Friend served with reposession order after just moving in.

milliemonster

The son of a friend of mine has recently bought a reposessed property with his girlfriend, they moved in a couple of months ago.

Today, he was served with a reposession order by bailiffs who turned up to evict him and change the locks. After the initial shock wore off (he has been paying his mortgage) it transpires that during his purchase, the searches were either not conducted properly or it was not picked up that there was a second charge on the property, it is this second charge mortgagee who has been to court and been granted reposession even though the house has been sold to my friends son by the original first charge mortgagee (hope this is making sense!)

He has left it in the hands of his solicitor who is trying to sort this mess out but can anyone offer any advice?

silvercar

Who exactly is at fault depends on when the second charge was registered.

Bottom line is that the seller's solicitor has to ensure that all charges are cleared and that the money from the sale is enough to clear the charges. Buyer's solicitor is responsible for registering the buyer and the buyer's mortgage lenders interest in the property.

DVardysShadow

silvercar wrote: »

Who exactly is at fault depends on when the second charge was registered.

Bottom line is that the seller's solicitor has to ensure that all charges are cleared and that the money from the sale is enough to clear the charges. Buyer's solicitor is responsible for registering the buyer and the buyer's mortgage lenders interest in the property.

Interesting thought. Was lender with first charge responsible for clearing first and second charge, but forgot to clear second charge,paying surplus to original owner? If so, no wonder second charge came around all guns blazing.

m_13

We bought a repossessed property earlier this year and one of the letters we wrote to our solicitor was to ensure that the title would be clear on completion and that no charges would remain (it had several charges on it and it was the first mortgagee that was selling).

We were assured it would be clear and have received a title in our names with no charges on it.

I suggest your friend's son downloads a copy of the title from the Land Registry to see what is held on the title today and see what change was made when they purchased it.

If they completed after 3rd August 2009 then the solicitors may have been caught out by a new Land Registry process relating to charges:

The Land Registry has recently introduced a new procedure that will affect lenders and borrowers alike.

Where a property is being transferred and the current charge discharged, in order to complete the application, the Land Registry has to receive a discharge. This can be either a hard copy form DS1 or an electronic discharge. In the past, the Land Registry has been prepared to wait for that discharge to be sent, maintaining the protection that a buyer and its lender have from their searches.

From 3 August, the Land Registry will register the transfer, and any new charge, even if it does not have the discharge relating to the old charge. The property would be put into the name of the buyer and it would be subject to both charges, the new charge taking effect as a second charge.

As soon as the discharge of the old charge is available, a further application has to be made to the Land Registry whereupon the old charge will be cancelled.

The new procedure cannot be used where there is also a restriction on the title (which is commonly the case now with commercial property) that prevents a transfer or a new charge being registered without the consent of the first charge holder. In those cases, the Land Registry will allow an extended period of 40 business days after the application is originally received for receipt of the discharge. Following expiry of that period, the application will be returned without any changes made to the title. This would mean that the buyer and the new charge holder had no registered interest and no protection.

As a result of this change, you are likely to find that buyers and lenders will require that a discharge is available on the completion of the sale or remortgage of a property rather than relying on solicitors' undertakings to provide these later. Special conditions in the contract may make completion conditional on the availability of the discharge at completion of a transaction. Without it, a buyer and lender may be left feeling precarious. Sellers should therefore be doing everything possible to organise the signing of the discharge forms as early as possible.

So, if on the Land Registry title download your friend's son is shown as the second charge on the property this is because the old charge has been made the first charge under this new process.

You'll see that under this new process the recommendation is that the buyer's solicitor makes it a condition of completion that the discharge is available but obviously this has not happened. It's down to the solicitors to fight it out between them but in the meantime I presume your friend's son is without his home? I think he needs to speak to Shelter and get some advice.

silvercar

DVardysShadow wrote: »

Interesting thought. Was lender with first charge responsible for clearing first and second charge, but forgot to clear second charge,paying surplus to original owner? If so, no wonder second charge came around all guns blazing.

No, the sellers solicitor is responsible for making sure the charges are lifted. The sellers solicitor receives the purchase money and uses it to clear the charges.

Problems can occur if a second charge is registered very near to completion date.

When we last bought our solicitor received notice from the sellers solicitor just before exchange that another charge had been put on the property. My solicitor was concerned that others may appear and got the sellers solicitor to personally undertake that all charges would be cleared from the completion money. Just before exchange there were conversations as to whether the seller would be able to get all charges cleared.

The big problem occurs when a seller doesn't keep his solicitor informed.

There are land registry procedures to prevent charges being placed from completion. I think the buyers solicitor registers the interest provisionally at completion to prevent any charges relating to sellers being placed after ownership has ceased.

hearts

I wouldn't worry about it someone is going to pay and it wont be him. ;-)