to take legal action over barrat homes "dream home" scheme that has screwed up my life

[twojobsjane]

Back in 2007 we really needed to get a secure house after several very bad rented experiences. We didn't have a deposit so we opted for a scheme with barrat homes where they lent 25% and we got a normal mortgage for 75%/from the Halifax.

We knew at the time that after 10 years we would need to pay back the 25% but were assured by several people that it would increase in value and so could just remortgage with the equity to pay this off.

Fast forward 8 years and the house is now worth 80k less than we paid and we have no equity in the property.

Now where this gets dodgy is barret homes legal stuff say we either have to pay back the original sum borrowed or 25% of the current value, whatever is higher! So they win either way if it goes up or down.

Aibu to think this is very shady practice and I should take legal advice?

Ppi was a hidden payment a deposit for a mortgage isnt hidden

You made a bad bargain there. The terms are pretty advantageous to Barratt, in that it potentially allows them some 'free money'. But I'd have more sympathy for you if you hadn't been trying to get some free money yourself. Because that's all you're doing when you expect a property to magically rise in value beyond inflation and the value of any work you've done to it. You were basically expecting to pass the cost on to the next person down the line, someone who bought in later than you. That's the whole basis for the ridiculous property Ponzi we have going now. You weren't the only one to buy into this, of course, but you were no better than Barratt either.

On practical terms, unless you're stony broke I probably would get some legal advice to check if you've a case for misrepresentation, depending on who told you the price would increase. I wouldn't be too optimistic, but it's arguably worth dropping a couple of hundred quid for even a small chance to save many thousands. Wouldn't liken this to PPI though. People in that scenario were sold products that were clearly unsuitable for them because they had pre-existing conditions or were pensioners. Nothing that's been said here suggests this deal was intrinsically unsuitable for you. Otherwise, I echo the advice from previous posters: get in touch with Barratt, see if you can make arrangements. They're likely to be willing to negotiate, because pursuing you for what you've not got won't make them any money. Paradoxically, being in a deeper financial mess can sometimes be to your advantage. You have sod all for them to take.

They haven't overvalued the property. A house is worth precisely as much as people are prepared to pay for it. I bet the other houses in the area on sale at the time went for much the same price?

And remember, if they hadn't lent you the £25,000 you would have had to borrow it elsewhere and would by now have paid out an awful lot of interest.

I'd say telling you as part of the sales talk that the value of your home would definitely go up etc. is most definitely enticing you, and that much of the financial misselling we are now uncovering followed similar ground.

OP, are you certain that the 25% is not of a current valuation. When I google, I find reference to the sum being 25% of the value when the loan is paid back.

Mrsjayy

Ppi was a hidden payment a deposit for a mortgage isnt hidden

Not necessarily. People have received ppi compensation if it was inappropriate for it to be sold, not just if it was hidden.

Barrett have been quite upfront (from what I can see by googling) that the shared equity schemes were a way of keeping sales going once mortgage lending had more constraints. Therefore the ethics of it are a bit dubious. in its most basic form it could be viewed as "the bank won't lend this person x amount because the bank doesn't feel they fit the criteria. We'll lend the difference to ensure we get our sale. The buyer who the bank didn't think suitable can take a risk on rising values"

All legal & presumably water tight but also a bit, I don't know, yacky?

paxtecum

Who is being mean? The OP is getting advice, and taking on the chin a bit of 'you've had your head stuck in the sand', but i'm not seeing mean behaviour at all.

The thread is hopefully helping the OP. Claiming that people are being mean, when they are not, doesn't really help anyone.

so very

It's a barrett shared equity scheme rather than the government's help to buy (i think).

There are lenders who will lend up to 95% of the value of your property in order to buy out the shared ownership, maybe speak to a mortgage broker? Don't forget that by having a 75% Ltv mortgage product instead of a 90/95% product you have saved a lot of money in interest.

I looked at this when it was available, I thought what you paid back could be less to a degree, what is the wording in the contract? have they written to you asking for an amount?

I bet they let you pay it back over a longer period but you will have a huge interest rate added on top

Have you gone through all the paperwork carefully? Is there nothing about extending the loan?

twojobsjane
We knew at the time that after 10 years we would need to pay back the 25% but were assured by several people that it would increase in value and so could just remortgage with the equity to pay this off.

Theycallmemellowjello
If they made oral representations to you that contradict the written contract you may have a case.

I'm thinking along the same lines as jello (although I think some contracts claim to supercede any oral/previous advice given). Were the people that advised you about the increase in value/providing assurances from Barratt's? In which case it sounds like possible misrepresentation. If so, do you have anything in writing to evidence the advice? That said, even if you did have a case, it would be a hideous (and expensive) process taking a national company to court.

Another thought is that there are going to be numerous people in your situation as the people who bought into the scheme were people unable to save a deposit, given the economic climate over the last ten yeas how many will have the money for Barrett?. It is going to get very expensive for them if they end up forcing people to sell, especially if the houses don't sell and there is negative equity and the money goes to the mortgage company first.

I bet you can do deal. Save as hard as you can, sell what you can and in two years negotiate with them.

Op your situation is shitty and i really feel for you. If i was you i would ring barratts and find out who owns your debt (its unlikely to be barratts) and then contact them direct to negotiate.

Personally, similarly to mortgages, i believe housing companies should have an obligation to do an affordability check before they agree these ridiculous loans. If we'd have had one done our lender would have seen we had no viable way to raise the equity amount over ten years, as the mortgage itself had us stretched. We were just naive and young (and ended up quite lucky). We were also never informed of any sort of indemnity insurance.

Imagine if a bank was lending these sums of secured funds without any fork of repayment vehicle in place- we'd all be screaming irresponsible lending!

Fascicle- A contract might purport to exclude any oral reps but with a consumer contract IMO that's unlikely to make a difference if there was clear oral misrepresentation. There are also lots of procedures derived from case law which mortgage lenders are supposed to follow in terms of making sure borrowers receive independent advice, making it clear that they are not providing advice and so on. If these aren't followed then the lender might be exposed to risk. It's not totally clear whether Barrett was acting as a mortgage lender or not so impossible to say what it's obligations were, as well as there not being enough to say what it actually did. Whether these kinds of claims succeed really is highly dependent on the surrounding circumstances and I don't think there's enough information here to go on. But this is actually quite a complex and still developing area with a lot of mutually contradictory CA cases which is why I think that advice from laypeople is not useful. Op needs to seek legal advice (and probably debt counselling for which the cab is a good first stop, as pp have mentioned).

OP and her partner were in jobs with double digit pay rises and bonuses.
If Barrett's were forced to do affordability checks, they might well have passed.

No one has been "mean". How ridiculous to suggest it. I've been in a similar situation with an endowment that underperformed by £15k. I had to switch the shortfall to repayment and it bloody crippled us but we did it and are now mortgage free. Paying for a house from scratch is never easy and I do empathise with the op but it's her problem to resolve which she thankfully appears to be addressing.

But a bank would never base affordability on someone probably getting a good payrise or bonus. It would have to be something guaranteed. We assumed my bonuses would help pay but they soon ceased to exist too but not once did anyone from the builders or finance company ask how we'd repay, we were just told five years down the line house prices would go up enough that we could release the equity in the house.

We were also only given the option of using two mortgage providers (with really high rates) we were told this was non negotiable as they were alledgedly the only deals for shared equity which turned out to be complete crap! The builders just got a referall fee!

If the op can go to FOS she won't pay for that service and they will rule on the case - the product relates to loans and there are plenty of regulations about the selling of mortgage products.

But CupCakes and OP did you only use the house developer's (or their referal) conveyancing solicitors?

Always pay for independent professional advice. You don't have to use the developer's people - ever. Question why they would want you to. It's never the cheap option.

Maddening - you can only use the services of the Financial Services Ombudsman (FOS) once you have gone through and exhausted the company's own complaints procedure. The FOS will not hear your case until then.

Naice- we were given a choice of two solicitors by the builder and told we had to use them. Obviously i know better now but back then we were practically kids who had no knowledge of this stuff. And to be fair isnt that the target customer of these builders? First time buyers who are a bit naive? They dont seem to have any ethics at all

This is exactly why I don't think these schemes should be allowed. If someone can't save over a few years for a normal house deposit- how on earth are they going to pay a mortgage and save to pay back the deposit 10 years later? Not only that, they are always on new builds which always drop in value as soon as they have been purchased.

I have 2 family members in similar positions and I dread the time when they have to pay back their deposits.

OP it sounds like you are now being sensible. Good luck!

I now think that they overvalued the property by at least 25%

If this is true, how could you not have spotted it? Did you not look at house prices at the time? Did you not get a valuation? What on earth were you thinking in agreeing to pay 25% more than it was worth?

You wouldn't do that with anything else, would you, why a house?