Who pays the legal fees in a forced house sale?

A forced house sale is not a scenario anyone wants to find themselves in, whether they are the party attempting to force the sale, or the defendant. However, these situations aren't unheard of - and they can be messy.

So if you find yourself in a forced house sale, who is responsible for the legal fees? Do you have to pay both the court fees and the conveyancing fees? Let's find out.

Who pays the legal fees in a forced house sale?

A forced sale can happen for any number of reasons - but we've managed to narrow it down to the five most common. Let's see what they are and who is responsible for the legal fees in the scenario.

1. Defaulting on your mortgage

If you fail to make regular mortgage payments, your lender can initiate foreclosure proceedings, ultimately leading to the forced sale of your home to recover the outstanding debt.

Who's responsible for paying the legal fees?

Generally, in the case of mortgage default and foreclosure, the homeowner is responsible for paying their own legal and conveyancing fees. The lender may also incur legal costs, which could be added to the amount you owe.

What about situations involving an 'interest-only' mortgage?

Interest-only mortgages require borrowers to pay only the interest for an initial period (usually several years) before the principal repayment is due. Planning for the repayment of the principal, whether through a sale or other means, is essential.

If a forced sale is triggered by a mortgage default, the process closely resembles that of other mortgages. The lender will commence foreclosure proceedings to recover the unpaid debt.

In a forced sale with an interest-only mortgage, the sale proceeds are primarily directed toward repaying the outstanding mortgage balance. Any extra after settling the mortgage is distributed to you, the homeowner. However, if the sale doesn't generate enough proceeds to cover the mortgage debt, you might still be liable for the remaining amount!

As with standard mortgages, you, the homeowner, are responsible for covering your own legal fees. In some cases, these fees are added to the outstanding debt owed to the lender.

2. Splitting up with your partner

In the event of divorce proceedings or separation, if you and your spouse can't agree on the division of the family home, a court will order its sale and the distribution of the proceeds.

Who's responsible for paying the legal fees?

The responsibility for paying legal and conveyancing fees can be negotiated or determined by court order. In some cases, both divorcing spouses may share these costs, while in others, one party may be ordered to cover the expense.

It's worth noting that forced sales are mainly applicable if you're married to your partner, or own the property as joint tenants together. If you're not married to your partner and do not own the property jointly, the rules for property division and the rights to proceeds may differ.

3. Probate or estate administration

When a house is part of an estate, it can be sold to settle any financial arrangements and distribute assets among heirs and beneficiaries. This can happen if the deceased person has specified the sale of the property or if there's no will (this is called intestacy).

Who's responsible for paying the legal fees?

The expenses related to the sale of a property as part of probate or estate administration are typically paid from the value of the estate. The estate will cover legal and conveyancing fees as part of the process, and the remaining proceeds from the property sale will be distributed among beneficiaries.

4. Declaring bankruptcy

If you or your business declares bankruptcy, your assets, including your home, may be sold to repay creditors and settle debts as part of bankruptcy proceedings. This may involve the county court issuing a charging order, and then finally an order of sale.

Who's responsible for paying the legal fees?

In a bankruptcy case, the legal and conveyancing fees related to the sale of your property are typically considered part of the bankruptcy proceedings - as such, they're usually paid from the assets of your bankruptcy estate.

5. Compulsory Purchase Order (CPO)

In cases where a government authority or local council needs a property for public infrastructure projects, they can issue a CPO, which forces the sale of the property. The homeowner is usually compensated for the fair market value of their home.

Who's responsible for paying the legal fees?

In a CPO scenario, the government authority or local council that initiates the forced sale is responsible for covering the legal and conveyancing fees associated with the purchase. Homeowners usually receive compensation for their property's fair market value, and this compensation includes these fees.

Each of these situations involves different legal processes and motivations for a forced house sale, but in all cases, the sale occurs due to specific legal or financial circumstances that necessitate it.

Who pays the fees in a forced sale of an investment property?

Buying an investment property is a good way to earn some extra income - but, as with any asset, it can be targeted with a forced sale. If you've invested in a property that is being forcibly sold, the responsibility of legal and conveyancing fees can vary depending on the circumstances:

If the forced sale is a result of financial distress, like a mortgage default, the property owner is responsible for covering their own legal and conveyancing fees.

If it's a jointly owned property where multiple partners or stakeholders invested, the allocation of legal fees may be outlined in your contractual agreement, specifying who is responsible for the legal costs.

In situations involving disputes between property co-owners and stakeholders, the responsible parties for legal fees can be determined through negotiation, mediation, or in a worst case scenario, a court order.

If a sale is forced due to your bankruptcy or the property owner's bankruptcy, the legal and conveyancing fees are paid from the assets and proceeds of the sale.

How much are the legal fees involved in a forced sale?

There are a lot of variables to consider in a forced house sale, with most of them affecting the final price. As such, you could be looking at legal fees from £1500 to £5000 - and that's just for standard cases. In some instances, legal fees may reach into the tens of thousands, depending on the value of the property and the intricacies of the case.

What affects the legal fees involved in a forced sale?

1. Property value: Higher-value properties may involve more complex legal work and, therefore, higher fees.
2. Geographic location: Legal fees vary by region, with more expensive areas generally having higher legal costs.
3. Case complexity: The complexity of the forced sale can significantly affect legal fees. For example, resolving disputes, addressing outstanding liens, or dealing with multiple parties can make the process more costly.
4. Choice of legal professional: The choice of legal professionals, such as solicitors or conveyancers, can influence fees. Some will charge higher fees based on their experience and expertise.
5. Hourly vs fixed rate: Some legal professionals charge hourly rates for their services, while others may offer fixed-fee packages for specific services, such as conveyancing. Make sure you clarify the payment plan upfront!
6. Additional costs: In addition to legal fees, there may be disbursements and other associated costs, such as court costs, land registry fees, and search fees, which can vary.
7. Progression towards resolution: If the parties involved are cooperative and able to reach agreements quickly, legal fees may be lower compared to situations involving prolonged court proceedings.

Summary: It depends...

If you need to force a house sale, or are on the receiving end of a forced sale, it helps to know who is responsible for the legal fees. Hopefully, you now have a better understanding of the fees involved within a forced sale, as well as the difficulties involved in providing an accurate estimate.

Every case is different, and each is judged - and priced - according to its complexity and the value of assets in question. For more answers to questions on forced sales, such as 'can a joint owner force a property sale?' check out our guide 'What circumstances can you force a house sale?'.