Auction disaster advice

JackJacobs

Advice required.

We have made a very foolish and costly error.

After a very kind gesture from our parents, they offered to buy our son his first property to get him on the ladder.

They found a local property listed in our area on a property auction site.

Neither them nor us had ever taken part in an auction before,

They asked me on the morning of the auction to bid for them as they were not too sure how to do it.

I was away on holiday at the time abroad.

With an hour to go before auction ended, I was having problems setting my account up with a bad WiFi.

It would not accept my home address as it is a new build estate, and the postcode wasn’t registered as yet.

I called the auction company who managed to set up my account.

I was advised to use my previous home address as it matched my driving licence for ID purposes.

We bidded on a property auction site and bought a 55k property

Oh dear the small print!!!

8k sellers fee!!

Now it appears there is a tenancy agreement for 6 months in the sales pack.

Expired a week before the auction.

Tenancy contract show £750 per month, with a daily late interest charge of 6%!!! 

So that could be additional 4.5k rent and 8.1k interest!!!

Sellers name at companies house shows 3 companies set up in past 12 month by the individual whose job is a cleaner and a gardener.

The nightmare is now becoming very real. Appears to be a very clever scam that foolish people like me fall into not reading the sales contract details.

So I need advice on the below:-

IF !!!  this is worst case senario, if we manage to sell the property for market value, we may just about break even.

Although the stress it has put my parents and myself through has been life changing.

Is there anything we can do with regards any of the points below or are we just wasting our time:-

Trying to prove there was never a tenant there?

If so, how can this be done?

Any recourse that they used my old address knowing I did not live there anymore in order to get me registered to bid?

Any advice would be really appreciated, I don’t need to be told how foolish I’ve been, I already know…..,

Emmia

Why did you seek to buy a property at auction if you have no idea on the process? Or the pitfalls?

Was it because it was "cheap?" - there is always a reason property is at auction and cheap...

Did you review the pack associated with the property and have it reviewed by a lawyer before bidding (no?)  You must know that auctions bids are final once the hammer (real or electronic) falls.

I don't understand the tenancy agreement part? Is there a sitting tenant at the property - are you now their landlord? If so you'll need to quickly get on top of your legal responsibilities as a landlord.

I think you need proper legal advice quickly.

bobster2

The part about the tenancy agreement is very confusing - @JackJacobs you make it sound like you're worried you have to pay rent to someone. 

This is going to sound like a daft question - but have you now visited the house? Is there a tenant there?

eddddy

Your post isn't completely clear.

Firstly,

• Was this a conditional auction (often called the "Modern Method of Auction"), or an unconditional auction?

• An unconditional auction typically means that you have already paid a 10% deposit (as part of the £8k) and exchanged contracts, and you have 28 days to complete

• A conditional auction typically means you have paid a £8k reservation fee, reserved the property, and you might have 28 days to exchange contracts

Where have you got to in whichever of the above process is relevant?



Next, It sounds like you're saying...

• You assumed that the property came with vacant possession (i.e. you assumed it was unoccupied, so your son could live in it)

• But you have found out that it is tenanted. (i.e. somebody is renting it) - so you will become their landlord

• (It should have been very clear from the auction listing that this was a tenanted investment property - and not a vacant property. Wasn't that the case?)

- 


The next bit is very unclear from your post - so I'm going to make a huge wild guess (because you mention a scam)...

• The tenancy has existed for 6 months - but there is 6 months rent arrears which amounts to £12.6k (i.e. the tenant has never paid any rent)

• Your purchase contract says that you have to pay the seller the £12.6k rent arrears - and then you chase the tenant to get the £12.6k back (This kind of clause is standard, when you buy a tenanted property.)

• But you believe this was a scam - the tenancy was 'concocted' as a way to make you pay the £12.6k rent arrears to the seller - with no prospect of getting the £12.6k arrears back from the tenant

(If that's correct, I've come across that scam before with tenanted auction properties.)




If that's the case...

• Is the issue that you don't have £12.6K to pay the seller, so you can't complete?

(If you do have the £12.6k, one option might be to complete the purchase, evict the tenant - and then your son can move into the property.)

Schwarzwald

Also dont understand the tenancy part.
WHO is the tenant?
Are they still in the property?
usually they would be on the hook for rent and interest due.
£8k fees in relation to 55k property value is a lot but seller fees are nothing unusual in auctions.

Keep_pedalling

You say the house purchased for your son, was or purchased in his name?

Section62

JackJacobs said:

...

Now it appears there is a tenancy agreement for 6 months in the sales pack.

Expired a week before the auction.

Tenancy contract show £750 per month, with a daily late interest charge of 6%!!! 

So that could be additional 4.5k rent and 8.1k interest!!!

...

What is the exact wording about interest in the agreement?  Seems improbable that an £8.1k interest charge could lawfully accrue over 6 months on total rent payments of £4.5k.

Is 6% the annual rate?

WIAWSNB

Rather than you having to prove there was never a tenant there, isn't the onus on the vendor to prove - with clear records - that there was? Evidence of chasing rent payments for a start?
The 'tenant' should surely be evidenced, and traceable; utility bills, deposit protection, etc?
How does this scam work? Surely a 'LL' cannot just claim a loss of rent and expect it to be accepted? Or, is it as simple as including it in the auction, and then it becomes part of the sale terms?
Lawdie.

Smalltownhypocrite

with a daily late interest charge of 6%!!! 

now granted I'm no expert in banking jargon but isn't their a cap of 3%?

From shelter:

You can only be charged a late payment fee once you’re 14 days late with rent.

The late payment fee must be mentioned in your agreement and you cannot be charged more than 3% APR above the Bank of England base rate.

You can only be charged by either your landlord or agent, not both.

sheramber

Smalltownhypocrite said:

with a daily late interest charge of 6%!!! 

now granted I'm no expert in banking jargon but isn't their a cap of 3%?

From shelter:

You can only be charged a late payment fee once you’re 14 days late with rent.

The late payment fee must be mentioned in your agreement and you cannot be charged more than 3% APR above the Bank of England base rate.

You can only be charged by either your landlord or agent, not both.

3% APR above the Bank of England base rate.

eddddy

Section62 said:

What is the exact wording about interest in the agreement?  Seems improbable that an £8.1k interest charge could lawfully accrue over 6 months on total rent payments of £4.5k.

Is 6% the annual rate?

Smalltownhypocrite said:

with a daily late interest charge of 6%!!! 

now granted I'm no expert in banking jargon but isn't their a cap of 3%?

Which might put the OP in an even worse position.

The auction contract probably says that the OP has to pay the seller the rent arrears according what the tenancy agreement says - i.e. including 6% interest.


But when the OP tries to claim the rent arrears from the tenant - the tenant doesn't have to pay the 6% interest because it is unlawful to charge that to a tenant.


i.e. The onus was on the OP to read the tenancy agreement before buying (i.e. taking over as landlord), to ensure that the terms were lawful and enforceable.

So in simple terms,  it's the OP's 'fault' if they chose to take over as landlord of an unenforceable / unlawful tenancy.


(But there's also the risk that the OP is unable to get any rent arrears at all from the tenant - with or without interest.)