Unmortgageable property, daughter very stressed - please help

[wheresmyglasses]

Good morning,

My daughter is in the middle of buying her first property and has run into a bit of a tough spot. As if the whole process isn’t stressful enough, right? I bought my house over 40 years ago, so I’m out of the loop on all this. Any advice would be appreciated.

My daughter had her offer accepted just over 2 months ago. It’s a 2 bedroom maisonette and is part of a small development, with a mix of maisonettes and houses, built in the early 80s. When she viewed the property, the estate agent pointed out that the freeholder and management company were missing, but the seller was able to pay for an indemnity policy. We didn’t think too much of it at first until the solicitor reviewed the paperwork and began raising some questions.

It seems the freeholder has been missing for quite a while, having vanished shortly after the development finished. Right now, there’s no service charge, and the seller can’t say when the property last underwent any maintenance or repairs. She inherited the property from her dad and doesn’t have much information.

The solicitor is clearly worried about the situation and has informed my daughter that she doubts the property can be mortgaged. She mentioned that there is no existing agreement for maintenance or repair work, and she is uncertain whether the property is insured. She said that while the neighbours may have their own insurance, it is the responsibility of the freeholder to insure the building, which, from what she has gathered, does not seem to be in effect.

The solicitor has indicated that it could impact the property's value, and even if my daughter is able to secure a mortgage for the property, she may find it difficult to sell it in the future. She spoke with the estate agent yesterday, who mentioned that the solicitor is being overly cautious, which is typical for certain flats, and that the indemnity policy will cover this. She recommended that my daughter look for a different solicitor. She also spoke with a few of the neighbours yesterday; however, they were tenants and didn’t have much information.

My daughter is understandably quite upset about this because she really wants the property and has her heart set on it. Being a single buyer, her borrowing capacity is limited, and this flat fits her budget. We have to wait until tomorrow to speak with the solicitor again. She mentioned that she will try to investigate further, but I am convinced that this is now beyond my daughter's control, and she won’t be able to buy the property. I don't know who else would be interested besides a cash buyer, and it's surprising that the seller managed to market the property given all these issues.

I’m sorry for the long post, but I wanted to share all the details. Has anyone encountered something similar or have any information regarding this? I had not heard of it until now, but it seems to be quite common with flats / maisonettes.

Thank you…

This is indeed quite common with older flats/maisonettes. I understand your daughter is upset but the best thing she can do it withdraw her offer and look elsewhere.

She will also encounter the same difficulties when she eventually comes to sell it, and may not be able to sell when the time comes which will cause even more upset.

This!

Never heard of this particular situation before. Personally I would walk away. It’s a very expensive purchase to go wrong - and who would foot the bill/arrange repairs on a structure that could have sizeable repairs in its near future? I’m thinking roofing/electrics/shared access and corridors needing decorating etc.

just remember- your daughters solicitor is working for her and looking after only your daughter. The estate agent is working for the seller and their commission.
guess who I would be looking to trust - and it isn’t the estate agent.

She could try talking to neighbours to try find out

But she would be putting thousands and could lose it all if no insurance

Best walk away

i would walk away! Last thing you want is to buy a property that would be difficult to sell on in the future. Are there no other properties around in her budget?

theres a reason this property is affordable….

Paying for expensive professional advice and then ignoring it is never a good plan. Walk away

I would advise her to walk away. Sorry but home buying is stressful enough without a missing freeholder and management company and no one collecting service charges since the 1980s.

As we said to our son after seeing a house he had offered on.. "Do not walk away from this property, run, as fast as you can!" The problems sound as though they could be immense. Would an indemnity policy cover the whole value of the flat if it burned down? Would it pay out if she couldn't sell in the future??

Honestly you’d need to be a maniac to buy this property. It’s cheap because no one in their right mind would want it. And as for the EA saying get another solicitor. Ye gods.

Friend had missing freeholder on a flat they wanted to buy. There was new company being appointed or something like that and it took a year before they were able to start buying process. They only sucked it up because they agreed heavily discounted rental with the seller and nothing else they liked was on the market, otherwise the wisest thing would be to walk away.

@Minniesoata Unfortunately, I had a feeling this could be true. I'm just shocked that it's been happening for 40 years and no one has ever raised any questions or investigated it further. The solicitor said that all the houses are okay since they're freehold, the flats are the issue and more than likely can’t be mortgaged. There’s at least 20 flats on the estate.

Heart-breaking as it may be to walk away, she has to look elsewhere. Some scummy, 'profitteering from the vulnerable' landlord will buy this place for cash.

I feel for you OP. My DS had to walk away from his dream flat due to problems with service charges not being capped and a useless management company! His solicitor flagged it as a major problem & his mortgage company said no because the service charge could have been increased to £££ and there’s nothing he could have done about it. A indemnity insurance was deemed insufficient and unacceptable. Of course the estate agent will tell you otherwise, they just want to sell it, they don’t care about future problems. She will have to walk away. It’s rubbish but happens a lot apparently with some flats/maisonettes.

She will be forced to walk away as the solicitor is usually acting for the mortgagee as well and will not give this property a clean sign off.
Estate agents always talk down problems and say the solicitor (or surveyor) is over cautious.
When we bought our current house the building regs sign off on the loft wasn't available and we were being pushed into the indemnity insurance corner. We said we didn't want a loft that was too hot in the summer and too cold in the winter. We wanted building sign off or nothing. Eventually the paperwork was forthcoming.
Absentee freeholder means no one is there to fulfill the functions such as buildings insurance, enforcement of covenants against lessees that are causing a nuisance and repairs (roof, staircases and all common parts). What use is a piece of paper.
There could be a reason that the neighbours are tenants. That is the owners can't sell.

Echo other posts. She should walk away now. There will be another property and, usually, a better one.

dont walk away, run away. This is why you pay a solicitor to find this stuff out - it’s very true you will struggle to mortgage such a property and even if you can, the number of lenders will be limited which will impact pricing and reduce options at remortgage etc not to mention resaleability.

Who do the tenants pay rent to?

Yep walk (run) away

ALWAYS go with the solicitor’s advice rather than the estate agent’s advice. Always!! Solicitors are impartial. Estate agents aren’t. They just want their commission.

Solicitor = highly trained professional, nothing to gain by telling you to walk away (they won’t be able to charge you the full conveyancing fee).

Estate agent = teenager in a shiny suit, everything to gain by you buying the place as they only get paid when the property sells.

Yes I’ve been in a situation when trying to sell a leasehold flat with an absent freeholder. It took 3 years to sell, and was probably the only flat in London that DIDN’T appreciate in value between 2000 and 2004. Don’t make the mistake I did!

I have bought and sold ten or so properties/ including houses, flats, leasehold, probates etc.

I wouldn’t touch this with a bargepole. It will likely be unsellable in the future even if she does manage to get a mortgage, she’ll likely have to go to a specialist mortgage broker if she can get one at all and the insurance issue alone would be enough to have me walking away.

Exactly this!

Nail on the head. The seller (and other owners) know that there are serious problems, with ownership/insurance/maintenance arrangements, and are selling it below "market value" accordingly, just to try to get rid of it.

Please walk away. Your solicitors have done you a huge favour to flag this up - it's what you pay them for. The estate agent is just desperate to sell and you have to remember the EA is acting for the seller, not the buyer, so won't have your best interests at heart.

It’s the solicitors job to look for the worst case scenarios, and in my experience it’s often theoretical risks they are worrying about. We have bought and sold a fair amount of properties and there is always something crops up. DH says if they made it look easy, you’d start thinking you could do it yourself!
In the 1990’s we paid £100 or so for an insurance policy to cover the chance that the house and land might be responsible for the maintenance of the church roof from some old document that they’d unearthed. The house had been given to the church at some point in its long history.
However for your daughter I’d look for something else if these issues will crop up again when she wants to sell, and if she can’t mortgage it, that will be your answer.

I think she needs to walk away.