will be able to advise you on what should be expected within this and in turn list anything which is missing. This will then give you an understanding of the risks which may apply to your potential bid. We will be able to advise you on the sort of information that would be revealed by the existence of the document which will allow you to make an informed decision on whether that is a risk you are willing to take.
5. Tailored to You
Before reviewing the pack you will be able to list any specific concerns you may have to your solicitor. They will then be able to consider these whilst reviewing the pack so they can advise on whether this property is suitable for your intentions.
Particularly, if you are looking to purchase as an investment there are several aspects that may affect a lender’s opinion on a property. This would in turn potentially affect any future refinance you may be considering or cause you issues when you come to sell the property in the future.
These are just a few of the reasons why it is so important for a legal pack to be reviewed prior to bidding. The remedies are limited for a buyer after exchange and you may be left with a property that no longer reflects your initial expectation.