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Homeowners are required to pay many different bills, including utility charges like water or electricity, mortgage repayments, council tax and more. If you have fallen behind on paying some of these bills then it can create some questions about selling the leasehold or freehold property, although getting a quick and competitive offer from a buyer is still feasible.
- Having arrears or overdue bills when trying to sell your property
- Are you legally allowed to sell a home when you have overdue bills?
- Will you or the buyer be responsible for paying your arrears?
- Preparing your house or flat for sale when there are overdue bills
- Four methods to sell property with arrears
- Frequently asked questions about selling a home with overdue bills
Having arrears or overdue bills when trying to sell your property
If you are planning on selling your leasehold or freehold property, it’s possible that you could be experiencing a situation where you have missed one or more payments for a major regular charge that applies to your home. These overdue debts can quickly add up to a prominent financial burden, becoming a key factor to consider when you try to sell the property.
With cost of living issues affecting many people across the UK, there are several different fees that homeowners might have to pay which could be easy to fall behind on, including:
Council tax: This is a mandatory charge that local authorities impose on leasehold and freeholder property owners throughout England, Scotland and Wales, as the UK Government’s website notes. Council tax payments raise funds to pay for a wide range of services and amenities provided by local authorities for within their jurisdiction, ranging from fire and police protection to street lighting, free libraries and much more.
Service charges: If you own a leasehold property, you will likely pay a service charge to the freeholder. This is a fee that other flat leasehold owners in the same building will also pay to the freeholder, often on a monthly basis, and they use the funds to pay for services that benefit the entire block of flats – such as rubbish collection, general maintenance, property insurance and more.
Ground rent: This is another charge that you will have to pay as a leaseholder, and it’s a fee that you owe them, generally on a yearly basis, as part of the terms of the lease agreement through which you own the flat for a set period. Lease agreements are legally binding and you’re required to pay the ground rent, but if you’re experiencing a financial shortfall then it’s possible that you might have difficulty in keeping up with paying this on time.
Utility bills: If you are responsible for paying utility bills at your home, including for water, electricity, gas or similar charges, it’s possible that you might have falling behind on paying these. That can happen for many reasons, such as a sudden financial difficulty as the result of an illness in the family or any other explanation. These bills are typically charged on a monthly basis, and the balance that you owe on them will continue to add up whilst they’re unpaid.
There are several other charges and bills that you might have to pay at your existing property for which it’s possible to get into arrears. This guide explains how such overdue payments may affect the sale of your house or flat, and offers tips on the best ways to sell a property that has arrears and still manage to attract a speedy and competitive offer from a buyer.
Are you legally allowed to sell a home when you have overdue bills?
Leasehold or freehold homeowners that have unpaid and overdue bills could face a lot of stress when trying to sell their property, with concerns about how it may affect attracting a buyer.
In some cases, falling behind on your bills can create questions over the future ownership of the property that you’re trying to sell. For example, if you took out a mortgage to pay for the purchase of your current house or flat but have since missed many of your required monthly loan repayments, the lender could move to repossess your home and sell it. Mortgage providers do this when they have no other options for trying to recoup the remaining debt amount.
Facing repossession of your property can be a very stressful situation but it might also take a long time. There are many steps that the mortgage lender must go through before they can successfully repossess and sell your home, as the charity Shelter notes. That could give you sufficient time to find a buyer for your property before repossession happens, and then some of those funds may be used to pay off the loan debt.
But the other types of arrears that you might have for a property – utility bills, a service charge or ground rent – cannot affect your legal ability to seek a buyer for your flat or house.
A leaseholder doesn’t have any right under existing laws or rules to prohibit you from selling the property, but they will retain the full ability and right to sue you to recover the arrears in the future even if you sell the property, and the next guide elaborates on this outcome.
Similarly, a utility such as a power company or water provider does not have any legal authority block you from selling your leasehold or freehold home.
Will you or the buyer be responsible for paying your arrears?
For almost any type of overdue bills that you owe which are connected to the property that you are attempting to sell, you will likely remain legally liable for paying off that debt. In practically every case, any debts you have incurred as a result of being late on your charges and bills will transfer with you as you move, and not be the responsibility of the next owner of the property.
Council tax, for example, is charged to the current freehold or leasehold owner of a flat, house or other type of property, and you will be responsible for paying any council tax up until the date on which you can prove that you were no longer the owner of the property. That means a local authority could file litigation against you to pursue repayment of outstanding council tax even after you sell the home where you had arrears, as they seek to clear the remaining debt.
With mortgage arrears, you will remain legally responsible for clearing this debt – it will not transfer to the next owner of your property. That’s because the terms of the mortgage agreement that you signed will have made clear that you are committing to the repayment plan, and that you will be responsible for either making those payments or being sued by the lender to recoup those costs if you have arrears.
The same applies for utility bills, as you will remain liable for paying the water, energy or other charge for as long as the provider can claim that you were the legal owner of the home. There are many households across the UK that are struggling to keep up with paying these bills given soaring electricity costs, as a recent story in The Telegraph explains.
For leasehold properties, your obligation to pay service charges or ground rent will terminate on the date that you can prove by law that you no longer were the owner of the home. However, if you have built up arrears with these or other fees, the freeholder will retain the ability to sue you in an attempt to win a court order that requires you to eventually pay back the overdue amount.
Although you will remain liable for paying your outstanding debt to the utility provider, you should take steps to ensure that the service is either terminated on the day that you move out of the property you are selling, or is transferred to the new owner on that date. This will help you to establish from a legal point of view that you are no longer liable for the utility at that home.
Preparing your house or flat for sale when there are overdue bills
As you get ready to sell your leasehold or freehold home, you’ll need to decide whether you are going to try and resolve whatever arrears you might have before attempting to find a buyer.
If you have the funds available to clear your service charge debt, overdue ground rent or any other arrears before selling, this can help to significantly reduce your stress with selling your flat or house. Once those debts are paid off, you will not need to worry about them anymore and they will not need to be a factor in your budget for what you can afford for your next home.
Some homeowners, however, may not financially be able to pay off certain overdue bills before selling their property, or they could be challenging some charges and hoping they get withdrawn. If this applies to your scenario, you may have to budget for the purchase of your future property by accounting for the potential for being forced by law to pay off the debt.
Regardless of whether you are able, or willing, to resolve your existing arrears before selling your property, there are some steps every owner can take to improve their odds of an offer.
First appearances matter when selling a house or flat, and that’s why you should take some time to tidy up the exterior of your home. This can include low-cost tasks such as a fresh coat of paint for window ledges, replacing any broken glass, fixing missing roof tiles as well as mowing and weeding any yard, garden or other green space that you have.
Inside the home, you can undertake similar steps like cleaning every room, removing as much clutter as possible, and keeping pets locked away during any viewings where potential buyers come to tour the property. These actions require minimal effort but can help to make your home appear more valuable to prospective buyers, as The Advisory website notes.
If your property has a larger-scale problem, such as subsidence or another structural flaw, you will also need to think about whether to address this before attempting to sell the property.
The benefit of fixing a major negative issue with your flat or house is that it would prevent a situation where someone wants to buy your home but makes a significantly reduced offer, subtracting the cost they expect to face to address the problem as the next owner. Therefore, investing upfront in fixing a problem could possibly lead to receiving better offers.
But there are many homeowners who simply will not have the time, money or interest in pursuing repair work that could take many months and a lot of funds to resolve. If this applies to your situation, the good news is that there are still options for getting a competitive and quick offer on your property, such as selling to a quick buyer like LDN Properties. These companies can buy almost any home, and complete the process within just a handful of weeks, and the next section of this guide details this selling method as well as three other choices.
Four methods to sell property with arrears
Deciding on which approach you would like to use for selling your freehold or leasehold home with overdue bills is one of the most important choices that you’ll make, some people even consider selling property by raffle. The top four options are selling through an estate agent, selling with an auctioneer, selling to a quick home buyer or selling without any help.
To help with identifying the ideal approach for finding a buyer, first note down your top priorities with selling, which should include whether you can accept paying any commission, your preferred property sale price, and the amount of time you can wait to sell. Then compare this against the specifics of the four options below and you’ll discover the closest match.
Note that there are pros and cons associated with the various choices, ranging from the benefit of being able to avoid fees when selling to a no-commission quick home buyer like LDN Properties through to the drawback of perhaps waiting a year to sell when doing so alone.
Selling through an estate agent
This method of selling can reduce your stress because the estate agent will put in most of the effort to find a buyer. Their work includes preparing a listing that features photographs of your home and describes it, as well as taking care of viewings where prospective buyers are allowed to tour the property, and hearing offers, hopefully taking one through to exchange of contracts.
But for doing this work, estate agents will usually charge owners commission based on the property sale price, usually within a range from 1.15 percent to 1.40 percent. You’ll face increased expenses when selling this way, as the fee is taken out of the final sale proceeds.
Selling this way is not very fast, and you should be prepared to wait more than a year before you get a genuine offer from a buyer. Also note that someone can make an offer but then cancel it, without facing any penalties, so long as the contracts haven’t yet been exchanged. You’ll then have to start over with looking for a buyer, which may add many months to the timeline.
Selling with an auctioneer
Much like estate agents, auctioneers will be responsible for most of the major tasks involved with generating interest in your house or flat from buyers. This includes creating and marketing a listing, along with hosting the auction and overseeing the successful sale of your property.
The average auction house will require that you pay them commission charged at a rate of 2.5 percent of the property’s final auction sale price, in the event that your home sells. This fee is deducted immediately from the auction proceeds, so you’ll have to add that to your costs.
You will not experience the fastest possible sale using this option, because there is a lot of waiting involved. After you decide to sell your home, there will be a delay of several weeks or even longer whilst your listing is advertised, to generate interest from buyers in the auction. And if the property sells at the auction, the winning high bidder who will be the next owner usually has about a month to complete their tasks to finalise the purchase, like signing legal papers.
Selling to a quick home buyer
Quick home buyers are businesses like LDN Properties that have the funding available to purchase flats or houses immediately, meaning they don’t have to wait for many weeks or even months to initially get approval for a loan to fund the transaction. This cuts the timeline when selling to a few weeks, which covers exchanging contracts and paying you the proceeds.
These companies can also make fast and fair offers to purchase practically any leasehold or freehold home regardless of its age, condition, location, shape, size or type. This can be useful if you’re trying to sell a "problem" property that has structural damage or another drawback.
By way of example, LDN Properties launched more than a decade ago and since that time it has made a wide range of purchases throughout the UK. The long list of homes that the company has bought includes properties with arrears or overdue bills, as well as houses with a flying freehold, homes with a boundary dispute, flats located near a motorway, properties with equity release, flats with a regulated tenancy, empty houses and many other situations.
Another pro of selling with this approach is that the honest quick buyers will never make homeowners pay any commission when purchasing their properties. This ensures that you receive a speedy, no-hassle and straightforward method for selling your home with arrears.
Selling without any help
The fourth choice for selling your home is doing so on your own, which puts the burden on you to handle every task – from the development and advertising of a listing through to taking care of the viewings and also fielding any offers that you might receive from serious buyers.
This is a huge amount of work and it will take up a lot of your time, so you should only consider this option is you have a friend or family member who has sold a home with arrears in the past and is open to helping you sell your property for free, or if you have that experience. If neither scenario applies, it could be at least a full year before you are able to find a buyer.
Perhaps the only obvious advantage of this method for selling is that you will not need to pay commission to an auctioneer or estate agent for helping you find a buyer. But this saving could be wiped out by the money that you’ll spend on advertising your property and other costs.
As an alternative, you could sell your home to a zero-commission quick buyer, because you would still avoid having to pay any fees, but you’d get the additional advantage of completing the sale of your property within a handful of weeks, rather than many months or longer.
Top queries and answers about selling a property with overdue bills / arrears
Property owners thinking of selling fast often have some questions to ask , ranging from the condition a property has to be in before selling through to selling with unpaid ground rent. Here are some of the top questions we’re asked about selling property with overdue bills / arrears:
Your top questions when selling a property with overdue bills / arrears
If you are the owner of a freehold or leasehold flat, house or other type of residential property, you have arrears if you have fallen behind in meeting your monthly or yearly mandatory payment for various charges, including council tax or utilities. The remaining debt that you owe for these arrears needs to be a factor as you plan a budget for the sale of your home.
There are several charges that could apply to your property for which it can unfortunately be relatively easy to miss one or several payments. These fees can include service charges and ground rent at leasehold flats and other properties, council tax which local authorities require leasehold and freeholder homeowners to pay, energy and other utility bills, and more.
Generally, the fact that you have arrears for a certain charge will not prevent you from selling your home in any way. But an important note applies to mortgage arrears, because if you have missed many home loan repayments then the mortgage provider could move to repossess your house or flat and then sell it, using the proceeds to clear whatever debt you own them.
Regardless of the type of debt that you owe associated with your existing freehold or leasehold house or flat, whether that’s council tax arrears, unpaid service charges or ground rent, overdue utility bills and other debts, the legal obligation to pay off this debt will remain with you. Even if you sell the home, that duty stays with you and the creditor could sue you to recoup the money.
There are several simple, fast and low-cost or no-cost steps you can pursue to make potential buyers view your property as more valuable. Inside the home, these actions include removing as much clutter as possible from rooms and getting them all as clean as feasible. Outside the property, consider mowing any green space, replacing missing roof tiles and similar tasks.
If you sell your freehold or leasehold flat, house or other property using the services of an estate agent or auctioneer then you will need to pay them commission, which will be deducted right away from the sale proceeds, adding to your costs. But if you sell on your own or you sell to a true no-fee quick buyer such as LDN Properties, you will not have to pay any fees.
Selling your property to LDN Properties or another quick home buyer is typically the fastest approach, as this should only take a few short weeks, and this includes paying you the proceeds and the exchange of contracts. The other methods of selling with an auctioneer, selling with an estate agent or selling without any assistance might all take several months.
