Mortgage for flat with no property management?

johnboya1980

Hi everyone,

I've been interested in a flat that I know has been repossesed and so have all the other flats as part of the same house.
I'm pretty sure that there wont be a property management company in place.
I'd like to put in an offer but I'm concerned that my mortgage funds wouldn't be released because they wouldn't be satisfied that there was adequate buildings insurance in place due to lack of property management company.
I've heard that there is indemnity insurance but I'm not entirely sure what this covers and if it would be satisfactory.
Has anyone had any experience of this themselves?

Fire_Fox

Who owns the freehold? Can you buy that along with the long lease? If it is only a small block it does not necessarily need a managing agent, it needs a knowledgeable and proactive freeholder as it is the freeholder who is ultimately covenanted to keep the place in good repair.

Buildings insurance can be sorted on an individual basis tho it clearly is not ideal, I'd be more worried about what debts you are inheriting as regards service charges, what repairs and maintenance need doing and who is going to do it. If the roof starts leaking what are you going to do?

If you are thinking of buying leasehold this website is worth reading thoroughly
http://www.lease-advice.org/publications/

Richard_Webster

they wouldn't be satisfied that there was adequate buildings insurance in place due to lack of property management company

There is no law that every flat has to have a property management company. There may be a problem, but you need to let your solicitor look at it all, because you may be getting confused by things people have told you that may oversimplify the issues.

Your solicitors will certainly need to ask about the insurance - it may be arranged direct by the freeholder who can be an individual or sometimes (though not ideal) each flat arranges its own insurance.

johnboya1980

Thank you both for the replies. I was concerned because the last flat i tried to buy was a repo and the property management company had gone bust with lots owing on fees. There were other tenants living there but noone was paying as they didn't know who to pay charges to. Nationwide said they wouldn't release funds because there was no buildings insurance and wouldn't accept separate insurance just on my flat.

The property I'm interested in all the flats have been repossessed. There are 4 flats in total. I'd like to buy but I'm concerned to go through it all again. Sounds like the best route is to go through solicitor again.

Fire_Fox

Try a different lender, perhaps a mortgage broker? It's ok if leaseholders stop paying service charges AFTER the managing agent/ freeholder has gone bust, alarm bells should be ringing if there were arrears before they went bust. Arrears can be collected via the courts, but they often denote unhappiness with the standard of service. As we found here, it is difficult to get a new agent to take on a property with service charge arrears. There is a big difference between a managing agent going bust and a freeholder going bust, if the agent goes bust the freeholder still has to repair and maintain.