Road not adopted - might Nationwide withdraw mortgage offer?

RainbowLaura

Hi all,

We have recently received our mortgage offer from Nationwide, which was such a happy relief after 3 weeks of waiting. But that didn't last long, as very soon afterwards our solicitor informed us that the house we are (hopefully) buying is on a road which is not yet adopted by the council. This was no surprise to us, as it is on a new development which has only just been completed, though they have been building for a long time now and our house, which was one of the first to be built, is now 12 years old. What did surprise us is that there is no Section 38 agreement in place for the adoption to ever happen, although "the intention is there". This all happened nearly 2 weeks ago now, and we are still no closer to finding any answers. All we know is that an agreement is being drawn up, but "has been in the hands of the developers for a considerable length of time". As a consequence, the solicitor now has to inform our mortgage lenders (Nationwide), and we have been warned that there is a chance that they might withdraw the offer as a result. Obviously we are panicking a bit now, as it has been 2 months since our offer was accepted and we have grown quite attached to the house, as silly as that may sound

Does anyone have any similar experience? What are the chances of our mortgage being refused? Any advice or comments would be much appreciated.

highguyuk

I don't understand why a section 38 matters tbh. If this was the case, how would any potential owner secure a mortgage on a brand new property or property on a private road?

It can be years and years before a section 38 goes through, even if one has already been drawn up due to the maintenance periods allowed.

Goldiegirl

I think Nationwide's decision will depend on the LTV figure.

If your mortgage is low in relation to the value of the property, they may decide there is little risk to their security, and advise the solicitor that he can proceed.

If the LTV is higher, they may feel there is a risk.

When I worked for a big lender, we'd normally proceed on high LTV mortgages with this sort of issue, but would put a retention on the mortgage, until the section 38 was in place.

This means that an amount of the mortgage, for example £1000' was kept back until the section 38 was in place. At that point, the rest of the money would be advanced to the borrower. Of course, the borrower had to find the extra cash to complete.

I don't know what Nationwide's attitude is, I think you'll have to await their response to your solicitor.

Buzby

Adoption used to be virtually automatic and after 1 year it was a done deal, it isn't the case now. Council's are now unwilling to take on this burden when the are not compelled to - it is up to the developer to sweeten the deal in some way, but this happens before the foundations are laid.

12 years on, I would expect the developers have no interest, and neither does the Council - leaving the property owners fully liable for everything, possibly even the electricity used for the street lamps.

Anyone taking on a property in a private road is not unduly penalised, they just have to factor in the additional costs of repairs or insure against them.

ValHaller

highguyuk wrote: »

I don't understand why a section 38 matters tbh. If this was the case, how would any potential owner secure a mortgage on a brand new property or property on a private road?

It can be years and years before a section 38 goes through, even if one has already been drawn up due to the maintenance periods allowed.

I think the distinction is between a Section 38 Agreement being in place and the Section 38 'going through'. The Section 38 only 'goes through' when the roads are adopted, which means that they have to be in an adequate state. AIUI, developers place a bond as part of the S38 agreement, against the possibility that the developer defaults on getting the roads to a fit state for adoption.

There is something puzzling about OP's situation - I am wondering if the Section 38 is not agreed but there is some other mechanism in place to cover the original buyers - or if the Section 38 agreement is actually in place but the roads have not been adopted and the message is being distorted somewhere.

In OP's shoes I would be investigating further to see whether the Section 38 agreement is in place and the problem is simply that adoption has not yet occurred. If there really is no Section 38 agreement, I really would walk from the property - trying to get the residents to agree to repairs will be like herding cats.

highguyuk

As someone who does s38 inspections on behalf of a client, I do have some knowledge of this area.

However, I must admit I've never really considered the householders viewpoint in this. Usually just do what I'm told and have my highway blinkers on!

My OH parents live on an unadopted road. No street lights, drainage or road maintenance. The road is unmade, always has been, and they can't get agreement from everyone to pay for repairs or do anything pro-active towards it. Hence, it's in a terrible condition!

As above, if there is no S38, you may wish to consider your position or offer accordingly.

RainbowLaura

Yes, apparently the original owners of the houses are protected against costs/liability, but anyone who buys the houses re-sale is not protected.

The LTV figure worries me as our deposit is only just over 10%, and it's the absolute maximum we could borrow :S

The issue with this particular development is that it is a large development of 1000 houses, and ours was one of the first to be built. The last houses have just been finished only weeks ago. The developers for some reason decided to wait until the houses were all finished before starting the road completion process. The adoption is apparently happening in 7 phases, with phase 1 already adopted. Ours is phase 4 so may be a while yet. As it happens the developer is Taylor Wimpey, so not a small business likely to go bust or anything...

Thanks for all your comments, it's useful to see things from different viewpoints as I feel that my vision has become rather tunnelled recently, all I can see is obstacles everywhere!

highguyuk

It sounds more positive that the development has only just completed.

We quite often gets batches of phases in one go etc, it wouldn't be unusual for us to receive a whole estate or just a couple of streets and then a couple more a little down the line.

RainbowLaura

I just hope that Nationwide will realise that though, as it does sound more "dodgy" than it actually is...