Negative Equity Question

consumersrevenge

Hi There - I have a question surrounding purchasing a property from a company who owe more than they may get from the sale. To give a brief summary, I know of a small company which buys, renovates and either sells / lets the property. They purchased a few apartments which have lost them significant money. I have an understanding that they may try to 'offload' the property at reduced rates, and was thinking of taking advantage of this (being as I am looking for a first home and plan to stay there for a long period). However, I am concerned that, should the company owe more than I pay, do I become liable for the extra debt, or do I have to settle this before taking the property? Does liablility stay with the company?

silvercar

If the individual properties are mortgaged then the mortgages will need to be paid off before you can get clear title to the properties.

If instead, the company has a business loan (not secured on the properties) then there would be no problem with the title (deeds).

Even if there are currently loans secured on the properties, the company may rejuggle things to release the loans from the properties they wish to sell.

If the company goes bust, those responsible for winding up the company could consider any offer for the properties.

In answer to your questions, your solicitor would ensure that you are not responsible for the companies debts.

consumersrevenge

thank you for the reply. i believe (through a little snooping) that the loans are not traditional mortgages as such, but they are secured on the properties (i know one of the developments they brough on they put deposits to secure the property, then took bridge loans to buy them before selling them right on, although i don't believe this has happened here).

I think they would rather accept below value and offload the property, as there are many repossessions in the development and their business plan obviously can't look at property as longer term investments (such as buying the house as a home).

I don't think they are in any danger of going under (despite loosing money on one development) as they have many other properties which are making good returns (which is also the reason I don't feel guilty about going in 'under value'). As long as I am not liable for thier shortfall though, I would be happy.