If the house that they are transacting has been bought or sold less than five years ago, Conveyancing Solicitors in Northampton need to be especially careful.
When Fridaysmove’s approved solicitor Dawn Thomas advised clients on the purchase of a freehold property on Herons View, Daventry, NN11, she discovered that the most recent sale had been made within the previous five years, meaning that there was a risk that it had been a Transfer at Undervalue.
This term describes a situation where a house is sold for less than its market value. There are many reasons for this – it might be a gift, a private sale to a relative or friend, or the seller might face the risk of bankruptcy or foreclosure and therefore be forced to sell his house for cheaper than the publicly achievable price.
With a shortage of council housing and council properties’ rent increasing in recent years, Northampton is particularly at risk to see homeowners unable to pay off their mortgages or go bankrupt. Conveyancing Solicitors in Northampton therefore have to alert their clients to the risk of a Transfer at Undervalue.
The issue of Transfers at Undervalue explained by Conveyancing Solicitors in Northampton
The problem for subsequent buyers is that if the person who originally sold the property under its normal value goes bankrupt, the sale can be “set aside”.
This is particularly frequent where the original seller is a struggling company and sold the house to one of its directors in order to invest some of its assets in a seemingly safe haven. The idea is that if the company goes bust, at least the property will be out of the grasp of creditors. But UK insolvency laws demand that in this case, the sale must be reversed, i.e. undone.
The new buyer will not be forced to give up the property if he didn’t “have notice” of the Transfer at Undervalue. But the notion is defined rather liberally: If the price is found to be far below the normal market value, this counts as “notice”. In this case, if the buyer does not investigate, the courts might decide that he acted in “bad faith” and force him to return the property. The period for this can last up to five years.
For this reason, Conveyancing Solicitors in Northampton always check that the selling price was at the rate expected if the last sale dates back less than five years. If the price was right, they can continue with the sale, but if not, they have to make further inquiries.
Dawn therefore quickly proceeded to make the necessary searches and requested the required information from the buyers’ Conveyancing Solicitors in Northampton, Simmons legal department.