Could I sue for being mis-sold

moneybunny123

A very long and complicated story, but please help if you can....

Five years ago, after a traumatic split with my ex I bought my own house on a shared-equity scheme, whereby the developers (a very well known firm) provided 25% of the asking price on the proviso that when I sold the house, I repaid them the first 25% of the sale price (whether that be more or less than what I paid for the houe).

Five years ago, the house cost me £152,000 so the developers provided £38,000 of that, leaving me to find the other £114,000 (over half was cash from my split, just less than half of it was mortgage).

The house has just been valued for an average of £139,000.

Two years ago I put the house on the market as I had to move out of the area, but couldn't sell it, so I rented it out instead. I have good tenants living there, but need to sell the house as I'm expecting a baby and want to get my (ever decreasing) equity out of it. Wanting to keep the tenants in-situ, if i could, I contacted some local letting agents to ask if they knew of anyone that might be interested. One of the agents themselves have made me an offer of £139,000, but on a part-now, part-later basis whereby they'll give me 65% of £139k NOW and the remaining 35% (25% to the developers, and 10% to me) at any time within the next 5 years.

I contacted the developers to ask if they would be willing to go for this deal, but so far they have refused. The alternative would be to evict my tenants, face paying the mortgage with no rent to cover it until the house is sold (IF it's sold!) and possibly for far less than the £139k asking price. Not to mention the £2k estate agents fees, and the cost of having to fix the house up prior to selling. If I don't sell it, and can't afford to cover the mortgage, it could be reposessed and surely sold for a lot less than £139k which means the developers will get even less!

Anyway, I'm rambling. But the gist of question is this: When I bought the house, all the small print in the contract of the shared equity scheme was not fully explained to me. I had no idea that it would be so difficult to sell my house, because I am contracted to contact the developers first to check that THEY are also happy with the selling price (remember, if I only sold the house for, lets say, £100k, they're only getting back £25k against the £38k they originally invested - so I can't make a decision without their say so).

To me, this seems grossly unfair as 75% of the house is MINE. THEY don't contribute 25% to the improvements on the house (of which there have been many).

But anyway, the small print of the contract was not fully explained to me, and the reason why? Because when I bought the house I was FORCED to use the developers' recommended solicitors - who clearly had the developers best interests at heart and not mine. I never once sat in front of a solictor who explained all this to me. All that happened was they stuck a 30 page contract in the post to me, asked me to sign it and return it. And that was that. Nobody sitting me down and saying, "look, have you considered that this may happen in the future when you want to sell...".

I had a similar issue with it all a few years ago when I wanted to release some of my equity from the house and re-mortgage. I was told that because of the shared equity, I couldn't get a mortgage with any other lender than the current one (Halifax) even though their rates were considerably higher than many other lenders.

I just feel trapped. I want to sell the house, soon, as I'm expecting a baby in 5 months and don't want to be faffing about with a house I haven't lived in for 2 years! But I can't sell it to any Tom, !!!!!! or Harry because the developers have me over a barrell. What can I do?

USM

Sorry if this sounds harsh but if you did not understand the document and felt that it had not been explained to you, you should have refused to sign or taken on your own independant legal advice.

They provided all the relevant information, you just didn't read it and/or understand it and that's really not the developers fault.

moneybunny123

USM - ok, you make a perfectly valid point. But in my defence, I'd just found out my fiance and partner of 9 years had had an affair months before we were getting married, was having to move out and buy my own house, and my head was all over the place. I was on anti-depressants AND the point I am sort of making is that surely you PAY your solicitors to point out the pitfalls? Well, why would this solicitor have ever done that when they were acting in the developers interests? I had no alternative but to use their solicitors - they wouldn't allow me to use my own.

USM

Its difficult - it sounds like you were having a terrible time... unfortunately none of that will be relevant in this particular point.

You pay a conveyancing solicitor to carry out standard conveyancing to facilitate the purchase of a house. What you were looking for was a financial advisor to spell out all the possible scenarios which isn't a solicitor's job. A solicitor will protect you so far as making sure your purchase follows the correct route but this isn't one of their jobs.

Hopefully you can see that I'm looking at this from an outsiders view, and you really should try to take that view before you throw good money after bad in persuing this.

WestonDave

Whilst I appreciate you are in a difficult position, I don't understand why you would think the developers are going to agree to a deal whereby you get nearly all of your share of the proceeds now and they have to hang around for up to 5 years for any of theirs, on top of making a loss on it anyway due to the loss of value. Its also fairly obvious that if they have a stake in the sale they are going to ensure that you don't screw them over in some way, so its pretty obvious they would have to consent to the sale terms. Its not like some its some hidden unreasonable contract term that you could never have expected. It sounds a bit like you want to run off into the sunset with most of your money which leaves the developers whistling at the buyer trying to get anything of their money. That was never going to run!

There is almost certainly a way out of this - if you restructure the deal so they get their 25% now and its you left waiting for the balance then they may regard cash in the bank as better than covering the interest while they hope prices increase. At best you might get them to wait for 35% of their 25%, but expecting them to hold out for the lot is frankly fantasy!

WestonDave

To add - in what way were you forced to use their solicitors - was it that they would only pay the legal fees via their solicitor or that they simply wouldn't deal with any other solicitors? I seem to recall the Law Society tries to ensure customers have a free choice of legal advice and there may be grounds for a fairly narrow complaint if this wasn't the case - however that is more likely to be a disciplinary approach than acheiving any financial result for you.

moneybunny123

Hmmm, yes, you are both making sense (unfortunately for me). In reply to you WestonDave, the developers having to wait up to five years for their 25% - well how is that any different than if I decided NOT to sell now, but waited another 5 years? Who's to say that house prices will be any higher than they are now at the point when I come to sell? My circumstances are my circumstances, and I want to sell now. If the figures aren't right for me, I wont. But surely as it's MY home, it's MY decision?

However, as you say, maybe an alternative would be they get 65% of their 25% now, and 35% of 25% in five years. Maybe this would be a scenario worth considering.

It just narks me that they have me over a barrell every which way. I can't sell on the open market unless it's for a price acceptable to them (and let's face it, an asking price is rarely the price a house sells for), and it's out of MY 75% that all the fees get deducted from. Mr Fatcat developer wins every which way.

CloudCuckooLand

Sorry OP, there's not much more to be said. Small print is there for you (or your legal advisor) to read. No developer/salesman/Estate Agent will point out the problems in the small print.

As for the specifics of the part-now, part-later scheme. To be honest, I'm not surprised the developer refuses to get involved. So should you. It just sounds like another way for you to get turned over by a property professional out to gain from your naivety.

Here's hoping you can find a proper buyer, without catches. Spring is a good time to try selling.

One way you can get back at Shared Ownership schemes, in general, is to post here on the regular threads from newbies asking the pros and cons of such schemes.

Several of us try to point out the failings, but having spotted them before buying so never having been put in a predicament like yours, those opinions seem to carry little weight.

Perhaps a real-life dilemma, eloquently put, would hit home to more forum members, tempted to tie themselves to such schemes/scams.

moneybunny123

I was told by the Sales Representative that I couldn't use my own solicitor. That for a speedy sale, I had to use their approved solicitors. Who were, in my opinion, next to useless. My own solicitor is fabulous and, inspite of USM said above (that they only provide a conveyancing service, nothing above and beyond) I know for a fact that myown solicitor WOULD have pointed out the pitfalls.

moneybunny123

Cloudcuckooland - your quote there from dunstonh - I agree wholeheartedly with. Again, in my defence, when I bought the house, I was only a 28 year old, single woman, earning less than £10k a year. My only option was to buy a house under shared equity keeping my mortgage payments down to something affordable on my pittance of a wage.

Not sure anyone could have blamed me for going for the scheme. This is small-fry to the developers - we're talking pennies (in relevance) on the astronomical turnover they have. But this is my LIFE!

Mallotum_X

You could still have asked your solicitor to look at things though. I cant see that you have much chance of claiming mis-selling.

They own 25% of the house, if I wa sthem then I would want my money now. You want your money now on the sale so why shouldnt they. It does sound like you woul dbe better looking for a normal sale rather than one like this.