Negative equity on unrentable property

whitescarf

Hi. My Husband and I got married last year and we both live in a property in Oxfordshire. I am the owner - i am on the land registry and the deads solely. The funds i used to purchase my property came from a previous failed marriage.

My husband also has a leasehold property in Sussex. The property was purchased several years ago using funds also from a prevous marriage. However, due to the property crash, a property that was re mortgaged in 2007 at 95% ltv is now in negative equity of arround 40k - 50k. As well as the negative equity, there is a clause in the lease stating that the property cannot be sublet. Also the lease itself is less than 60 years and therefore is unapealing to buyers. He is currently paying an interest only mortgage plus council tax and standing utilitys as well as the lease payments amounting to around £600.00 per month. We are unable to live in the property in Sussex as i have a disabling conditon and would not be able to manage the stairs, plus, it would be difficult with work commitments to relocate to Sussex.

The end of the month my husband will be leaving employment due to health reasons. I will be paying the bills for our current property plus the bills for the property in sussex until we find a solution. My questions are as follows

Does my husband go for Volentary reprosession? - if this happens would this more than likely lead to bankrupsy?

if this happens, will we lose our home in Oxfordshire which we currently live?

As my husband is leaving for health reasons, plus the fact that he doesnt want to be working away (as i have been hospitalized on occations with a disabling condition), would the mortage company (or would it be likely) for us to offer a suitable affordable payment plan to avoid bankrupsy?

is there any way around the council tax - as i would be in effect paying council tax at the full rate in two properties, one of which i do not live in nor own?

is there any way of getting a court order to have the lease changed as the inabilty not to sublet could be deemed as unfair in the current property climate and as the property cannot be sold provided the rental is only to cover the costs at no financial gain?

what is the best type of person to advise us on these matters?

If he needed to go bankrupt would it effect our current home or would the judge deem that he would have an interest in the properties equity (the equity is no more than 15% (around 20K). However this property was bought using no money from my husband, had i had been paying the mortage solely until november last year when we switched to a joint bank account (but neither income or expenditure had changed so i was still in effect paying for our household bills).

I do not see this as a "your problem not mine" situation, and i am prepared to take out loans etc or do what ever is best for the both of us solve this problem.

paying the household costs of the other property plus our own is just about affordable with only my income, however it will be tight, leaves us no room to save for a rainy day, and would be unaffordable should intrest rates rise on the mortgage in sussex (it is currently Variable linked with LIBOR).

Thanks

RAS

Whatever happens, you need to close that joint bank account and separate your finances now.

calypso_rhapsody

What a nightmare - i feel for you.

But i think maybe you should post on the Bankruptcy board. In particular this thread https://forums.moneysavingexpert.com/discussion/1639589 may get you (or your husband) some appropriate advice.

It does rather sound to me that he should consider bankruptcy but it is not something i know much about! Thank the lord ....

JQ.

Personally I'd be investigating that no sub-letting clause to see if it can be removed. And if not, is the Landlord likely to find out - not many ground rent landlords ever inspect their properties, even when buying them? Most of them own 100's if not 1,000's of properties all over the country. If it was between me going bankrupt and not complying with the terms of a long lease I'd have that property rented out tomorrow.

franklee

JQ. wrote: »

And if not, is the Landlord likely to find out - not many ground rent landlords ever inspect their properties, even when buying them? Most of them own 100's if not 1,000's of properties all over the country. If it was between me going bankrupt and not complying with the terms of a long lease I'd have that property rented out tomorrow.

I don't think it's a good idea putting a tenant in that position. Also it has risks as letting isn't risk free a landlord would cash to deal with any issues or problems that arise.

whitescarf

JQ. wrote: »

Personally I'd be investigating that no sub-letting clause to see if it can be removed. And if not, is the Landlord likely to find out - not many ground rent landlords ever inspect their properties, even when buying them? Most of them own 100's if not 1,000's of properties all over the country. If it was between me going bankrupt and not complying with the terms of a long lease I'd have that property rented out tomorrow.

unfortunately the lease is managed by the people who live there - and the majority of people who live there have lived there since they were built in the 1970's, have no mortgage and have not had one for years, and know the terms and conditions of the lease from the back of their hand. Aparantly when he first moved in and was making a bit of noise in the flats while moving furniture around, someone posted a copy of the lease through the letterbox highlighting the appropiate clauses!!!

DVardysShadow

whitescarf wrote: »

... I do not see this as a "your problem not mine" situation, and i am prepared to take out loans etc or do what ever is best for the both of us solve this problem.

Given the above, the advice below looks barmy. But I can assure you that it is the best thing you can do and something you should startdo immediately. Not only bank accounts but any kind of contract or financial product which creates a Joint and Several liability must be separated.

RAS wrote: »

Whatever happens, you need to close that joint bank account and separate your finances now.

If the worst happens, you may not be able to fend off some dire financial consequences or your OH's property. If that happens, you will be in a much better place together if only one of you goes down.

devotee

Can your husband not contact the freeholder and ask for the permission for the property to be let out for a while as he cannot sell it at the moment - lease too short. He could present it as a temporary measure - until he sorts out the finances to extend the lease for example?
That might not be necessarily true, but might be worth a shot?

dancingfairy

Hmmm a very difficult situation indeed. I'd be inclined to seek help from National Debtline or CCCS or your local CAB.
I can't see you being able to sell the other house with 40 -50k negative equity as this would still leave you with this much debt and no way to be able to afford to repay it so I can't see the mortgage company agreeing to this Plus the problems with the lease etc...
He could go bankrupt but then he will loose the house and the associated bills etc but then there is unfortunately a risk that your current house could be at risk especially given the equity - the Oficial Receiver (OR) would look at the equity available at the 2 year 3 month mark and you could be forced out and would have to live with the uncertainty until then. They key question is whether the OR would argue that your husband has an interest in the property or whether it is safe as it is in your name. Unfortunately I don't know the ins and outs and it could result in a legal argument but your OR could well argue that your husband has contributed in some way and therefore has a share in the property. I know that where houses are jointly owned one person can buy the other persons share of any future equity if the house is in negative equity at the time that the OR looks at it but i'm not sure whether you could say offer 10k or whatever the value of your husband's share of any equity is at the 2 years 3 month mark and put this forward to his creditors? this might be worth exploring?

I'd do as the others suggested - get your finances seperate as soon as possible to minimise damage and I'd also post on the bankruptcy board as they can advise better and also contact the debt charities.
Best of Luck
df

Caveat_Mortgagor

So.......
Remortgaged at height of a credit bubble.
Unsaleable due to short lease
Significant negative equity
Clause prohits letting out


Something is missing here. Correct me if I am wrong, I have read between the lines to make the following assumptions:

Your husband doesnt have any illness / sickness cover to make his mortgage payments.

Have you considered (or even used up entitlement to) S.M.I.? (support for mortgage interest - a benefit that pays interest on mortgages for up to 2 years on first £200k of mortgage for those out of work)

Your husband bought several years ago using funds from previous marriage. So no mortgage on it at that time?

Remortgaged in 2007. At the height of the credit bubble the flat would have been worth more than it was originally purchased for and was re-mortgaged almost to full value.

What happened to this money? On the face of it, I guess this was a significant sum of money.

Do you have any of it left over? It seems a lot of money not to have any left over! What about any possessions bought with this money? Car, caravan, speedboat, perhaps even a Yacht? (I'm not holding my breath - reading all the other mistakes I wouldnt be surprised if you said it was spent on holidays or even hookers&cocaine!)

If you can sell any such items it might help you to fill the gap between what the flat sells for and what is owed on the lifetime rental agreement aka Interest only mortgage.

Sorry if that sounds harsh, but look at my username. For too long people were careless with borrowed money.

mightymouse

Hi

I am the owner - i am on the land registry and the deads solely. The funds i used to purchase my property came from a previous failed marriage.

Establish your Equity value that was in your property prior to getting married.

in view of your health problems I feel that renting or extending the lease will not help much with such a large negative equity.

Obtain a valuation from a local estate agent then ask the mortgage company to see if they will agree to sell it at that price. (I doubt it!)

It seems to me that you need to get rid of the problem, if you hand the keys in, there will be a mortgage shortfall but that can be sorted out in a year or so based on your husbands income and any cash that might be available to make them a small offer them in full settlement.