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Buying and owning a property can be plain sailing. Sometimes however things can go painfully wrong, costing you money, problems or inconvenience. Here are some of the disasters or pitfalls to avoid…

1. Not having the money to complete a purchase

If you purchase at auction you will normally be asked to pay a 10% deposit and the balance in 28 days.

If you buy-off plan you will typically be asked for the balance of purchase price when the property is physically completed and ready to occupy.

It is a really bad idea to agree to buy in these or similar situations where you are not 100% sure you have or will have the balance of purchase price to legally complete the purchase.

If you don’t, you will lose your deposit, will be in breach of contract and could face costly legal proceedings forcing you to complete or asking for compensation for your failure to complete.


2. Overlooking building or contents insurance

There may be occasions when you are tempted not to insure or to skimp on insurance in order to save a few pounds.

There will also be occasions when it is your responsibility to insure – but you fail to do so because of lack of knowledge.

Always consult your advisers on the matter of insurance when buying a property. With the average sale, you are responsible for insurance not on completion – as you may assume – but when you enter into a legally binding contract on exchange of contracts.

It will be a nightmare, to put it mildly, if a property is seriously damaged or destroyed and you are without insurance cover to meet the expense of reinstatement.

3. Not protecting a co-ownership share

If you buy a property jointly with someone else, take care to protect your co-ownership share or interest in the property.

Ensure a Trust Deed or Deed of Trust is prepared – dealing with issues such as a sale of the property and responsibility for its maintenance.

Decide if the property is to be held on a joint tenancy basis (50:50) or a tenancy in common basis – with the percentage share of each co-owner set out according to their contribution to the purchase price.

Acrimonious or expensive disputes at a later date can be minimised if these issues are addressed at the outset.

If you hold property on a joint tenancy basis and fall out with your co-owner, consult a lawyer on “severing the joint tenancy” in order to protect your share or interest in the property.   


4. Not prioritising mortgage payments

If you ever get into financial difficulties, a key thing to do is to prioritise your debts, ensuring that you pay those that are most important – the ones which will cause most harm, loss or damage to you if you don’t pay them.

Perhaps the most important debt of all is the mortgage on your home and you should treat it accordingly.

First, make sure you build a mortgage reserve to draw on in the event of unexpected setbacks – such as loss of job, ill health or large rises in interest rates.

Seek professional advice as soon as payment difficulties arise and explore all practical options to pay off the arrears.

Consult your lender at an early date and see what help or assistance they are able to offer.

Residential lenders are bound by a code of conduct and rules of court which make possession proceedings a last resort – however you should fully engage with your lenders and take all possible steps to clear the arrears promptly.

If you fail to deal with mortgage arrears adequately, your lender can take possession proceedings, obtain a possession order and then send in bailiffs to evict you and make you homeless. 

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5. Not taking lease obligations seriously

If the property you own is leasehold, your rights and obligations in relation to the property will be set out in a legally binding lease.

Among your main obligations will be paying ground rent and service charges for services or work provided by the lessor or managing agent.

Failure to pay can lead to forfeiture proceedings which can lead to your lease being terminated and eviction.

There is statutory protection against forfeiture in the case of residential property, but in the end lawfully due sums for ground rent or service charges must be paid.

Even if you avoid forfeiture proceedings, you are likely to be responsible for the legal and other costs and charges which apply.

As a last resort, a court will forfeit your lease if you fail to pay sums lawfully due – and that would be a disaster on many levels.  

Service charges can be unexpected and run into several thousand pounds – for instance if major works are required – and so it is good practice to have a reserve to deal with such an eventuality. 

Have you experienced a property disaster? How did you deal with the situation? Are there any tips you would like to share?

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Dalton Barrett
Rebel Property Coach

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