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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:
whynotwhatknot · 15/09/2021 21:57

Sounds like anightmare but just wondering why you didnt have asurvey done-i know its not a legal requirement but it would have probably brought up all the problems and who knows maybe more

Kdubs1981 · 15/09/2021 22:02

Run

NoSquirrels · 15/09/2021 22:09

@Welcometomyhouse

Thank you Thanks

@NoSquirrels only last week. The sellers solicitor has been really slow through this whole process and only sent the documents over 6 weeks ago, after my solicitor chased them. I did mention to my solicitor in the beginning about what I'd been told in regards to the indemnity policy but she said she'd have to look at the paperwork once it had come through. I honestly didn't realise it was so serious as the estate agents were so blaze about it and stupid me believed them but I guess they'd sell their mum for a tenner!

In that case I think this is just a case of chalking this up to experience, and doing a lot of research now on how leasehold abc share of freehold that’s work.

If you’d known, you’d have been able to walk away quicker. But if the estate agents stressed it and you went ahead they’ve technically done all they had to in making you aware.

I’m really sorry. Next time will be better.

(PS Stop thinking of rent paid out as ‘paying someone else’s mortgage’ - it’s not 100% accurate. When you buy your own place on a mortgage you’ll still be paying ‘rent’ to the bank in the form of the interest payments, and you’ll be liable for all the expensive bits of home ownership like maintenance and repairs and all the hassle with that. Try to reframe it as your landlord taking the strain for you at the moment! Your time will come and you’ll be prepared when it does.)

2bazookas · 15/09/2021 22:14

It's not unusual for properties to be unmortgageable; EA adverts sometimes mention that. Sometimes, the reason its unmortgageable also makes it virtually uninsurable.

  Even a cash buyer would  be very reluctant to sink their money into an uninsurable   multiple-occupiers property  in the circumstances and condition  you describe.    The risks  are far too high. 

   When you've found a property you want,  and have begun to imagine living in it, it can be very disappointing to have the deal fall through/go bad (for whatever reason)   But trust me, there are times when you just have to  walk away  to save far worse  grief and  future problems/ disruption.    Learn from it.

     One of the saving graces   to take away from this is that you have found a trustworthy solicitor  who is doing all the right things  for their client.  Patient explanations,  answering questions., good advice.
IamtheDevilsAvocado · 15/09/2021 22:33

[quote Welcometomyhouse]@DameFanny I have nothing in writing. They told me about the indemnity policy when I first phoned up to arrange a viewing, it was actually the first thing they said oddly enough. They mentioned it at the viewing too [/quote]
It does truly suck...its a horrid situation and one that MANY people have gone through. It won't always feel this raw.

Anongsr MANY house disappointments over the years... For me and my pals...

We had three sales fall through over a year... It was pants... But now? I just don't move in mentally.... It's just sooo bloody frustrating and upsetting when it falls through for whatever reason. I try and outlay the minimum of money now.

A pal had 4 houses fall through last year...

It really really isn't unusual. Upsetting but mot unusual.

The English system does stink though.

OnTheBoardwalk · 15/09/2021 22:46

I took a gamble on a house and spent 14 years regretting it and having no money. Some things that needed doing I could see many were hidden and came as a lovely surprise

Sorry OP but this house just screams run away as fast as you can

MaggieFS · 15/09/2021 23:04

It fucking sucks and I'm sorry it happened to you. People aren't saying walk away as if it's a simple or easy option, they are saying walk away because if you proceed (if the mortgage lender would even still lend) then the costs you could end up with could be much much more than the £1k you've already spent on the solicitor.

Singlebutmarried · 15/09/2021 23:23

You’re in a good position. You’ve paid off your car loan, now put those payments into savings. If you’ve not already done so set up a LISA as it’ll give you an extra boost to your deposit (there’s a minimum time period you need it for). Get your deposit to 10-15%. You’ll end up paying almost half the interest rates that you will on a 95% mortgage.

For the sake of a years more savings you’ll own another 5-10% of your flat straight away and pay a LOT less for the privilege.

Singlebutmarried · 15/09/2021 23:31

For instance 95% ltv 3.69% 85% ltv 1.79 = interest payments per month of £307 vs £149 (interest only but can’t be arsed to work out the C&I repayments on £100k) so £158 per month at least better off by saving that extra deposit

RedToothBrush · 15/09/2021 23:36

I think the experience of having bought a house before is that its not easy.

Many of us will see a house, think its the one only for there to be complications and it all to fall apart. Its devastating and you start to imagine your whole life around it.

But once youve been through that and then found the right house, its almost as if the other house you had your heart set on doesn't matter. It just wasn't meant to be. And there's not a lot else you could do. And actually its probably for the best anyway.

It does sound like you are too emotionally invested in this on. Take a step back and listen. You are being told to run for the hills by everyone.

HalzTangz · 15/09/2021 23:56

@Welcometomyhouse

I know something else will come up one day. I think I will have to take a break for maybe a year or two and try and save a bit more so I have more options. The flat was only 80k (valued at 90 by the mortgage lender). Flats are around 100k upwards around here. I only have a 5% deposit and earn 20k. It doesn't sound like much but it's been hard to save that much whilst renting at the same time. They will only lend me 79k. I've used 3k of my savings to pay off my car loan as the lender wouldn't lend to me unless I paid that off first. Paid it off two weeks ago because I thought everything would be ok and found out a week later that the flat might not even be mortgageable. Just absolutely gutted.
The positive you could take away from this (should the flat fall through) is you could pay what was your car payments on top of what you were paying into your savings account (so say car was £200, and monthly savings was £150, you'd be putting £350 each month into savings. That will soon build up
Ann30567 · 16/09/2021 01:26

I am in a situation where I share a freehold with other flat owners. But they don’t do anything. As in, they don’t want to pay any money for fire alarm checks, building insurance and maintenance. So I can see how this has happened in the building that you would like to purchase your flat in. I have been forced to do everything and have to chase them constantly for the money. As a result I am selling as I didn’t sign up to be an unpaid property manager. So I know it is awful but I would advise you to not buy as it will cause you no end of grief.

Strangeways19 · 16/09/2021 08:03

That's rough I'm really sorry, people are shite. Is it all EA's?! No wonder they have a crap reputation... They should definitely be more rigidly regulated. We were purchasing a property recently & it was down a private road, EA was clear that there was parking. No parking rights at all after solicitor dug a bit. We pulled out but now we've found a doer upper.

Just a thought, if the other flats are freehold could there be a way of altering the lease to a freehold? Then you could insure it etc

Bogeyes · 16/09/2021 08:33

There may be problems when you decide to sell

Original poster
Welcometomyhouse · 16/09/2021 11:00

After some digging I found out that all the flats and even some houses on the street are leasehold. I'm not sure why I was told that they were freehold. One flat even sold last year so I wonder how they got around the issue... just really strange.

Just to let everyone know I've decided to withdraw. I've notified my solicitor and the EA (and given reasons why, the EA didn't realise how serious it was apparently). Feeling really down today but I'm sure in the long run, I'll see that I've done the right thing Sad

OP posts:
amillionrosepetals · 16/09/2021 11:25

I'm really sorry this has happened to you, it really is awful. But you have absolutely done the right thing. Best of luck in your future property search.

RedMarauder · 16/09/2021 11:25

Good luck OP.

A friend of mine ended up in a similar screwed up situation. She subsequently found a flat in a better area.

Take from this that if you find another leasehold flat research the freeholder and any management company, yourself before even involving a solicitor. Some of them will turn up on a Google search as unscrupulous individuals/companies.

MaggieFS · 16/09/2021 11:36

Chin up OP, it's definitely the right thing.

It's quite possible for quirky historical reasons that other blocks even on the same street could have different freeholders.

Dragonsmother · 16/09/2021 11:40

Property buying is painful.
I am concerned that you could be left in a difficult position if you brought this place.
How many years is there left on the lease?
Put yourself if the position of a seller. If you brought this place would you struggle to sell it on? A property is an investment and it sounds like you could end up with issues further down the line.
I walked away from the property I was buying 2 weeks before planned contracts exchange date. It was painful but 10years later I am so glad I did.
Whilst you are desperate to buy I think you need to be really careful how you proceed.

ScaredOfDinosaurs · 16/09/2021 11:46

Don't touch this with a bargepole. My DP got embroiled in a situation like this with his first property and it cost him upwards of £50k.

It's cheap for a reason!

Lockdownbear · 16/09/2021 11:53

Something else will come up. The seller might get their solicitor to actually sort the issue out and get back to you.
But keep looking and saving.

ToffeeNotCoffee · 16/09/2021 13:52

Just to let everyone know I've decided to withdraw. I've notified my solicitor and the EA (and given reasons why, the EA didn't realise how serious it was apparently). Feeling really down today but I'm sure in the long run, I'll see that I've done the right thing

Sorry you are feeling so down. Especially as your heart and head were set on moving in. You were so excited too. Sorry that's £1,000 down the drain. You've ended up clearing your car loan though.

As others have said, the repayments could potentially become savings from now on ?

It's easy for me to say this but one day you could look back on this and see what a lucky escape you had. You might end up with something better and be saying if it wasn't for that, I wouldn't have this.

It's galling to have to keep renting. To have paid £1,000 in legal fees for nothing material at the end of it. I know, my DH and I have lived in rented accommodation for a total of four years and only purchased a house last year. Sorry, I didn't mean to rub your nose it in.

You don't know what's around the next corner.......

pilates · 16/09/2021 14:43

I feel very sorry for you op, but you have done the right thing. You might not think so now, but I bet you end up buying something much better. I always believe things happen for a reason.