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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

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

268 replies

twojobsjane · 25/04/2015 09:27

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?

OP posts:
Floggingmolly · 25/04/2015 21:02

I'm an accountant.

SolomanDaisy · 25/04/2015 21:07

On that MSE thread which someone helpfully linked to, there are loads of people in the same situation. Without exception, Barratts are expecting them to repay 25% of the current market value. OP, are you sure you've got your facts straight here? Not that it makes much difference, since you don't have the money to repay anything, but you say this is what you're most concerned about.

bemybebe · 25/04/2015 22:11

And just thinking a bit more about this arrangement, you might have had a case if your house went up in price and you were landed with the demand for 25% of the value way over and above what was originally borrowed. So, suppose you bought a house for 100K and financed it with 25K barratt's loan and 75K mortgage. Suppose in the next 10 years the value shoots to 1M. Barratts send you a demand for 250K, which you don't have. I think there would be a good legal case... As all you are expected to pay now is the original borrowed amount without the interest, this is an interest free load post factum. You cannot expect to get out paying anything as In a standard loan agreement you would be expected to pay interest on top of the amount to pay back and this is not what you are looking for, I guess.

bemybebe · 25/04/2015 22:13

I mean I don't think You can expect to get out paying nothing...

Bearbehind · 25/04/2015 22:30

FFS it's not even the FSA anymore it's FCA.

Unless the OP can prove she was mis advised by Barratts she doesn't have a leg to stand on. Bad decision with hindsight but if prices had rocketed as predicted then I'm sure she wouldn't be complaining now- shit happens and blaming others isn't going to help.

Icimoi · 25/04/2015 22:32

bemybabe, do have a think about the practicalities of all these legal arguments you're coming up with. OP would have to finance a legal action which Barratts would fight to the bitter end. How do you suggest she should do that? There's no legal aid available, and no lawyer would touch a no win no fee arrangement with a bargepole. On top of that, OP would be looking at paying Barratts' costs if she lost.

kapai · 25/04/2015 22:57

I feel for you OP. I remember what situation was back then. I saw people around me taking 125% mortgages and buying properties they then made ten's of thousands on. For some, it was start into the property market that they have gone on to do very well from. It was easy to think 'I need to get into this'.

While you have undoubtedly been a bit naive I also know that I was lucky enough to get hard financial education from my family about property prices falling, only ever using an independent solicitor and never the perils of negative equity. A good solicitor should have questioned you on how you would pay the 25% back. Even if your property had gone up in value allowing you to extend your mortgage, would you be able to afford the higher repayments now?

I think you should post on MSE and see what has happened to other people. Talk to your neighbours and think about approaching Barratts on mass.

Good luck OP.

AvaCrowder · 26/04/2015 00:07

OP I don't think you have given enough information to get advice.

I can't understand if the house value has dropped by 80k it must have been a very expensive house to start with.

Is it just you and and dp? or do you have children too?

Why have you not been saving for the last eight years against this?

I think its a horrid situation.

UncleT · 26/04/2015 04:48

Shady? Hardly - it will have been perfectly clear from the outset, and you chose to proceed. You'd be laughed out of court.

bemybebe · 26/04/2015 08:59

Ici do have a read what I actually wrote.

DinosaursRoar · 26/04/2015 09:23

OP - again, the advice you'll get does depend on how much money we are talking about! How much is the 25% you have to pay back?

If you are talking about £20k, then that's rather a different to £100k.

If you are looking at a smaller amount (albeit one you can't find) the chances of you being able to take out another loan or being able to pay it off if you get an extention to your payment date by Barrett homes, and it would be in their interest to extend if at the end of that they will get their money back, compared to pushing you towards bankrupcy, when the mortgage provider will get 'first dibs' on the money from the sale of the house and your other savings, which you said will not leave anything over for Barret homes to get.

It's in their interests to help you find a way to pay, be it an extra 5 years, or installments etc, but again, the chances of you being able to put together a realistic repayment plan to offer them does depend on how much money we are talking about.

dementedma · 26/04/2015 09:23

Slightly missing the point but I can't imagine what it must be like to own a property so nice/expensive that it has the capacity to drop £80k in value. I dont think our small flat would have reached 80k in value even when the market was at its height round here....
We paid 38k for it on a 100% mortgage 12 years ago, had to remortgage to fit new windows etc(big mistake) and would be lucky if it sold for much over 70K now. So interesting to read of everyone's different situations.

treaclesoda · 26/04/2015 09:23

Nothing to do with the OPs situation but with regard to the drop in vamye, my house has easily dropped in value by 80k since 2007 and it's just an ordinary modest sized house. From the peak of the market to the lowest slump it lost about two thirds of its value, and even now it's not worth half of what it was in20087. It doesn't affect me financially as we're not in negative equity, but an 80k drop definitely happened to most people where I live, although obviously I don't know where the OP lives. (Barret don't build homes in my area though, so she's not anywhere near me).

OP, I do feel for you, but I think as others have said, you have been naive in thinking prices would rise. Sorry.

treaclesoda · 26/04/2015 09:24

Argh, fat fingers. That post was almost unreadable Sad

Lilmissconcerned · 26/04/2015 10:08

Its not dodgy at all... You took a risk buying a house valued at 25% more than you could afford.

Houses prices have suffered since 2007 so there was 7/8 years where you could have been saving to put something in place. Knowing that your house hadn't increased by 80k (wow! That's some easy money you figured you were getting!) nothing's ever done to the detriment of the corporations

keepitsimple0 · 26/04/2015 10:24

Just seems very unfair that if it rises they win and if it falls they have no losses.

What other way could they make money?

It's a company. No company is going to give you 25% for nothing. Why wouldn't they just stick it in the bank instead of giving it to you? In general, it's a good idea to see any deal from the other side. You should look at it from their point of view and see how they are planning to profit. If you can't see how, then reread the documents again, because you have missed something.

Sorry to hear, but it sounds ok to me.

Puzzledandpissedoff · 26/04/2015 10:34

It's a company. No company is going to give you 25% for nothing

And for me, that sums up the whole thing in just a few words

There's been a lot of talk on here about mis-selling, dubious practices and more ... am I the only one who believes the facts may well have been mentioned/written (or were at least easy to find out) but that they were brushed over in the excitement of finally moving into a nice new house??

specialsubject · 26/04/2015 10:38

The OP did come back. She is starting to take action and admits she should have done so much earlier.

as mentioned, this has happened twice in recent years: late 80s and mid 2000s, when prices were very high and then crashed. (except London but the OP isn't there - and the first one even affected London). There are houses stuck on the market in my area where people want to get back their mid-2000s price and nobody is buying. House prices do not always go up.

lesson: rates can go up and prices fall. NEVER take on a mortgage without a plan about how you will pay it back that does not involve the words 'and then a miracle will happen'. The early mortgage years are the ones for scrimping and saving.

yes, Barrat are there to make money. Surprise?

Perfectlypurple · 26/04/2015 11:03

To me, they lend her Samsung. That will be interest free unless she makes a profit on it, then they will expect interest which is proportionate to the amount she has 'made' on the property.

So yes they win in that respect but they have also given her a ten year interest free loan.

Perfectlypurple · 26/04/2015 11:04

Samsung should have been x amount. I don't know why it changed it to Samsung!

Feckeggblue · 26/04/2015 11:16

To be fair, they didn't give her x amount or 25%. They reduced the amount of profit they would make upon sale and delayed receiving It for 10 years.

Say it costs them £70k to build a house and market value of that house is £300k They've made £230k profit. Only people are struggling to buy that house so to shift the
Units I take £75k less now and the owner signs a contract to say they'll pay me that in 10 years. I haven't lent anyone anything.

Icimoi · 26/04/2015 11:20

bemybabe, I know exactly what you wrote. You said more than once that OP should not give up on the legal route and put forward various potential legal arguments, thus potentially getting her hopes up that this offers a realistic way out of the problem. I was pointing out that, for very practical reasons, it doesn't unless she has a very large pot of money available. And, if she did, she would still be wiser to use it to pay off the debt than to finance a very speculative court case.

Fairenuff · 26/04/2015 11:22

The OP did come back. She is starting to take action and admits she should have done so much earlier.

That's not what I read Confused

Last time OP posted, she was still trying to blame Barratts and still thought none of this was her responsibility:

'They most definitely did not do me a favour! They made a huge profit on me and even if I never paid back the 25% they would be quids in! Overvalued the property encouraged me to take on a lot of debt and no matter what they win out of it. Yes it maybe businesses, but it isn't ethical.'

Floggingmolly · 26/04/2015 11:26

The op seems unable to follow that though, Feck. She seems to think that because the value has dropped, Barrats should take the hit out of the deferred payment owing to them. Confused
I really hope the action she's supposedly taking now takes the form of saving to pay the debt; not looking for ways to prove "shady practices" or she's in very real danger of losing her home.
And she'll never get on the housing ladder again.

foreverdepressed · 26/04/2015 11:26

I have mixed feelings OP.
On one hand you should have read the contract and understood what you were signing up for, then planned ahead.

On the other hand these schemes are set up to get people into houses they really can't afford and are always stacked in the business/banks favour. Really is the latest "endowment scandal" that will explode at some point.

None of these schemes deal with the fact that houses:wage ratio is all wrong and more houses need to be built to meet demand and bring down prices.

But sorry, YABU because you did sign the contract. If you can't remortgage I assume selling/bankruptcy is your only option now.