Could I get stitched up buying an informal HMO?

Dear Joel,

You sound like you have very real concerns over the honesty of the vendor and agent in this purchase and your own protection.

I would make sure you take advice from your solicitor raising your concerns as their advice will be insured and you have protection under the law society.

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If it doesn't feel right then it probably isn't..................

Neil's right that your first step is to take legal advice. My thoughts are that even though buyers are liable for costs if pulling out between exchange and completion of contracts, that the ownership becomes valid only on completion anyway?

At that point, you definitely want vacant possession. In the meantime, if you have questions over the current tenancy arrangements, ask for copies of all AST's to be sent to your solicitor for review before you exchange.

On completion - change the locks!

HMO's are not only subject to local licensing but also any mortgage lender needs to know if it's being rented out as a standard AST or as an HMO too. Not all lenders accept HMO properties as security under their criteria, so any 'HMO' arrangement that is not agreed by the lender could be subject to a breach of mortgage terms, and the serious consequences that the lender would be allowed to impose.

And this is therefore a word of caution and advice to all pseudo-HMO landlords. If your property is mortgaged and rented out as an 'HMO' albeit the mortgage is a standard BTL product, please contact a mortgage Broker who can help put things 'legal' and proper again.

Howard
http://www.property118.com/member/?id=314

Hi Joel,
you don't say if you are buying to live in or buying to let. If you are buying to live in, and are buying with a mortgage, it's usually a condition of the mortgage that there is vacant possession on your purchase, so this is an avenue that your solicitor should check and ensure. If you are buying to let, then this is a bit of a grey area in that most lenders allow the transfer of tenants, usually with the provision of a new AST, which has to be administered by the solicitor in any case to protect their situation.

Also, ask yourself these two questions; what does the vendor have to gain by leaving a tenant in there? Not a lot, probably, then ask yourself this; what does he have to lose by leaving a tenant in there? An awful lot I reckon.

quite simple really. immediately before completion you need to inspect that the property is empty. if it is phone the solicitor to release funds, and change the locks whilst still there. you will need to have a clause in the contract that you will need access immediately prior to completion. if no VP then completion will be delayed.

You can also ensure that your solicitor inserts a clause into the contract that exchange is on the basis of vacant possession on completion.
As I'm not legally qualified you will need to ensure you take proper guidance but I know from personal experience whenever we've sold a property that is tenanted at the time an offer is accepted but due to be vacant by completion our solicitors have had a clause inserted into the contract to this effect. It may be wise to use a solicitor who has experience in this area.

Reply to the comment left by "John Constant" at "29/04/2015 - 11:05":

Hi John,

I was thinking that if the vendor had a controlled tenant in one of the rooms and wanted to hide this from me he could hatch a deal with the controlled tenant such that if he could sell the property at a good price, he could pay the controlled tenant say 5K to dissapear for a few weeks on holiday and then return back and claim he knew nothing about any sale? THis way the vendor gets rid of the house to me, the controlled tenant gets 5K and still has his tenancy in place. I would then have legal hassles I guess. This obviously sounds quite messy but what would happen in a situation like that? This situation I desribe could happen if the vendor had bribed the controlled tenant in the one room couldnt it?

Reply to the comment left by "John Constant" at "29/04/2015 - 11:05":

I am planning to buy this property to rent it out. There will be no mortgage in the property.

Reply to the comment left by "Neil Patterson" at "29/04/2015 - 10:24":

To tell the truth I dont trust anyone in business and infact the friendlier they appear and open, the more cautious I tend to be. I dont have any reason to distrust the vendor but I was just wondering on how to cover myself.

My thinking was this - the agent has told me the house will be empty in 2 weeks, I go and check and it is empty. My solicitor then excahages and completes and then I get a knock on the door and a controlled tenant waves a bit of paper to say he has a long term tenancy. I guess I would have a legal case with the vendor at this point for selling me a non vacant on completion property but what if the vendor dont care about the law and runs off quickly abroad? I guess the solicitor will say to me that it was offered empty and you checked it was before completion and we asked the vendors solicitor to confirm it was going to be sold empty and thats all we could do.

What happens next, am I just stuck in legal chaos?

Reply to the comment left by "Joel Hearne" at "30/04/2015 - 11:43":

unlikely scenario i think, but you would have the defence of equitable estoppel.