Transfer at Undervalue and Solvancy

mxcg2020

Hi All. Im new here and its my f irst Post:-).
I wanted to ask you a question from a buyers perspective. If a transfer at undervalue (home, main dwelling) is undertaken between an unmarried couple breaking up, and both parties have agreed on a settlement. Would a declaration of solvency and bankruptcy check be enough to protect the buyer in the event of the seller becoming bankrupt in the future? If the seller is fully solvent and has no debt, does this mean that a trustee in bankruptcy cannot put aside a transfer in the unlikely event that the seller becomes insolvent when proven that the transfer was not performed impending a bankrupcy? I find it very confusing seeing that the buyer has little protection within the law in the case.
I know indemity insurance protects the value of a loan for a mortgage lender, but surely there is something within the law that can protect a buyer in an honest transfer.
Appreciate the help
Thanks

fatbelly

That's quite a technical question for a first post!

Solicitors may advise insurance at that point.

There is something in the Insolvency Act that may offer protection.to future purchasers (if purchased in 'good faith') but knowingly entering into a transaction at undervalue would not have the same effect

https://www.legislation.gov.uk/ukpga/1986/45/section/339?view=plain

Minkym00

The relevant time period here is 5 years. The transaction must have been entered into within five years of the seller being made bankrupt for the OR / Trustee to consider it. With a transaction at undervalue the nature of the relationship between the buyer and seller is irrelevant.

If the transaction is more than two years prior to bankruptcy, then the OR / Trustee needs to prove that the bankrupt was insolvent at the time of the transaction, or became insolvent as a consequence of the transaction, in order to void it. (In other words, someone who is solvent can do whatever they like with their assets, it’s only they are technically insolvent, or become so by the transaction, that it becomes an issue). However, if the transaction is within 2 years of bankruptcy then the seller’s insolvency is presumed, and the transaction can be voided.

If you are the buyer in this scenario then you should be absolutely sure of the seller’s financial position before going ahead. Or get insurance.