Problem with conveyancer - solicitor is off sick

quantumdefect

This has little to do with the solicitor being ill, more to do with the advice I have received from the conveyancing assistant.

My fianc!e owns a house with her sister. It has never been mortgaged by them as it was left to them in will. We have agreed to buy her sister out at a total property value of £400,000. The bank agreed to lend us £200,000 to purchase the other 50%. Seems straight forward, 50% LTV, fianc!es share is the equity.

I chose a solicitor based on their knowledge of these sales, and until he became ill, I could not fault his service, BUT....

I was speaking to the conveyancer on the phone regarding search costs, and she piped up about SDLT at 3%. I suggested this was incorrect as I did something similar with my brother last year and paid SDLT on the transfer value, hence we should be paying SDLT at 1%. No biggie, we should be able to get to the bottom of this when the solicitor returns.

She has since sent a draft statement of completion that says we need to pay £200,000 in deposit! I contacted her about this and she said that as the mortgage offer says we are purchasing a £400,000 house and have a £200,000, we need to make up the rest of the money, then my fianc!e will have to "work out privately" a refund of her £200,000! This seems ludicrous! Why does she have to buy something she already owns? She wouldn't give me an answer to this question. She said she will write to the bank to confirm that " your (me) understanding matches that of the bank" i.e. that we are buying 50% of the house for £200,000, not the whole of the house for £400,000.

What is going on here? Having (un)luckily never had to mortgage a property, I am unaware of how the "deposit" works when you own some of the property you are buying? Surely it's similar to shared ownership? Needless to say, we don't have £200,000 in liquid assets so if she is correct we can't buy the house! We are still pre-contract but this sale needs to go through.

Hopefully if no one can clear this up, the solicitor will be back in work soon. Thanks in advance for replies.

WestonDave

It should all come out in the wash - what the mortgage company want at the conclusion, is their legal charge (mortgage) of £200,000 secured against a property worth £400,000 registered in your fiance's sole name (as she is the borrower). They wouldn't normally get involved in how the "deposit" is made up unless there is an issue that the property is really only worth say 95% of the stated value with the 5% being a gifted deposit by the vendor meaning that in reality the owner has no equity. That isn't the case here.

Sounds like the assistant needs to get some guidance from her boss, and some further training before being left alone again!

quantumdefect

WestonDave wrote: »

Sounds like the assistant needs to get some guidance from her boss, and some further training before being left alone again!

These are my thoughts exactly, but at the end of the day she is the one who works in the field so I would expect the information to be correct. I would, of course, like the information to come from a qualified professional, but it's not his fault he is off.

We've paid for the mortgage, valuation fees and even had a full survey done so that there are no surprises down the line when we come to sell on. I had even discussed the transaction at length with the solicitor, that's why I was so shocked (actually appalled) to see the deposit entry on the statement (and of course, a £5k saving on SDLT should never be overlooked).

Fire_Fox

Go up to the office, collect your file and take it to another solicitor.

Richard_Webster

The lender needs to be told the whole background and sadly some mortgage people don't get these messages through when it is a slightly non-standard situation like this.

Often a lender's computer system will not allow it to offer what appears to be 100% mortgage - £200K on £200K price when there is £400K value so they simply put in that you are paying £400K. If the solicitor writes and explains the situation and the lender had already been told about it you should be able to get a letter saying they understand the position and it is OK to proceed notwithstanding what is in the offer.

It may be that the conveyancer phoned the lender and got some nonsense from them and that is why the £200k is being asked for - it is often simply a matter of persistence. Occasionally, however, the lender won't budge, and that is sometimes down to the fact that some stupid mortgage broker didn't tell the truth when lodging the original application, so they think something funny is going on because they are being given inconsistent stories. If that is the case you may have to get a mortgage broker who will tell the truth and get a mortgage from a different lender.

quantumdefect

Richard_Webster wrote: »

...

Thanks for the reply.

I dealt with the lender, first direct, directly. They are fully aware that we are borrowing £200k at 50% LTV as my partner owns 50%. I even spoke to the underwriters on several occasions before there was approval, and they have the mortgage valuation to show that the property can be borrowed against at the agreed level.

In your professional opinion, do you agree that there are no legal hurdles to us purchasing 50% of a property by mortgage? I would think it is just a case of how the contracts are drafted e.g. XYZ agrees to purchase 50% of property ABC for £Y?

The conveyancer has written to first direct to ask whether the mortgage offer stands for us to buy 50% of the property with the mortgage (she sent me the draft) and I'm hoping that this will clear the situation up.

May I also ask whether my understanding of the SDLT is correct i.e. if we are transferring £200k we pay SDLT on this? That was how the HMRC detailed it when I called them.

DVardysShadow

Unfortunately she is lacking the supervision necessary to do anything out of the ordinary, so she is in 'computer says No' mode. In your position, I would ask to speak to whoever is currently supervising.

PasturesNew

It should be just the trasnfer value, not the whole value.

PasturesNew

quantumdefect wrote: »

..do you agree that there are no legal hurdles to us purchasing 50% of a property by mortgage?

It's just like any husband/wife, two buyers, buying the other one out when they fall out. It must happen everywhere every day. Maybe your wording is what's "off".