Developer Mortgage

[avanapa]

Hi Nigel, am I correct in thinking that a law was passed some time ago that said that a buyer must be given the opportunity to pay a share of an outstanding developer loan to the developer's bank in order to receive a waiver and be released from the bank's charge on their section of land. Or am I mistaken and the bank can refuse this option.
Thanks

[Nigel Howarth]

Hi avanapa,

The change in the law came into effect on 29th July 2011. This is how it works:

In circumstances where a property is sold that is already mortgaged, the buyer may pay a proportion of that mortgage to the mortgagee (usually a bank). The mortgagee is required to accept this – and the buyer’s contract of sale, having been duly lodged at the Land Registry, will take precedence over that mortgage regardless of whether the whole amount of the mortgage has been repaid.

Furthermore, the vendor cannot intervene in this arrangement.

So if a person purchases a property for (say) €200,000 and it is discovered subsequently that the land is mortgaged for €8,000,000, that person may pay the mortgagee €200,000 (or any smaller sum that is proportionate to the value of the property purchased). So in future, buyers will not be called on to pay the purchase price of the property and the debts of the vendor.

However, for contracts that have already been lodged at the Land Registry when this law comes into force, the above arrangement can be made providing that both the vendor and mortgagee give their written approval.

Regards,

[Pantheman]

Hi avanapa,

The change in the law came into effect on 29th July 2011. This is how it works:

In circumstances where a property is sold that is already mortgaged, the buyer may pay a proportion of that mortgage to the mortgagee (usually a bank). The mortgagee is required to accept this – and the buyer’s contract of sale, having been duly lodged at the Land Registry, will take precedence over that mortgage regardless of whether the whole amount of the mortgage has been repaid.

Furthermore, the vendor cannot intervene in this arrangement.

So if a person purchases a property for (say) €200,000 and it is discovered subsequently that the land is mortgaged for €8,000,000, that person may pay the mortgagee €200,000 (or any smaller sum that is proportionate to the value of the property purchased). So in future, buyers will not be called on to pay the purchase price of the property and the debts of the vendor.

However, for contracts that have already been lodged at the Land Registry when this law comes into force, the above arrangement can be made providing that both the vendor and mortgagee give their written approval.

Regards,

Nigel, confused.com

Are you saying that if he already bought and paid the 200k he may have to pay ANOTHER 200k to be free from the mortgage?? if so, what's the point. of course I must be missing the point here.

[avanapa]

Thanks Nigel, but I am confused too. I would have thought it unlikely anyone would pay for the house twice. What I understood was, that if your property was one of say ten properties on a plot of land that was subsequently found to have an unpaid developers mortgage, the bank was obliged by law to accept a one tenth share of the outstanding loan in exchange for a waiver that would remove the bank, s charge on the section of land your property is built on. What I need to know is whether the bank is legally bound to give me this option or not.

[Nigel Howarth]

What I need to know is whether the bank is legally bound to give me this option or not.

When did you purchase the property?

If it was after 29th July 2011 and you approach the bank to repay an element of the developer's mortgage, the bank cannot refuse you.

If you bought before the 29th July 2011, you need the agreement of the bank and the developer to you repaying an element of the developer's mortgage.

Pan - If avanapa has already paid the total price of the property, there's no point in talking to the bank as the money will have already gone to the developer. It could be that the property has not been completed and avanapa is still making stage payments. Assuming he purchased after 29th July 2011 he can use some of the money he has yet to hand over to repay an element of the developer's mortgage to the bank.

Regards,

[Pantheman]

What I need to know is whether the bank is legally bound to give me this option or not.

When did you purchase the property?

If it was after 29th July 2011 and you approach the bank to repay an element of the developer's mortgage, the bank cannot refuse you.

If you bought before the 29th July 2011, you need the agreement of the bank and the developer to you repaying an element of the developer's mortgage.

Pan - If avanapa has already paid the total price of the property, there's no point in talking to the bank as the money will have already gone to the developer. It could be that the property has not been completed and avanapa is still making stage payments. Assuming he purchased after 29th July 2011 he can use some of the money he has yet to hand over to repay an element of the developer's mortgage to the bank.

Regards,

Thanks Nigel, that makes it more clear to me.