Hi. My friend went sale agreed on a house a few weeks back. Signed the contract with his solicitor. Seller also signed. Then a judgement mortgage turned up on a search, seller claims was unaware of same. Seller has subsequently contacted the bank in question and "made an offer" to the bank for not the full amount. No response yet from bank. Has anyone any experience of this situation. We understand the judgement has to be lifted before sale proceeds. If the seller is trying to do a deal on the amount is this likely to be accepted by the bank as surely they will want the full amount outstanding ? How long does it take the bank to decide on offers; days, weeks or months ? Can purchaser walk away given they didn't know about this problem when signing contract ? They just want to move home asap.
Judgement mortgage discovered after contracts exchanged.
- Thread starter Susie2017
- Start date
Yes. I understand that. Solicitor is awaiting news. I was wondering if the bank will do a deal with seller ? are they likely to hold out for full amount ? How long does it take to sort out and most importantly can purchaser pull out as they are losing faith that it will ever be sorted.
Is it not strange for the contracts to be signed before a search is complete?
As usual, there is a lot going on here.
The purchaser's own solicitor needs to walk the purchaser through this.
The Judgment Mortgage did not appear out of thin air. There was already a judgement against the Vendor - unless, and this is highly unlikely , the Vendor was not aware of the proceedings. From experience, I would suggest this is a Vendor trying to pull a "fast one" on the Bank.
There is a crucial date/ time query to be asked - was the Judgment Mortgage registered before or after Contracts were signed? If before, the property is subject to the JM and, if after, there is a strong argument to be made that the JM is ineffective. Try telling that to your bank who are lending you the money!
The rest of it is piece of string stuff.
mf
The purchaser's own solicitor needs to walk the purchaser through this.
The Judgment Mortgage did not appear out of thin air. There was already a judgement against the Vendor - unless, and this is highly unlikely , the Vendor was not aware of the proceedings. From experience, I would suggest this is a Vendor trying to pull a "fast one" on the Bank.
There is a crucial date/ time query to be asked - was the Judgment Mortgage registered before or after Contracts were signed? If before, the property is subject to the JM and, if after, there is a strong argument to be made that the JM is ineffective. Try telling that to your bank who are lending you the money!
The rest of it is piece of string stuff.
mf
The judgement mortgage only came to the buyers and solicitors knowledge after the contract was signed by the buyer. Is there a fault on the side of the buyers solicitor ? Seller claims to have been "unaware" of the judgement mortgage, which (I take your point) is probably not the truth. Seller signed contract nonetheless on day he "found out" about the judgement, said he would sort it. Judgement amount is approx 10% of sale value. I am not sure when the judgement was registered but will find out. Surely it was there for a number of years ? Bottom line - can the buyer get out of this mess ? He has paid 5 k to auctioneer and balance of 10% to solicitor who has cashed cheque. Any advice /experience welcome.
PaddyBloggit
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Talk to your solicitor!
newirishman
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As long as the judgement mortgage is smaller than the sales price, there shouldn't be a problem at all.
Just means that the bank gets the money first, and whatever is left goes to the seller.
If the amount is bigger then the sales price, things get tricky as negotiations with the bank would need to happen to understand if they would be happy with less money. In this case, things will probably get delayed and it might be worth pulling out of the contract (which you would be right to do if the contracts are done correctly).
Just means that the bank gets the money first, and whatever is left goes to the seller.
If the amount is bigger then the sales price, things get tricky as negotiations with the bank would need to happen to understand if they would be happy with less money. In this case, things will probably get delayed and it might be worth pulling out of the contract (which you would be right to do if the contracts are done correctly).
Is the sale price sufficient to redeem the "main" mortgage and the judgement mortgage? If so, then there is no problem as the vendor's solicitor simply redeems both mortgages with the sale proceeds.
But it is more likely that the sale proceeds aren't sufficient to redeem both mortgages in which case consent will be needed from the holder of the judgement mortgage to allow the sale to go through. If consent isn't forthcoming then the buyer may wish to pull out in which case it is the responsibility of the buyer's solicitor to retrieve the 10% deposit from the auctioneer and the vendor's solicitor. Both solicitors and the vendor are at fault for letting this mess develop.
But it is more likely that the sale proceeds aren't sufficient to redeem both mortgages in which case consent will be needed from the holder of the judgement mortgage to allow the sale to go through. If consent isn't forthcoming then the buyer may wish to pull out in which case it is the responsibility of the buyer's solicitor to retrieve the 10% deposit from the auctioneer and the vendor's solicitor. Both solicitors and the vendor are at fault for letting this mess develop.
Brendan Burgess
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Agree that the vendor is at fault. Though from what MF1 says, if someone has a judgement against them which has not yet been registered, then they should try to exchange contracts as quickly as possible in order to avoid the creditor getting a judgement mortgage.
Is it normal for the buyer's solicitor to do searchers before contracts are exchanged?
I would have thought that the solicitor for the buyer would check the contract and title deeds and the mortgage approval and allow the contract to be signed?
It would be just before the closing that the searches would be done?
If the seller's solicitor had done a search, then they would include anything negative in the papers. But again, is it normal practice for the seller's solicitor to do a search before the contracts are exchanged?
Brendan
finance1233
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i was a vendor in the exact situation recently. had no clue about the judgment mortgage. had an old loan
that bank stopped chasing in 2011. apparantly they served notice of judgment in 09. no recollection of being served
any notice(something i would have taken notice of) i assumed the bank had written the loan off. judgment mortgage
obtained in 2012. never recieved anything from deeds registry either, anyway i did owe the money.
property was in negative equity so judgment mortgage couldnt be satisfied from sale proceeds. thankfully i was able
to do a deal with the bank on the judgment mortgage for less than was owed. process took about 2 weeks to get agreement.
if your vendor said he will sort it im sure he will, banks can be slow making decisions like this.
that bank stopped chasing in 2011. apparantly they served notice of judgment in 09. no recollection of being served
any notice(something i would have taken notice of) i assumed the bank had written the loan off. judgment mortgage
obtained in 2012. never recieved anything from deeds registry either, anyway i did owe the money.
property was in negative equity so judgment mortgage couldnt be satisfied from sale proceeds. thankfully i was able
to do a deal with the bank on the judgment mortgage for less than was owed. process took about 2 weeks to get agreement.
if your vendor said he will sort it im sure he will, banks can be slow making decisions like this.
Brendan Burgess
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Hi finance
At what stage in the proceedings did you discover that there was a judgement mortgage on the property? Before you went sale agreed? Before contracts were exchanged? After contracts were exchanged?
Who discovered that there was a judgement mortgage on the property? Your solicitor or the buyer's solicitor?
At what stage in the proceedings did you discover that there was a judgement mortgage on the property? Before you went sale agreed? Before contracts were exchanged? After contracts were exchanged?
Who discovered that there was a judgement mortgage on the property? Your solicitor or the buyer's solicitor?
finance1233
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hi brendan
my solicitor had recieved signed contracts and deposit from purchaser. i met him about a week after that to sign contracts
as i was away. this was a week before agreed closing date. i was informed then. im not sure which solicitor performed search
but i would have thought the purchasers solicitor would have to make sure there was a clean title. and i would have thought this should happen prior
to purchaser signing legally binding contracts and paying deposit. and not just before closing.
my solicitor had recieved signed contracts and deposit from purchaser. i met him about a week after that to sign contracts
as i was away. this was a week before agreed closing date. i was informed then. im not sure which solicitor performed search
but i would have thought the purchasers solicitor would have to make sure there was a clean title. and i would have thought this should happen prior
to purchaser signing legally binding contracts and paying deposit. and not just before closing.
As would I and reading your post this judgement was on the title for a few years. I presume the contract had a caveat in it though which allowed for the buyer to pull out in the event of the title having such attachment. I wonder does the OP have that caveat.
My limited understanding of what happens is the vendor signs contracts, forward them to buyers solicitor and the buyer signs. Then, buyer's solicitor runs the final searches to be absolutely sure where everything stands as of that moment. It's only if those final searches are clear that they will return signed contracts to vendor and close the sale. If the vendor does not have signed contracts, they will be unable to force the sale.
Thank you for all replies. This judgement only came to light a couple of weeks after the purchaser had signed. It was on the day that the seller was signing that the purchaser was informed by their solicitor. I will find out exactly when the judgement order was granted in relation to the timescale and post back. It is still not sorted. Purchaser is getting worried.
Here is the process:
Vendor wants to sell. Instructs solicitor (VS) . Completes a questionnaire where confirms there are no judgments against him/her. Authorises solicitor to take up Deeds from Bank.
If title is a registered title ( Land Registry) VS orders up to date folio. That will show all charges, including any judgment mortgage.
If title is unregistered , VS does not ordinarily do pre Contract searches - clients don't want that expense.
VS issues contracts. Contract confirms that Vendor will furnish clear , charge free property - unless there is some other arrangement.
Purchasers solicitor (PS) investigates whats been furnished and, if all in order, Purchaser signs Contract, returns to VS and pays balance of 10% deposit. Vendor then signs the Contract. Once they have both signed, one part contract goes back to the PS and the contract is now binding.
There is a gap between the day contracts becoming binding and the actual completion/closing. On the closing day, PS pays balance of agreed price to VS to be held in trust pending clear searches and organises the searches . If the searches are clear, the deal is concluded and keys are released to the purchaser. If the searches are not clear, the questions start.
So:
When was the judgment mortgage registered? If before contracts became binding, the judgment mortgage stands. If after, technically it is not valid - but try telling that to a purchasers bank.
Assuming the judgment mortgage is valid, what can the Vendor do? If they can clear it, problem sorted. If they can't, purchaser will pull out but cue lots of argy bargy about deposits and the like.
"It was on the day that the seller was signing that the purchaser was informed by their solicitor. "
I find this hard to follow- surely, if the seller now knows there is a judgment mortgage on the property, they should not be signing contracts until they have sorted it out?
Depending on the dynamics of the situation ( how badly any of the parties want the deal to close, or not to close ( as appears to be the case from the Purchaser here), the capacity of the Vendor to clear the JM- deal or no deal etc.,etc) , its just a shed load of grief for all concerned
Suppose the vendor wants to finalise the deal but it will take time? Purchasers need to decide do they stick with it or try and pull out or serve a completion notice which will put a timeline on it.
mf
Vendor wants to sell. Instructs solicitor (VS) . Completes a questionnaire where confirms there are no judgments against him/her. Authorises solicitor to take up Deeds from Bank.
If title is a registered title ( Land Registry) VS orders up to date folio. That will show all charges, including any judgment mortgage.
If title is unregistered , VS does not ordinarily do pre Contract searches - clients don't want that expense.
VS issues contracts. Contract confirms that Vendor will furnish clear , charge free property - unless there is some other arrangement.
Purchasers solicitor (PS) investigates whats been furnished and, if all in order, Purchaser signs Contract, returns to VS and pays balance of 10% deposit. Vendor then signs the Contract. Once they have both signed, one part contract goes back to the PS and the contract is now binding.
There is a gap between the day contracts becoming binding and the actual completion/closing. On the closing day, PS pays balance of agreed price to VS to be held in trust pending clear searches and organises the searches . If the searches are clear, the deal is concluded and keys are released to the purchaser. If the searches are not clear, the questions start.
So:
When was the judgment mortgage registered? If before contracts became binding, the judgment mortgage stands. If after, technically it is not valid - but try telling that to a purchasers bank.
Assuming the judgment mortgage is valid, what can the Vendor do? If they can clear it, problem sorted. If they can't, purchaser will pull out but cue lots of argy bargy about deposits and the like.
"It was on the day that the seller was signing that the purchaser was informed by their solicitor. "
I find this hard to follow- surely, if the seller now knows there is a judgment mortgage on the property, they should not be signing contracts until they have sorted it out?
Depending on the dynamics of the situation ( how badly any of the parties want the deal to close, or not to close ( as appears to be the case from the Purchaser here), the capacity of the Vendor to clear the JM- deal or no deal etc.,etc) , its just a shed load of grief for all concerned
Suppose the vendor wants to finalise the deal but it will take time? Purchasers need to decide do they stick with it or try and pull out or serve a completion notice which will put a timeline on it.
mf
Brendan Burgess
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It's reasonable to assume that this was a long standing judgement.
It's reasonable to assume that this was unregistered title or else the vendor's solicitor would have picked it up earlier.
Therefore the vendor's solicitor was not aware of the mortgage.
The purchaser's solicitor was not aware either until they did the search after the contract was signed.
It's reasonable to assume that this was unregistered title or else the vendor's solicitor would have picked it up earlier.
Therefore the vendor's solicitor was not aware of the mortgage.
The purchaser's solicitor was not aware either until they did the search after the contract was signed.
But does this not mean it was a deliberate act by the vendor hoping that the purchaser would say something in the style of 'I'll pay the JM pending a deal' so that the sale can go through ? Is the contract binding if the searches are not cleared and more importantly does that make the deposit non-refundable ? Can the contract not specifically state that there is nothing outstanding on the title ?