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Original poster

Property might be unmortgageable - what happens now?

242 replies

Welcometomyhouse · 13/09/2021 22:21

Evening.. I was going to post this in the property section but thought there would be more traffic here. Just wondering if anyone has been through a similar situation and what was the outcome?

I’m a first time buyer purchasing a first floor flat on my own. The lady who is selling the property inherited it from her mother who lived there for 20 years. There is a mix of houses and flats on the street, however only my downstairs neighbour and I are leasehold, whilst all the other properties (including the flats) are freehold. When I went to view the property I asked the EA if there were any services charges and they explained that the management/maintenance company no longer existed. In the 20 years that the woman lived there she never had to pay any service charge nor did anyone request any payment from her. The daughter has tried to contact the company multiples times but has not been able to get in touch with anyone, so she believes that it has dissolved. I believe this to be true as all the communal areas are overflowing with weeds etc and it is clear that no one has maintained it for some time now. The gardens are kept tidy, grass cut etc but that’s because the neighbours do it themselves.

All searches have come back and I’ve had my report but my solicitor is still awaiting a response from the other side in regards to this issue. The vendors solicitor didn’t send sufficient documentation in regards to this other than “the sellers mother hasn’t paid any service charges for 20 years and we believe the company has now dissolved”. They’ve told us that they will have an indemnity policy put in the contract to protect me incase someone tries to come after me in the future and demand payment. My solicitor isn’t happy with this and has said she doesn’t think the mortgage lender will be either. I don’t understand all this legal talk but I went into her office today and she gave me a few examples which helped me understand the severity of it.

1.	The management company own the outside of the property and are suppose to insure it. Because the company no longer exists the building is currently uninsured and if both flats went up in flames/flooded etc we’d be screwed. 

2.	The management company are responsible for dealing with any repairs etc. We are suppose to pay a monthly service charge to them and in return they deal with any repairs. Because they no longer exist there is no agreement in place which explains who is responsible for what and who pays for what. I’m on the first floor and if a slate fell off my roof and there was water gushing through my ceiling, technically both my neighbour and I would be responsible for paying for the repairs but they could just tell me to piss off and there’s nothing that I could do about it. If the management company was still active it would be their responsibility to enforce that they pay half the bill. The same could apply if they came to me with an issue, I could just tell them to get lost. 

3.	Similar to the above issue. If my downstairs neighbour was playing loud music until 1am, the only thing I could do is go down there and ask them to stop. Again, If the management company existed it would be their responsibility to enforce this. 

4.	If nobody has paid any services charges for over 20 years, then there might not have been any repairs done on the building in quite some time.

Whilst waiting for the other side to come back, my solicitor suggested that I knock the neighbours door to see if I could find out any more information but the lady downstairs wasn’t in today. I’ve left a note with my phone number on asking her to give me a ring to have a quick chat. My solicitor is doing everything that she can but has been honest with me and said that the property might be unmortgageable unless the vendors solicitor can provide sufficient documentation, however I’m not confident that she’ll be able to if the company no longer exists… it will then be up to the lender to make the final decision. It is out of our control now.

Apologies for the very long winded post. My anxiety is through the roof at the minute and it’s awful being told this after 9 weeks of waiting around. Surely things like this happen all the time and there must be a way around it? Sad

OP posts:
TakeYourFinalPosition · 14/09/2021 12:23

@chesirecat99 Has said everything I was going to jump in and say...

Puzzledandpissedoff · 14/09/2021 12:25

Still no response from the other side and my solicitor will not go to my lender until they come back

Very wise - and please take absolutely no notice at all of the EA and some mortgage broker, both of whom will be more interested in their commission than your interests

Glittertwins · 14/09/2021 12:35

@Puzzledandpissedoff

Still no response from the other side and my solicitor will not go to my lender until they come back

Very wise - and please take absolutely no notice at all of the EA and some mortgage broker, both of whom will be more interested in their commission than your interests

This absolutely ^^ Sounds like you have a very good solicitor who is working for you. The EA is most definitely not working for you - they have been signed up to sell it!
chesirecat99 · 14/09/2021 12:35

[quote TakeYourFinalPosition]@chesirecat99 Has said everything I was going to jump in and say...[/quote]
Great minds think alike... and fools rarely differ Grin

@Welcometomyhouse, even if the directors don't have active companies, there will be other ways to possibly track them down once you have their names and DOBs eg the electoral register, the national will register.

altiara · 14/09/2021 12:42

Surely things like this happen all the time and there must be a way around it?

I don’t think this does happen all the time.
When I bought a flat, there was a management company dealing with repairs/maintenance and another company that dealt with the freehold.

Lockdownbear · 14/09/2021 12:43

What should have been a straightforward purchase has turned into a nightmare

And you know what, it's an even bigger nightmare for the seller, they will be getting hit with utility bills and possibly council tax. Walk away and don't put yourself into a position where you can't sell on. Or paying big bills for repairs that should be divided with the other flats.

Run or at least sit back and let the seller sort it.

Blinkingbatshit · 14/09/2021 12:50

Whilst this is a total pain in the backside if you have time then it could work out in your favour….. If the freeholder is genuinely untraceable the current owner can club together with the downstairs neighbour to force the purchase of it and you could end up with a share of freehold property instead…there are however lots of hurdles to jump so it’s best to make them do it or negotiate a mega price drop and (having confirmed your neighbour’s commitment) take it on yourself… Just google absentee freeholders and there’s lots of info out there…

saleorbouy · 14/09/2021 13:37

I lived in a relatively new development where the management company failed to file annual accounts and mismanaged funds. As a residents association and after legal action we were were able to take over the running of the complex after setting up a management Co. that all owners had a share in. Later we bought the freehold aswell.
Your situation sounds precarious on these fronts.

  1. No maintenance for a number or years - suggests a full structural survey of the whole building as you are partially responsible for the building. There is no sinking fund for large repairs.
  2. Unknown freeholder, how long is the lease, how much is the rent.
  3. The mismatch of owners and leaseholders is unusual.

Perhaps you could take some legal steps to get the freehold, leashold. If not I'd leave it well alone, even if you can get a mortgage it will be difficult to resell in the future.

LibrariesGiveUsPower45321 · 14/09/2021 13:40

Run a mile, find a different property.

delilahbucket · 14/09/2021 13:45

We came across this when looking at a house. No one knew who the leaseholder was, so the residents had set up their own management company, however it was only managed by two out of eight residents. Everyone paid a fee to this company. We walked away as fast as our legs could carry us! Wouldn't touch anything like that with a bargepole. There's always someone who owns the land, even if they don't currently know it, and they can come and take claim whenever they want.

ToffeeNotCoffee · 14/09/2021 13:59

I understand your disappointment but I'm concerned you are being palmed off by the seller.

There's a reason why it's such a good buy. OK, you may be gutted presently. Believe me you will be even worse off should you buy this.

Maybe a cash buyer would buy it, even then the same issues will be present.

I know you are gutted but have you looked to see what else has come up on the market in your budget & area ?

IamMaz · 14/09/2021 14:30

Sorry - haven't read all the thread so might be repeating things...

Our son wanted to buy a flat about 3 years ago. There were 4 flats in a converted old property. The letting company had not been kept up to date and had reverted back to the Crown. We found this out - it was not declared. There was no sinking fund for any repairs that were needed [survey we had done revealed about £60,000 minimum!]

Don't even consider it!!!

Obviously our son pulled out. [Very embarrassing as it belonged to a good friend of his who had no idea!!!] The solicitor said our son could not have bought it anyway as it would have been impossible to obtain a mortgage on it, with a defunct management company.

Abitofalark · 14/09/2021 14:50

@Welcometomyhouse

Sorry if I've not explained it very well *@parietal*. This is all new to me so I'll try and explain it as best as I can. There are 4 flats in each block but we all have our own front doors. There is no communal area. My front door is on the front of the building with stairs inside leading up to my flat and my downstairs neighbours front door is on the side of the building. All of the flats in on the street have this lay out.

It is only is our flats (my downstairs neighbour and I) that are leasehold. The others, including the two flats that are adjoined are freehold. I know my solicitor was confused by this.

There are buildings of exactly this layout in a road near me - four maisonettes to a building. Very nice looking and well kept they are too and so attractive I wouldn't mind living in one of them. Easy to see why you would want to buy one like that, with your own front door and the small number of neighbours in the building. But by the looks of it, in this case I would probably run a mile.

If I did want to pursue it, I'd try to have a word with the two freehold owners in the building, to find out if they (each) have a share of the freehold or if they are the full freeholders of the building and how they got the freehold they have and sound them out about obtaining freehold for the remaining two and about ground rent, buildings insurance and repairs arrangements to see if you can gauge the prospects of getting things like that sorted out or if they are likely to be impossible to manage if you did buy there. Of course they might not be forthcoming or might not know or be hard to pin down on facts.

I also wonder if you have a property solicitor specialising in leasehold and freehold or a general solicitor who does a bit of everything.

Jobsharenightmare · 14/09/2021 16:31

Given the complexity here I agree you need a solicitor, not a conveyancer, who specialises in leasehold. Without this I'm concerned you'll be naively signing up for this property without understanding the liabilities that may await you.

Droite · 15/09/2021 17:20

@Jobsharenightmare

Given the complexity here I agree you need a solicitor, not a conveyancer, who specialises in leasehold. Without this I'm concerned you'll be naively signing up for this property without understanding the liabilities that may await you.
OP has a solicitor already who seems to be looking after her interests well.
thenovice · 15/09/2021 17:28

DO NOT TOUCH THIS WITH A BARGE POLE!

WTF475878237NC · 15/09/2021 17:31

Droite

OP has a solicitor already who seems to be looking after her interests well.

^ that's debatable. Personally I'd be advising her to find another property.

Lovetoplan · 15/09/2021 17:31

I think if you want to you can sort this out. It might be worth it if the property is cheap or it might not. First find out who the freeholder is and contact them. If its a company it is either active or it is not. A company has directors. You couldctry to contact them. Usually a leaseholder pays a ground rent. Find out whether it is being collected and by whom. It's the responsibility of the freeholder to maintain the building and this they might devolve to a management company or they might not. You could consider purchasing the freehold with your neighbour as well.

Gran71 · 15/09/2021 17:59

I would definitely walk away. There seems to be too much risk.

Original poster
Welcometomyhouse · 15/09/2021 18:14

This is the issue @Lovetoplan. It seems that the freeholder (who is the management company) no longer exist. Ground rent and service charges have not been collected in over 20 years. I'm actually not sure if they've ever been collected tbh. I've tried to look them up on companies house but I can't find anything, although they must be on there as my solicitor has looked them up previously. Estate agent never came back to me with the documents either Confused. I was really pissed off today. Sellers solicitor still not come back to mine so my solicitor is going to chase them up tomorrow and also phone the lender and see what we need for this to go through. Really really frustrating! I don't think I can wait another 3-4 weeks to see if the property is mortgageable or not.

OP posts:
Original poster
Welcometomyhouse · 15/09/2021 18:16

Just can't believe something like this can happen 9 weeks down the line... all this money and time wasted and I'll probably have fuck all to show for it Angry

OP posts:
jules0607 · 15/09/2021 18:31

You’ve got a good solicitor, believe them. Go to www.leaseholdknowledge.com/ to get an understanding of what they’re trying to save you from

Jerseygirl12 · 15/09/2021 18:35

How much cheaper is the property compared with to a similar one?

WingingItEveryDay7 · 15/09/2021 18:53

Everyone has already said it but seriously WALK AWAY NOW! Leasehold properties are a pain in the arse anyway because whether you pay service charges or not they can still come to you with a big bill for something and there's nothing you can do about it!

It sounds dodgy as hell! No matter how nice or cheap it is, after 20 years of nothing being paid or maintained you just know something will happen and you'll have to cough up the cash to sort it out. Like your solicitor has already pointed out, who insures the structure? It has to be insured, it's a requirement of the mortgage. What happens if it burns down for instance? You have nowhere to live, no way to rebuild it and the mortgage still needs to be paid.

RUN AWAY NOW OP!!

TheWoleb · 15/09/2021 18:59

Why are you not listening to what you're being told?

Your solicitor doesnt want you to buy it but they need to be diplomatic in how they say it because they are acting on your behalf. But she does not want you to buy it. Everyone here has told you to cancel it too.

Walk away!!