Mortgagee in Possession - Unusual Contract?

[lee]

Do you know much about property contracts and conditions on how to dismiss them after six months. I am looking at a property that is basically nearly mortgagee in possession and I want to live there for six months paying the current owner an agreed weekly amount and then at the end of the six months, I will decide whether I purchase or not. The chances are that I will probably just pull out at that time. The owner said that the bank will not allow a rental contract because of the problems getting the a tenant out. He said they may also require around $10,000 in a lawyers trust account.

Of course, I would want to get this back in full after the six months when I pull out of the agreement. The owner told me that he is currently about $10,000 in arrears with the bank but is obviously trying to hang onto the property so he can still try and sell it for a better price than the bank would. He purchased the property in 2010 for $385,000 and the bank gave him the full amount against the property. He has been trying to sell it for $390,000 but has been unable to sell at this price. He still owes $290,000 on his home loan.

My question is whether an agreement / contract is fairly standard in these situations and is my exit after the six months available and on what various grounds are available to me to exit the agreement and be returned my $10,000. Thanks,

 

[Worldly1]

Hi Lee
I’m a bit confused - why would you enter an agreement to purchase a house that you don’t want? It seems like a potentially costly game to play. You’re essentially putting a deposit down and want to make sure you can get out if you change your mind in 6 months?

If you simply want to rent, there shouldn’t be a problem with you having a rental agreement. In the rental agreement, you can include a clause about agreeing to end the rental agreement early on notice of a certain period that would satisfy the bank's concern about "getting a tenant out". You might want to have a look at the Consumer Affairs Victoria site or Fair Trading NSW or RTA Qld for more info - depending on where you’re located.

If you're actually going to buy the property, then I suggest you get some personalised legal advice from a property lawyer.

 

[James D. Ford - Solicitor]

Hi Lee

This query probably belongs in the Property Law Forum. Not sure if and how the forum can be changed.

This is a complex situation, and as Wordly1 has advised, you will need to obtain personalised legal advice. I can assist you with this. Please let me know if you want me to provide you with a quote.

The Contract you negotiate can be on any terms you are able to agree with by the current owner. It sounds like you will require a rental agreement (if the Bank consents) with an option to purchase at an agreed price attached.

Kind regards.