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Mortgagee and co-owner disputes

By Frank Higginson06 Oct 2011

It must be a sign of the continuing tough economic times, but in the last few weeks we have been relatively inundated with queries from clients about mortgagees taking possession of units and disputes between owners.

Here are some simple rules to operate by.

Mortgagee taking possession

A bank’s mortgage allows them to take possession of a unit if the mortgage is in default.

Normally, the first you will hear of this will be a letter from the bank or their lawyers directing you to deposit the rental monies to a new account. It will also direct you to deal with someone other than the owner. From our end, you can take this at face value. Feel free to call the person named in the letter to confirm that if needs be.

At that stage you should not send anything further to the owner of the lot without the consent of the bank. If the owner of the lot contacts you about anything, simply refer them to the contact person in the letter from the bank to discuss their issues.

Remember that you are agent for the owner of the lot. In simple terms, when the bank takes possession of the lot they are effectively the owner.

When it comes to tenants, irrespective of the length of a lease over a property, a bank has the ability to terminate it on no less than two months notice if it did not consent to the lease (which never happens in a residential tenancy).

The early termination of a tenancy agreement in these circumstances is not a legal issue that should be of a concern to a resident manager. If the tenant wants to argue with the bank, all you can do is refer them to the bank. It is not a fight you should be involved in.

Disputes amongst co-owners

When you operate a trust account you are a stakeholder for monies that are not yours. They belong to your clients.

This means that you should only deal with them as directed by those clients.

We have advised two clients in the last week who received conflicting instructions from the co-owners as to where the rent money should go. One wanted them sent to the existing bank account and the other wanted them sent to a new bank account.

In these circumstances, the very simple rule is to do nothing unless you get instructions from all co -owners in writing. The moment you pay it at the direction of only one is the moment the other one will be accusing you of theft, fraud or some other criminal offence.

You need to make it their problem to figure out where it is to be paid, and until they solve it you should not pay it to either. Don’t get caught up in their dispute.

In both of the above circumstances you should still charge your management and other fees. You have done the job for the month and deserve to be paid.