While our economy recovers from the recent global recession, signs of economic lags continue to make its presence felt through increasing numbers of mortgagee sales. Figures reveal that by November last year, 1,535 properties were brought to market as mortgagee sales compared to just 571 in 2007. The prevalence of mortgagee sales provides an opportunity for some buyers to potentially “grab a bargain”. However, buyers should remain vigilant as the risks attached to mortgagee sales are significant. DIFFERENCES IN AGREEMENTS Agreements used in mortgagee sales usually differ from standard Sale and Purchase of Real Estate Agreements whereby amendments are made to greatly favour and protect the mortgagee. For mortgagee sales, vendor warranties that are contained in standard agreements are usually removed, as is the obligation to provide vacant possession. There have been cases where previous owners or tenants have refused to vacate the property even though it has been sold. In such situations, the issue of removing unlawful occupiers becomes the new owners‟ problem. REMOVING UNWANTED OCCUPIERS The options for removing unwanted occupiers include obtaining and enforcing a trespass notice pursuant to the May 2012 – July 2012 Page 4 of 4 Swayne McDonald Lawyers Manurewa Office 09 267 2700 Botany Junction Office 09 265 2700 Postal: P O Box 75 442 Manurewa, Auckland 2243 advice@smlaw.co.nz Trespass Act 1980 and/or a possession order pursuant to the Residential Tenancies Act 1986 („the Tenancies Act‟). Section 65 of the Tenancies Act provides that a legal owner of a property can apply to the Tenancy Tribunal for a possession order that can then be enforced to evict unlawful occupiers. While in theory the process seems straightforward, the reality remains that whilst the buyer is obtaining a possession order, the risk of the property being damaged by the unlawful occupants is significant. PROTECTION AGAINST DAMAGE Mortgagee sales often leave behind disgruntled mortgagors (previous owners) and it is not uncommon for properties to be vandalised after the mortgagee has sold the property and prior to possession. Obtaining insurance cover for the property upon signing the agreement for its purchase is therefore highly recommended. If purchasing at auction, insurance should be arranged before bidding so that insurance cover is effected immediately upon the sale taking place. CHATTELS It is important to note that chattels (such as stoves, light fittings, curtains and carpet) are not included in mortgagee sales. This means that the previous owner is well within their rights to remove such items from the property, as they retain ownership of the chattels despite the mortgagee sale. CONCLUSION The lesson here is simple – know the terms of a mortgagee sale well and be aware of the risks. There are numerous other matters that a buyer should be conscious of beyond those discussed above. It would be wise to consult a lawyer prior to signing the purchase agreement – particularly when dealing with unit titles or cross leases. Doing so may prove a worthy investment considering the potential headaches it could save in the future.