Pre-emption agreement stopped remortgage!

Effie1

We have heard today that our remortgage application has been rejected because we have a pre emption agreement on our house that states that should we ever wish to sell our house in the next 8 years we have to offer it at full market value to the person we bought the land off. He then has 28 days to reply whether he wishes to buy it or not. Barclays do NOT like this arrangement as it will slow down the sale of our property should they have to foreclose on the loan.
Our loan to value amount is 50% and we have made provision that foreclosure will never have to happen!
Why are we being treated like this by Barclays? Do any of you know any other mortgage providers who have a better attitude to this kind of situation?
We are currently with Nationwide but want to raise some extra funding using interest only which Nationwide won't do any more. Incidentally, the pre emption has never been a problem for Nationwide so why are Barclays being so petty for the sake of a month?
Sorry to rattle on but would be interested to hear if any of you have any advice?
Many thanks in advance!

holly_hobby

Barclays, or indeed any lender, can accept or reject what ever business they wish.

Unfortuantley, I think you will find this is will be an issue with most lenders, and as Barclays have explained, is in relation to the preferred referral/pch arrangement in place, and the impact it will have on any possessionary order and disposal of the property they seek.

If affordability is there, why not stick with Nwide and go C&I route instead ?

Sorry if not what you hoped to hear, but hope explains where Barclays are coming from.

Holly

Effie1

Holly,Thanks for your speedy reply. Yes, you're absolutely right, Barclays have the right to lend to anyone they like but I suppose I can't understand their thinking. If the person we have the agreement with wants to buy the house, they have a purchaser within a month! Must be a good thing! What's the risk?
Anyway, will look at discussing this matter with a mortgage broker and seeing if we can find a lender who is more flexible. Nationwide are just a bit expensive as they only do repayment and we want to raise some of the money on an interest only basis which they won't touch now.
Again, thanks for your response. We need to go and have a think!
Effie1

Thrugelmir

Effie1 wrote: »

we want to raise some of the money on an interest only basis which they won't touch now.

Are you sure that Barclays isn't taking a similar view?

What's the purpose of the equity withdrawl? As this too may be impacting the application at the underwrting stage.

chrissiewants2save

Does the pre-emotion agreement bind the mortgage company etc or is it just personal? Also could you get it varied so that it wouldn't bind a mortgagee in possession trying to sell? From what I've seen banks will steer clear of anything out of the ordinary. Sometimes the decision is made by a clerk who doesn't understand the legal side of things.
I've even heard of a bank scaring a friend saying they would never be able to sell their property because it was affected by an electricity cable easement. How many properties are affected by these, we all need them and generally very close to or affect our properties.

Thrugelmir

Effie1 wrote: »

Barclays do NOT like this arrangement as it will slow down the sale of our property should they have to foreclose on the loan.

Is there any defination of "full market value" in the document?

Something makes me uneasy as to why a pre emption agreement would be applied to a property rather than just land. Which is normally the case.

Other there other clauses in the agreement. Which are favourable towards the land owner?

Effie1

Thank you all for taking the time and trouble to reply. Latest news is that Barclays don't want the pre emption agreement in place. Very happy to lend the money but pre emption MUST be removed. It is a case of they just want no complications should they have to foreclose - which they won't ever have to do. Anyway, we will now be talking to the man who sold us the land to see if he will help us and agree to extinguish the pre emption (more legals!) and then reapply....probably not to Barclays though.Again thanks for all your comments and help. Lovely to feel you can talk this stuff over with people.

Hodgeland

Effie1 - Do you have an update? Did you get a mortgage with another lender?

We have exactly the same problem. We were processing a re-mortgage with Barclays, and because of a pre-emption (neighbour has first refusal on our property) they wouldn't give us a mortgage. Our current interest rate is REALLY high, and we want to get a better rate with another lender. Did you find a lender that would accept the pre-emption agreement?

Cheers

holly_hobby

Have you checked out what existing borrower rates your current lender are offering ?

As it stands,you'll struggle to remortgage (and also sell on if the purchaser requires a mortgage and/or doesn't like restriction). Have you sought the advice of a conveyencer with regards to what options there are to having the restriction removed/amended ?

What are the terms, is it specific to a particular individual whilst they remain your neighbour ?
Or just anyone whom lives next door ?
Is there a defined period for this restirction to be active ?
If so, when was this restriction added, or has it been in place for long period ?
Were you aware of this term when you purchased yourself ?

Holly x

Hodgeland

Hi Holly

It's quite a long story but I will try and be brief, basically, we owned the property next door (the bungalow) and built a new house in the garden of the bungalow. We now live in the new house and sold the bungalow but as part of the sale the purchasers wanted first refusal on our house if/when we want to sell (at full market price). Our solicitor at the time said it was a win win situation for us!

The Solicitor set up the agreement which is only between us and if we were to sell our house to someone else, the agreement would end. To answer your questions:

What are the terms, is it specific to a particular individual whilst they remain your neighbour ? The agreement is only between us the 'individuals'.
Or just anyone whom lives next door ?
Is there a defined period for this restirction to be active ? It's active as long as we both are neighbours.
If so, when was this restriction added, or has it been in place for long period ? Added as part of the sale/purchase of the bungalow
Were you aware of this term when you purchased yourself ? Yes, it was set up during the conveyance of the bungalow.


If we struggle to re-mortgage I will be extremely cross with our Solicitor, because I did specifically ask whether this agreement would effect any future mortgage applications, of which he replied 'I have never known it, worst case scenario the lender has a guaranteed buyer which is good for them'. Our Solicitor also stated that should our house be repossessed the agreement would end, because the lender would be responsible for the property, not us.

I hope this makes sense?

Tinah

Senior_Paper_Monitor

It just happens that I have spent much of the last month looking into pre-emption rights, remortgage, resale and lender's attitude to the same.

Lenders are across the board very reluctant to fund either purchase or remortgage with pre-emption rights. Some are slightly more receptive to remortgage when it is a council pre-emption on a previous right to buy acquisition, but most don't differentiate.

I only know two lenders (one large - one small) who will take purchase with a pre-emption in place (but I haven't yet covered all the small ones as I was specifically researching for lenders who would also take BTL portfolio owners).

I have some serious doubts about what your solicitor apparently told you - but wouldn't want to comment further without seeing the documents involved.

Back to your remortgaging problem - there should be a handful of lenders (depending on your other circumstances) who would remortgage provided the pre-emption terms are reasonable. I quote the requirements of the most obvious lender:


"providing the pre-emption nominationperiod doesn't exceed any of the following:



- no more than 4 weeks in which todecline or accept to buy the property

- exchange to be no more than 4months after accepting to buy the property

- completion no later than 1 monthafter

OR

- a total period for nomination,acceptable and exchange not exceeding 6 months



The property just needs to be soldfor no more than open market value, and they have confirmed that the pre-emption holder will normally act reasonably and we generally do not come up against thisproblem at all."

I would stress that most of the subsequent research I have done is around (and specific to) the purchase of previous Right to Buy properties during the 5 - 10 year pre-emption period (as we have a large client base of current right to buy borrowers who we need to understand the difficulty they may have selling their properties at market value during years 5 - 10).

You should be able to find someone to remortgage you but you will need to give each potential borrower full details of the pre-emption arrangements early in the process to review otherwise there is a considerable risk of rejection at a late stage when you have already spent money.