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…

@4forksache We’re not sure who owns the other flats unfortunately. My daughter only spoke with the tenants who knew nothing about this.

Their landlord who will be the leaseholder of their home. Their landlord probably bought the property without a mortgage, or before the missing freeholder issue came to light and have been unable to sell since.

Completely separate to this issue of a missing freeholder.

The property fits her budget bc no-one else would buy it OP. Listen to the solicitor!!!

^ that’s quite a common situation in England - and is routinely covered by an indemnity policy which mortgage lenders are fine with. https://www.comparethemarket.com/home-insurance/content/chancel-repair-liability/

However, an absent freeholder can’t be covered by an indemnity policy and should be avoided like the plague. You’d only be able to sell to a cash buyer in the future. No mortgage lender would offer on the basis of an indemnity policy in this case.

This!

Budget limit now would mean bankruptcy if major works need doing like a new roof

I'm afraid she has to listen to her solicitor. An indemnity is worthless in this case and the estate agent is just wanting their commission on the sale.

This is a serious issue. There may be tears now but better to discover all of this at the outset.

We walked away from a very similar situation and I’m so glad we did! This is not something you want to take on, especially from a selling in the future perspective

This.

I feel very sorry for your daughter but how on earth will she ever sell again even if she was a cash buyer?

There's no comparison whatsoever to the ancient obligation to maintain church spires (rarely enforced and so money for old rope to insurers) and an absentee freeholder with ongoing obligations such as insuring the building in case it burns to the ground or fixing holes in the roof.

@MrsEmmelinePankhurst sorry to hear you went through all that stress. Were you aware of the issues before you bought the flat or did your solicitor not flag it? I know we’re lucky that my daughters picked up on it.

What a bafflingly ignorant post.

I’d walk away. I’ve been there as a FTB having to walk away. It’s exhausting and upsetting but it will work out for the best long term

If your daughters budget is limited, this isnt the property for her. It may be in her budget but sounds like this property could have hidden legal costs down the line. She would be wise to cut her losses and walk away.

Absolutely walk away.
Ds has just completed on his first property (one bed, we jokingly call it his teeny tiny house) and the absolute priority was that he would have no issues selling it on in the future.

The last thing you want for your dd is to be stuck with this flat for all eternity.

There is better out there.

I would also be very wary of an EA suggesting employing a different solicitor. I have known a couple of people this has been suggested to, and in both cases there was a problem with the property, which the EA was hoping a different solicitor might miss.

Run! 😉

Absolutely this!
When ds was buying his house, the solicitor recommended by the EA was rubbish and missed some important details. He withdrew from them and employed an independent solicitor who was much, much better.
Trust the solicitor, not the EA. The EA want the property sold, they want their commission.

It’s really disappointing, but she needs to cut her losses.

I would hazard a guess that the reason this flat fits her budget is because it is priced on the lower side to compensate for this massive issue.

If your daughter is wanting to go for this because she is struggling to find something else that fits her budget, she needs to go back to the drawing board - change the area she's looking in, number of bedrooms etc - not lumber herself with this liability

As someone who lives in a development of flats where there have been issues with leaking roofs needing several repairs, and eventually leading to a new roof, with all work arranged by the management company /freeholder and paid for our of our service changes, I'd advise your daughter to run a mile. I dread to think how much hassle and expense it would have been to sort the leaks if the management company and freeholder had been missing.

In case anyones interested

https://hoa.org.uk/advice/guides-for-homeowners/for-owners/absent-freeholder/

Please encourage her to walk away from this property, She might be lucky and find a lender who will assist but she is heading for problems when she eventually is ready to move on. Really not worth the risk.

It's not even a question if she needs a mortgage to buy. She won't get one.

Stop and run away from this.

Don't listen to the estate agent. They are working for their client.

She would be buying a whole heap of trouble.

Tell her to listen to the solicitor and not the estate agent who has fuck all legal qualifications.