The perils of buying property at mortgagee sales have been outlined in the July newsletter of Dunedin law firm Gallaway Cook Allan.
An article over the names of solicitor Rory Ross and two of the firm's partners, David Smillie and Nathan Adams, warns property buyers that a contract connected with a mortgagee sale will "almost certainly" be weighted "heavily in the mortgagee's favour" and involve "factors" outside the mortgagee's control.
"These factors may include a very unwilling and obstructive owner-occupier who is being forced from their home.
"This is a problem that the purchaser may be left to deal with, as the mortgagee will exclude responsibility."
The Otago Daily Times reported last month that in May there were five times as many mortgagee sales in Otago as in May last year, with the Queenstown Lakes district the hardest hit.
The data, from Terralink International, showed 247 registered mortgagee sales nationally in May, compared to 88 for the same month last year.
In Otago, there were 16 mortgagee sales in May, compared to three in May last year.
There were 11 in March and seven in February.
A spokeswoman for Gallaway Cook Allan could not provide an example of problems occurring in Otago.
The article noted that the mortgagee was usually unwilling to negotiate terms with the purchaser and was likely to adopt a "take-it-or-leave-it" stance.
"It is not uncommon for purchasers to face difficulties after settlement, such as having to evict a previous owner-occupier or having to deal with damage caused to the house by the disgruntled owner."
The article warned that contracts were commonly unconditional from the outset and they could also contain terms allowing the mortgagee to cancel the agreement, prior to settlement, if the owner paid the debt.
It advised buyers to undertake due diligence and get legal advice before signing a contract.
