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…

Solicitors will be overly cautious. Estate agents will want it sold. What does the mortgage company say?

Exactly. As a former commercial property solicitor I am always bemused by people who chip in to show their ignorance. Glad to see the solicitor is doing their job.

This is a blighted property and your daughter should walk away. If there is ANY way she could afford a small freehold somewhere I’d advise that. Any form of leasehold is just more likely to hold problems.

Agree, as another commercial property solicitor I would never buy leasehold unless I truly had no other choice.

100%. If I can even avoid a chain with a leasehold in it … I will 🤣

Better to be disappointed for a bit now than have hassle later! It would be best if mortgage provider said no to lending on it. I lost my first ever flat to gazumping and I was devastated but I soon found another one!

This. Now is the time to parent.

Eg Over my dead body are the buying this - you will not be able to sell it, insure it etc it is not even worth £0 it is worth minus to you - literally a bottomless pit.

Don’t walk but run.

Tell her No - she can’t have it. It’s the Emperor’s New Clothes for property and she needs to have somewhere viable.

they aren’t “overly cautious”! They are doing their job!! People would be the very first to complain a couple of years down the line if a problem crops up that wasn’t explained to them at purchase.

In this case, the solicitor may want to give the purchaser the option to halt without going all the way to completing reports on title for both purchaser and the mortgagee. That way abortive costs will be less.

Most people only buy a few properties in their lifetime. Volume resi conveyancers deal with 1000s and can spot one that’s unlikely to be mortgageable .

🤔

Alternatively just have a reasoned conversation with your daughte without the histrionics. How bizarre.

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.

Think of what might motivate the EA to say this. Why would you trust a single word?

I'd be more inclined to listen to a solicitor than an estate agent. Remember state agents o lh get paid for selling a property, do t trust a word they say when trying to finish a deal. The solicitor is doing the right thing that's what conveyancing is about, to find potential problems with a sale. They shouldn't be selling without the free holder being identifiable. All sorts can go wrong, what if someone turns you e say saying it's their free hold and starts charging really high charges, or if they say your daughter hasn't bed h paying, she's forfitted her lease

I wouldn't touch this with a barge pole. It sounds like a massive liability.

And I would trust the solicitor who is working for you over and above the estate agent who is working for the seller (and themselves).

As PP said there is a reason this is so affordable...

This happened to me in 2019. I owned an apartment and the management company was wound up by the freeholders without our knowledge in 2009. They continued to maintain the upkeep of the grounds but never requested service charges. I placed mine on the market in 2019 and it was only then this came to light during the conveyancing stage. I ended up having to back out of the sale (I had another property and couldn’t afford continuing to pay both mortgages)

We, the apartment owners, had to instruct a specialised solicitor to purchase the freehold, set up a new management company and this cost thousands. It took 12-18 months to complete this and then I was able to sell.

I would advise your daughter to walk away unfortunately. The seller needs to rectify the issues as it is not sellable.

Withdraw. Something else always comes up.

I wouldn't buy it. And I used to own a leasehold flat - it was difficult to sell and lots of queries came up with the solicitor even with a good management company and freeholder in place. It's so complicated I wouldn't touch it unless it is literally your only option and you are ok with the risk of big repair bills and being unsellable/unmortgagable now or in the future.

Properties are full of potential issues once having been bought, I wouldn't start off with one that doesn't sound like it can be easily mitigated

Estate agent is relying on a sale of this particular property to make their money and their job is to represent the seller’s interests. Solicitor will make their money from your daughter’s purchase wherever and whenever she buys, and their job is to represent her interests. Walk away from this flat, and advise your daughter not to take advice from an estate agent.

Another commercial property solicitor here and I third this!

(Also I feel for resi colleagues who have to deal with agents and clients undermining their advice)

Please tell your daughter as a first time buyer to not go ahead with this purchase. We had a similar situation to @user1491934176 with a maisonette we purchased. It was a probate sale that had been on the market for a number of years. Turned out there was a freeholder but had been no management company for over 20 years. It would have been impossible to obtain a mortgage but we were cash buyers. There were numerous other issues too. We are experienced property investors with a small portfolio so are reasonably confident in dealing with these matters. We went ahead with the purchase, got the upstairs owner onside, insured the buildings ourselves, started the process of buying the freehold which took nearly 3 years to agree a reasonable price and now after 7 years(!) finally have the freehold.

And that is the short version! We were in a position to do this but if we were working 'normal' jobs rather than being semi-retired it would really have not been possible. The main reason we persevered was so that in the future if we wanted to sell it would be mortgageable.

I know the stress. I also have a DD buying as a solo buyer and the number of properties she can afford is severely limited.

But I would tell your DD not to buy. It's a hard thing to do because at the moment everything looks good and this is just a paperwork issue. But what happens when something goes wrong and nobody knows who is liable and your insurance won't pay out because nobody knows who's in charge? Having had two very good friends separately lose houses to house fires (nothing to do with me, just co incidence, honestly!) and seen the amount of paperwork and fast talking that goes on from insurers etc - I would never want my child to be involved in any property purchase that is more complicated than it has to be.

And to add I am advising our own children who will both be buying their first properties within the next couple of years to really try and avoid leasehold properties - easier said than done on some parts of the country!

OP, I completely understand your daughter’s disappointment, but she needs to walk away. Your solicitor has done right by her, to advise her of the pitfalls of this particular property, and as PPs have said, it certainly won’t be any easier when she comes to sell. My Dd’s MIL had to walk away from a flat after she’d put in an offer and had a survey because the solicitor found something he didn’t like in terms of liabilities, so that had the building needed a new roof, say, the flat owners would have been liable for for the costs, whatever they might have been. That’s why you appoint your own solicitor, and don’t use one chosen by the estate agent. It’s disappointing in the moment, but saves a lot of future heartache.

Who do I trust...Estate Agent or solicitor ... now let me think...

estate Agent hasn't even done their job (checked the offer is proceedable) let alone be in a position to offer your daughter advice.

its affordable because of all the problems. It might be an ok buy for a cash buyer with plenty of money to take the risk. But it would be utterly foolish of your daughter to do anything except withdraw her offer tomorrow

she WILL find another way to buy a property (move further out, save bigger deposit, shared ownership) but no matter how much she lives this property, she must not buy it (thankfully it's highly unlikely she'd ever get a mortgage on it)

Can I join in with the other solicitors saying don't buy leasehold. I know that's an impossibly high bar especially as we live in London. When I start to help DC with property purchases, I will be encouraging them out to zone 4+ to buy a teeny tiny freehold house rather than face the hassle of leaseholds. I know there are some well drafted leases and mostly good cooperative neighbours but when it goes wrong, it goes wrong spectacularly.

You’ll probably find that the other flats have tenants in because the owners couldn’t find buyers for them.
If your daughter goes ahead, she needs to be really clear on what the indemnity insurance will cover, and what would happen if there were structural issues going forward

The seller will be banking on finding a naive first time buyer to pick up this property. Don't let your daughter be that mug!