House purchase gone wrong

Harbour

I hope someone with legal expertise or insight can help out with this problem.

I had an offer accepted on a repossessed property earlier in the year and was due to complete a few weeks ago. The conveyancing was completed with the report showing that the property was owned by a finance company, which was the same information that I had received from the EA. Based on the property report and a telephone conversation with the paralegal who had written the report, I felt assured that the purchase would be straightforward. I thus took out an equity loan on a property overseas to pay for the repossessed property.

Once the finance was settled, I contacted the paralegal to confirm the date we had set to complete. At this point I was informed that apparently the repossessed property was owned by the finance company but there debts secured against the property owed to a second mortgagee, another finance company. This second mortgagee, who was not mentioned in the property report, had refused my offer and was unwilling to sell. Completely confused at what was going on I downloaded the Property Register from Lands Registry. This clearly showed two restrictions - namely that the property could not be disposed of without consent of both finance companies.

Had I been alerted to this second mortgagee in the Property Report, or in any of the many emails I exchanged with the paralegal prior to receiving the report, I would not have signed for the loan.

I believe the paralegal was negligent in not reporting the full ownership of the property and alerting me to potential problems with the purchase. Had I known about the second mortgagee, I would not have taken out the loan. I have written to the solicitor responsible for the paralegal outlining my complaint but have not had a satisfactory written response as to why I was not informed fully about the house ownership in the report and why I was not informed once the paralegal had found out.

Could anyone advise me on what I could reasonbly expect in way of redress. The solicitor has billed me in full for the property report, which I certainly do not wish to pay but I have also taken out a loan in good faith.

Thanks in advance for any advice of what I should do next. Sorry for the long post and thanks for reading.

silvercar

I didn't know the second mortgagee could block the sale. If the first mortgagee repossessed they can sell. Who actually repossessed, the second mortgagee or the first?

Harbour

Silvercar, in the proprietorship register, the company I thought I was buying from predates the company blocking the sale. So I assume I'm buying from the first mortgagee (ie. the company who repossessed the property and put it up for sale).

G_M

Have you exchanged contracts? If so, the contract you, and the seller, have signed should state that all Charges will be removed at or prior to Completion. If the contract does NOT say this, your conveyancer is at fault.

If you have not exchanged yet, then it is precisely this sort of legal issue that causes property sales to take time - as the conveyancers discover and resolve (or fail to resolve) the legal issues.

You say

...and was due to complete a few weeks ago. The conveyancing was completed ....

but this is vague. "was due to Complete" implies you did NOT Complete. "The conveyancing was completed implies you DID complete. Which is it?

And what about Exchange?

:huh:

JQ.

It's not very clear from your post, but is the paralegal being employed by you or the vendor?

Harbour

G_M Thanks for your reply. I am a first-time buyer and unfamilar with the process. As far as I understood, the conveyancing had been completed as I was sent a property report and the conveyancer agreed on a date to exchange contracts. The second restriction in the property stated in the property register but was not brought to my attention (ie. that the sale might not go ahead if all charges were not cleared). As it is, the second mortgagee has arrived at the party very late and is blocking the sale.
Shouldn't the conveyancer alerted me to the existance of the second mortgagee earlier? I found out about this second debt by simply reading the poperty register from Lands Registry. Isn't this the job for the conveyancer? I had informed her that I was taking out a loan and asked her specifically if there was any issues with the property that I should be aware of.

Harbour

JQ - The paralegal referred to is my conveyancer.

Land_Registry

By way of background information regarding a Transfer under power of sale (repossession) you may want to read our online Practice Guide 75 and specifically section 3 re the priority of entries on the register.

Other things to note here are that
a) the restrictions in the Proprietorship (not Property?) register alert you to the existence of more than one charge in the same way as the charge entries themselves in the Charges Register
b) If the restrictions are simply ones which require the consent of the stated lender on any disposition (sale, mortgage etc) by the registered proprietor then they don't restrict the mortgage lender(s). They should not therefore impact on a repossession sale as the sale is not by the reg prop but by the lender (chargee)
NB - check the wording of the restrictions to see if they restrict just the reg prop or whether they also restrict any sale by the lenders?

As silvercar implies a second chargee is unlikely to be able to block the sale of a first chargee but you would need legal advice on that and the issues around contracts/exchange and so on.

As section 3.2.2 of the PG advises The transfer overrides any inferior registered charges. The priority of registered charges as between themselves is determined by the order in which they are entered in the register, subject to any entry in the register to the contrary

It is important to read and understand the land register, inc any restrictions and other protected interests, fully and then discuss this and the other matters with your legal adviser.