A specialist UK based Auctioneer, Allsop, have announced they are holding their first distressed multi-lot property auction on the 15th April 2011 at the Shelbourne Hotel in Dublin. The sale will comprise of over 80 lots from across the country (comprising predominantly residential stock, but there will also be some commercial mixed use buildings) on behalf of a variety of Receivers and other distressed sellers. Receivers are appointed by a Mortgage Lender when the borrower (typically a development company) runs into difficulty repaying the borrowings. People who have acquired property previously at auction will know that they are asked to sign a legally binding Contract to acquire the property and typically pay a 10% deposit immediately after the property is “knocked down” to them. Unless that buyer has already obtained legal advice as to the terms of the Contract, then they will be bound by whatever contractual terms are contained within the Contract pursuant to which the property was sold at auction. To the novice property purchaser, it might be easy to assume that all Contracts are the same. This is certainly not the same in respect of distressed property transactions. There may be very significant curtailment of the usual warranties and protections you would expect to obtain under a typical Contract for Sale. In particular, matters relating to the Structural Defects Indemnities, Architect’s Certificates of Compliance and the Title to the property need to be carefully examined. As many properties are being sold in the context of a Receivership, therefore one must be satisfied that the Receiver has been properly appointed. In the context of a sale by a bank as mortgagee in possession, one must be satisfied that they actually are in possession of the property, particularly in the context where they are selling without the benefit of a Court Order. These matters cannot be assumed. A significant number of complications may well arise in respect of the sale of the distressed property which in turn will affect the purchaser’s ability to obtain a mortgage to acquire that property. It is imperative that any prospective purchase obtains a copy of the Contract and Title of the property in advance of the auction and retains their own solicitor to examine that Title.
Fergal McManus