Mortgage Retention for Council Works? HELP!

drblitzen_money

I sincerely thank anyone in advance to anyone who offer any advice. I am trying to get my head around how a mortgage retention situation I am in might pan out.

Purchase price £179000
Mortgage valuation survey has also valued the property at £179000
It is a council property with an ESTIMATED works bill of £7000.

Some of the works have started, but as it is council, the works bill will roll over several years. The seller has come back with a draft proposal that requests a 3 year retention from my mortgage of £7000. My questions are as follows -

What happens to the £7000 after 3 years if, lets say, £3500 of works have been done?
WHat happens if I get a bill of £7000 after 2.5 years from the council?
How does the retention amount go to the council when billed?
What is the maximum reasonable length of retention period I can have? Can I ask for 7 years instead of 3? I ask this because the council does repairs over a long term rolling basis.
What if I remortgage (or sell) before full works bill has been finished? Can I remortgage easily enough?

On another note, can I ask for an agreement that says we credit the council with £7000 on completion? I heard this may be an option somewhere. Is it a possibility?

THANK YOU to anyone who can share their knowledge or experience on this matter.

Kindest regards

Charles

G_M

drblitzen_money wrote: »

It is a council property with an ESTIMATED works bill of £7000.

Some of the works have started, but as it is council, the works bill will roll over several years. The seller has come back with a draft proposal that requests a 3 year retention from my mortgage of £7000. My questions are as follows -

What happens to the £7000 after 3 years if, lets say, £3500 of works have been done?
WHat happens if I get a bill of £7000 after 2.5 years from the council?
How does the retention amount go to the council when billed?
What is the maximum reasonable length of retention period I can have? Can I ask for 7 years instead of 3? I ask this because the council does repairs over a long term rolling basis.
What if I remortgage (or sell) before full works bill has been finished? Can I remortgage easily enough?

On another note, can I ask for an agreement that says we credit the council with £7000 on completion? I heard this may be an option somewhere. Is it a possibility?

I assume it is currently council owned and you are a council tenant (Right to Buy?)

What does the draft proposal say?
Have you spoken to your mortgage provider? What do they say? Do they want to retain £7000? If so, on what terms?

Presumably if/when the council bills you for the works (whether all in one go or in phases) the mortgage lender will release the funds to pay their bill.

Presumably also, if the works are not complete within 3 years and it is a 3 year retention, the the lender will release the funds to you (and you will have to pay whatever bill subsequently comes from the council.)

I'm sure the council would be only too happy to have your £7000 on Completion, but why on earth would you want to pay in advance for works which might cost less, might drag on for years, might never get done........

fg22

Have you got this the right way around? I think that the buyer often asks the seller for a retention, ie the seller does not immediately receive the money from the amount you give the solicitor, to meet bills for past work. It sounds like they are proposing £7000 is retained and this £7000 can be used by you to pay the major works bill when it is finalised. My worry would be that the bill ends up being much more than £7000.

Hopefully someone more knowledgeable will be along to explain (or ask your conveyancer after the bank holiday).

G_M

My understanding is that it's a council property. Council has 2 roles
1) as owner, currently selling to OP
2) as managing agent, with an ongoing responsibility

As 2) above involves £7K worth of work over the next 3 years (which council would fund if property remained in council ownership) council wishes to be sure they will receive this from the new owner (OP) and so proposes their mortgage lender withold it and pay the council when the work is done.

But that's just my guess of what's going on.

kingstreet

If there's a £7k retention on the mortgage, it will normally only be held for twelve months. After that it lapses and is no longer available.

The question is, has the buyer got an extra £7k sitting around to make up the difference so he can actually purchase the property?

And OP, you ask about remortgaging. You'll find it difficult during the five year "pre-emption" period as you'll need the council to provide a deed of postponement. During this time, it's difficult to switch mortgages £ for £.

Borrowing extra money on top is virtually impossible as you'll be borrowing into the council's discount and your chances of a deed of postponement reduce drastically.