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…

As sad as it is, just walk away. A nightmare waiting to happen!

Going back into the 1990s I purchased such a property. Solicitor at the time did not flag any concerns. All went ok for a couple of years, but then the freehold was claimed and sold. New company played catch up with the maintenance at considerable costs and introduced significant charges. There is more protection these days for leaseholders, but I am afraid given the potential cost risks I would not touch it.

This doesn't sound great if the solicitor has concerns, are the maisonettes just 2 on top of each other? DH once owned a maisonette like that, it was leasehold and he just paid ground rent, not a service charge - however it was clear in the leasehold documents that he was responsible for maintaining the roof.

If nobody ever bought a leasehold property, there would be vast swathes of the north west that suddenly became uninhabited as leasehold with a 999 year lease is more common than not there! You have to judge situations individually.

How disappointing for your daughter but she’s been given very good advice here to walk away. The estate agent just wants to shift the property to add to their sales target. The solicitor, who is infinitely more qualified than the EA, is giving good advice.

Your daughter is paying several hundred quid for solicitor
listen to them

My friend who has a lovely massionette in a council block

she’s just been hit with a 40k plus bill for her share of building works

100%. Thankless job resi.

Agreed. My partner has sold his house in a less than amazing (but still safe) part of London to parents (one of whom is a solicitor) buying for their two DC. Rather than a flat in their own area they have gone further out to get freehold.

It’s the lack of control and having to reply on third parties to act decently. The ones with local authorities as the freeholders are sometimes the worst in terms of service charge gouging.

Another one here (not a solicitor) saying avoid leasehold if at all possible.
Ds was able to afford leasehold two bed flat or freehold one bed house with parking and small garden. He chose the freehold house. Even though it’s smaller.

Sadly where i live there are no one bedroom houses, there aren't many 2 bed houses and my budget didn't stretch to one anyway. It was a choice of a one bed leasehold flat, or continue to rent and try to save more deposit. As I was 40 I didn't have years available to me to continue to save, as that would have resulted in me having to take out a shorter, and thus not affordable to me, mortgage. I'd agree if you can afford freehold, then do it, but not everyone can.

I had a family member who had set his heart on a conversion flat. It was cheap and in his budget. His solicitor advised him to walk away as the conversion did not have planning permission. He had to accept this. It would be very foolish to go against legal advice.

Leaseholds are a necessary mode of tenure for residences where the land underfoot is communally occupied. We couldn't manage our big cities without leases. However, it does throw up problems. All leaseholders sharing the space need to be able to enforce covenants (of neighbourly behaviour and obligations), either through a mutuality clause or calling upon the freeholder to enforce. The freeholder has to play their part and then fairly apportion costs to all the leaseholders who should then pay.
There can either be drafting problems within the lease or parties not playing their part to either pay or behave well and in accordance with the lease. I know you can have problems with a next door neighbour in a house but at least you are not in a legal relationship with them.
Of course people have to buy leaseholds but approach them with an abundance of caution.
It is true that there are some high street solicitors in a cosy relationship with estate agents from whom they get referrals. However, they should not be risking their indemnity insurance by overlooking defects in title. Any solicitor signing off this property would risk being sued by the purchaser or the mortgagee if they repossess and face trying to sell a much devalued property.

Don't touch it. Just walk away and NEVER get an indemnity policy they are not worth the paper they are written on.

Estate agents lie. She needs to walk away now and cut her losses.

It’s not a definitive no because there are legal provisions called a vesting order where the freeholder cannot be located, it allows the leaseholder to acquire the freehold BUT huge caveat, this isn’t a quick or cheap process. It may be a broker can get a mortgage but there is no guarantee. Definitely mention to solicitor how you would acquire the freehold, it may be they personally don’t know the process, I remembered a similar scenario on a property programme but crucially they were cash buyers

Properties like this are often sold at auction, for very low prices.

Usually bought by investors who rent them out but who also have time, knowledge and resources/professional help to sort it out.

This information would be ‘hidden’ in the legal pack.

Solicitor didn’t flag it. He was newly qualified and just hadn’t spotted it.

"She spoke with the estate agent yesterday, who mentioned that the solicitor is being overly cautious,"

That's a bigger red flag than they had at Stalin's funeral.

If the EA is trying to talk down the solicitor's advice this is as dodgy as fuck.

Run, don't walk, away.

You ignore the advice of the conveyancing solicitor at your peril. You are paying for their advice. Disappointing but she must walk away.

Can’t you see on Zoopla if these flats and being regularly bought and sold? If they are at mark ups that seem decent, I’d take the indemnity.

I bought a flat with an absentee freeholder (didn't realize the implications!). Turned into a bit of a nightmare tbh. BUT you can go through a process to resolve it, but only if you work with the other leaseholders and you all have to put money in. The money is then held by the court until/if the freeholder turns up. It was a long slow expensive process (and there were only two other flats). Def only do this if the price is seriously discounted - and talk to the other flat leaseholders (not tenants) to see if they would be interested in going through the process. It took at least two years from memory - and the courts calculate how much the freehold would be worth and you pay that.