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Hi there, has anyone ever come across this problem before, its a new one to myself, my solicitor and the auctioneer...I bought a property after auction which was 4 units (2 commercial, 2 residential) the 2 commercial were tenanted and the 2 residential vacant. In the legal pack it stated that one commercial tenant was 3 months in arrears (Now 4). We agreed a price and i signed a contract stating that i would pay for their legal searches (£225) and nothing else stated.
Now as completion is a few days away their solicitor is stating that i have to also pay the seller for the rent arrears and take over the collection duty from the tenant, or they won't complete. It is my understanding that especially as this tenant has no lease, that it is a matter entirely between the seller and the tenant to recover this debt, and i should start fresh from completion. Who can say why this money wasn't paid, was the seller at fault as a bad landlord? etc.
The problem is that completion is a couple of days away, and i don't want to put my deposit at risk by not completing, but i feel their solicitor is trying to bluff me...
I would love any feedback from anyone who has had experience of a similar situation...
I came across a similar property in an auction recently whose SoC mentioned the purchaser being liable for the rent arrears - I stayed well clear of this. I think you might find this the case with you too if you revisit the SoC and search for the words arrears. If not and its not even in your contract, I can't see how they can make you pay that but I think you might find it.
The properties I am referring to were from Barnett Ross's July auction and were in Newport Pagnell.
Thanks for your reply, there is definitely no mention of the buyer being liable for any arrears in the SoC, or i would have factored that in to my offer price. This is why i am so perplexed that they have thrown this in at the 11th hour, and why i think they might be just 'trying it on'.
The only possible clause that could pertain to this is the one below, but it's vague at best:
If at Completion the Seller is entitled to interest or other sums or any provision of this Agreement such interest or other sums shall be treated as part of the monies due at completion and the Seller shall be entitled to withhold delivery of all or any Title Deeds for the Property until payment in full is received.
You need to check with your solicitor which terms and conditions the sale was agreed under, I suspect even though you purchased the property post auction the sale will be being made under the Common Conditions of Auction (2009). Clause 11.2 states If on completion there are any arrears of current rent the buyer must pay them, whether or not details of those arrears are given in the special conditions.
Yours is the first instance I have seen of the arrears actually being stated in the legal pack.
Thanks Ian, you clearly know your stuff... I had no idea about clause 11.2 CC of A, thats obviously what they are falling back on, and it's correct then.
I suggest you ask your solicitor to ensure the seller transfers the right for you to collect the outstanding arrears from the tenants after you have completed.
Thanks Ian yes that's all in hand.
That would be it then. I remember it seeing somewhere, I thought it was in the Special Conditions but it was in the General Conditions instead.
If this was new to your solicitor I would change solicitor because its very standard. They are supposed to be the experts but it sometimes feels we are doing the research for them. I have only ever bought one auction property but I have come across "current Rent " arrears so a solicitor certainly should. One question though- what is still current?- I have a vague feeling it can only go back 3 months but i am no expert- Ask a (proper) solicitor. Hopefully if its an auction buy its still a good purchase even with this spanner in the works
Ha yeh I hear ya, you expect solutions off professionals not more questions... To be fair to him though I neglected to show him the rent arrears printout which I considered not worth checking out as I understood it, however now looking at it I can see it states "Arrears referred to in condition G11" at top in small print... This refers to the Current Rent section of the CCofA, but yes he should have known about the G11.2 clause anyway!
Upon examination 'Current Rent' is a maximum of 4 months arrears according to the CCofA
Yes thanks it's still a great deal, just a v minor issue, the rent should be recoverable anyway as the tenant has a good business, and just fell out with the previous owner so I believe!
Many thanks for your input
Hi James - what was the outcome on this?