Be wary of the pitfalls when buying a distressed property

Be wary of the pitfalls when buying a distressed property - Louise McBride → independent.ie/business/pers … 54577.html

Tax bills

If buying property from someone who has been in financial difficulty for some time, there could be an outstanding tax bill on the property – which you will have to pay (along with any penalties incurred) unless it is settled before you buy it.

The above is taken from the Louise McBride’s piece in the indo. How is this possible, how could a purchaser be liable for someone else’s tax bill? Surely not!! :confused:

It definitely applies to Development Contributions to the local authority. Maybe not fair but it is reality.

Can anyone else offer an opinion on this, the article says “outstanding tax bill” not Development Contributions. So now we could have a situation where someone buys a property with outstanding Development Contributions and an outstanding tax bill, does this mean the developer is no longer responsible for both of these costs once the property is sold? Shouldn’t any outstanding costs be taken from the proceeds of the sale before the vendor gets their hands on them.

What’s the story with outstanding service charges in multi unit developments when buying at auction? Do they get deducted from the hammer price and paid to the managment company or does the liability transfer to the purchaser and likely need to be settled before the management company will do thier part on the transfer of ownership?

Local taxes in France are paid for the property (taxe fonciere) and separately for living in the area (taxe d’habitation). If you buy a house midyear the tax fonciere should be split between the seller and the buyer, though only the buyer will receive the bill at the end of the year. Normally a solicitor will deal with this during the signing of papers and request a pro-rata contribution from the seller to cover their share.

If you read the small print on the Household Charge and the Septic Tank Registration fee it seems to indicate that these will be treated the same way. The debt will travel with the ownership of the house and the conveyancing process will now include getting confirmations that these are paid up to date. It has also been flagged that Property Tax will be treated this way when it is introduced; it will become a charge on the house if unpaid. I’d say the original article was intended to cover all these types of scenarios. A general tax liability (unpaid income tax etc.) could only really become an issue if revenue had registered a judgement on the house and that would come up during title searches.

That’s what you pay your solicitor for, to make sure that all of this is wrapped up as part of the closing process, and why you should get a decent solicitor and not just go for the cheapest option.

would depend on the auction I guess; but I’m not sure if the management company has anything to do with the legal transfer of ownership.

TBH if you are buying in a development with large numbers of distressed properties there are likely to be others outstanding; this [hole in the sinking fund] would concern me more than the individual service charge outstanding on the individual property!

I was kind of thinking getting a solicitor was a given for a property purchase :open_mouth:

Im looking at the title for one the properties on this fridays Allsop auction. It states the last owner. And in the section after that it states.

What does this mean?
Would I be liable for some debt to Bank of Scotland, after I buy the property from the owner?

For a commercial property purchase unpaid rates are a burden that travel with the property.
A solicitor checks for this.
If they haven’t been paid you’d negotiate a discount or vendor would pay what is owing.

Its a residential property. Rates dont apply.

Part of the closing arrangement will be that a discharge of the BoS(I) mortgage will be available. You solicitor will (should have) asked for the discharge amount and pay two cheques on closing- one to the receiver/vendor and one to the bank to redeem the mortgage(or at least she/he should so). It used be that the Vendor’s solicitor would undertake to do it, but in seeing as solicitors’ undertakings have taken a beating in terms of their reliability, your own solicitor may do it.

i presume they are talking about the situation where the Revenue take a charge out on a property to secure something owed to them.

It would have to be cleared as part of the sale process and Revenue would have to agree to its removal.

Thanks for that info elgreco.

You are right. In the “General Conditions of Sale” document it says the vendors solicitor is giving an undertaking to discharge the charge. However why doesnt it say how much the charge is for? Am I understanding this correctly?

That’s a hard one to gauge. If it is part of a bundle/portfolio of properties that we re-financed together only one mortgage document is stamped to cover all of the debt (the 630EUR mentioned above). BoS(I) will know what the split is and if your solicitor is worth their salt you will not sign the contract until you know the debt outstanding attributable to that specific property. There should be a special condition in the contract in relation to it, but as it’s an auction there may not.

But why is the amount of the charge not in the documents? The text that I quoted from the title indicates that €620 is some kind of duty/tax. It also seems a very low amount.

I dont want to spend €500 on a solicitor because Im probably not going to win this auction. Im an engineer, I should be able to understand any document.

Take that approach and you will get spanked. A lot of properties end up at auction precisely because they have dubious titles. If you don’t investigate the title beforehand you have no business buying at auction.

I was making the distinction between a struggling newly qualified solicitor advertising all in conveyance pricing of €700 (IIRC that was the lowest quote that’s been mentioned on here) and an experienced solicitor who comes recommended and might be more expensive but will do a thorough job.

Bank’s are only required to put the amount of the mortgage on one instrument/charge. If the amount loaned was eur1M that would be inserted on the principal charge and the other charges stamped collaterally.
WRT the stamp duty, it is payable at eur1 per1000 borrowed up to a maximum of eur630 no matter how much more is borrowed. I think your copy folio (as it’s registered land) is in error.