RECEIVERSHIP PROPERTIES – “BUYER BEWARE”

Over the past year I have found a huge increase in the number of properties being sold through property receivers. A property receiver is a receiver appointed by a bank over a property, rather than a business, where the mortgage has gone into default. Although appointed by the bank, a receiver acts as an agent for the distressed borrower and he/she will have very little knowledge about the property. A property receiver is not required to be licensed and accountants and chartered surveyors are increasingly appointed in this capacity in Ireland. With the introduction of this new type of sale, the warning Caveat Emptor or "Buyer Beware" has never been more important.

Once appointed, the receiver takes possession of the charged property and the property is usually put on the market and sold, most commonly through auction. The auctioneers/estate agents will have the contracts for sale and copy title documentation available online prior to the auction for viewing by prospective purchasers. 

The special conditions attaching to a receiver contract for sale are extremely onerous and burdensome on the purchaser and it is imperative that perspective purchasers obtain legal advice before bidding at auction. It is also highly advisable to have the property surveyed by a suitable qualified surveyor/engineer to ensure that the property is structurally sound, that there are no issues with boundaries and that there are no third party rights e.g. ensuring that there are no rights of way over the land. It is also essential to take steps to satisfy yourself that the property is in compliance with the Planning Acts and Building Regulations and I would always advise clients to carry out a Planning Search against the property prior to bidding at auction to ensure that no notices have been served by the local authority. 

Most receiver contracts will contain many pages of special conditions, which would not be found in a standard contract for sale, which exclude many of the warranties and representations that a purchaser would generally expect to receive when buying a property.

However, a receiver contract will usually specifically exclude these warranties and the onus is put on the purchaser to ensure that he/she has taken all necessary steps to ensure that the property is in order and has planning permission and has been built in substantial compliance with the Planning Acts and Building Regulations. 

If the purchase is being funded by way of a mortgage, your lending institution must be notified that the property is being sold through a receiver and your lending institution will also have to confirm its agreement to the very onerous provisions contained in the receiver contract before the contract is signed.

Extra caution should be taken when considering purchasing a receiver property. “Buyer beware” has never applied more. Whilst receiver properties can certainly be snapped up for bargain prices, the risks that apply to such sales should also be borne in mind and legal advice obtained in advance of bidding at auction. 

For further information please contact Catriona Sharkey at Catriona[at]brophysolicitors.ie

Catriona Sharkey

Brophy Solicitors