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Need to offload a property with negative equity - any ideas?

My other half had a one bed flat when we met. Now we are living together and she has kept the place to rent out.

The flat is generally pretty run down, it is in an old house conversion above a pizza delivery shop.

The freeholder employ a company to look after the day to day running of the property and the one next door. The have done so very inefficiently and a few months ago informed all the leaseholders of a £500 per quarter service charge.

Last week we received a bill for £6000, partly for service charges and partly for works. What these works are I am not sure. The flat has a value of no more than £60,000, which is exactly the same amount as the current mortgage amount outstanding.

Bottom line is we cannot afford this bill. The rent just outweighs the mortgage payments but nowhere near enough for the stress it causes nor to fund £6000 bills.

Can anyone make any suggestion how we can proceed? If my other half misses the payments she'll then become property free but with adverse credit. If we don't pay we end up in court. If we do somehow pay then what will they ask for next?

Taking legal advice is not really an option as we don't have the funds to pursue anything against them legally.
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Comments

  • PasturesNew
    PasturesNew Posts: 70,698 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    You need to write (pen/paper) to them asking them to give a breakdown of what all the costs are for. That'll buy you a couple of weeks (or more) while you work out your options.

    Your options are a little limited as it's above a shop (a lot of mortgage companies won't go for that).

    Is it tenanted? When does the tenant's AST end? You might be 'stuck' and only easily able to consider selling it to another landlord.
  • fugitive333
    fugitive333 Posts: 16 Forumite
    Seventh Anniversary 10 Posts Combo Breaker
    oh, we're stuck alright!

    we have a list of costs, mainly for service charges (£553 per quarter!)

    I think there may be 2 companies that do mortgages above a shop, the same as a freehold property basically.

    The AST has even expired! The council pay the tenant's rent directly into our bank account.

    It's a real mess, I am just picking up the pieces.

    Selling the property is not really viable as a) it leaves a big void between sale price and balance outstanding and b) with all this hanning over it no one will touch it
  • fugitive333
    fugitive333 Posts: 16 Forumite
    Seventh Anniversary 10 Posts Combo Breaker
    and we tried a long time ago to get he tenant out as he wasn't paying. At that stage I managed to meet with him on several occasions and fill out all the necessary forms at the council to have them pay us directly (the flat was initially in the hands of a letting agent and they put him in there.)
  • richardw
    richardw Posts: 19,458 Forumite
    Part of the Furniture 10,000 Posts
    How many years are left on the lease?
    Posts are not advice and must not be relied upon.
  • fugitive333
    fugitive333 Posts: 16 Forumite
    Seventh Anniversary 10 Posts Combo Breaker
    75-80.

    unfortunately not 1 or 2!
  • richardw
    richardw Posts: 19,458 Forumite
    Part of the Furniture 10,000 Posts
    Might be worth finding out the exact number of years remaining on the Lease and if you need to start a lease extension process pretty quick.
    Posts are not advice and must not be relied upon.
  • Annisele
    Annisele Posts: 4,835 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    75-80.

    unfortunately not 1 or 2!

    That "unfortunately" is misplaced.

    If you only had one or two years left, you'd be far more stuffed that you actually are - the lender would still require repayment of the loan.

    You could see if the Leasehold Advisory Service can help.
  • Cornucopia
    Cornucopia Posts: 16,373 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    If the charges are unreasonable, threaten the freeholder with the Leasehold Valuation Tribunal.

    As far as the negative equity is concerned, you have limited options: pay with savings/unsecured loan or transfer equity from your main property.
  • fugitive333
    fugitive333 Posts: 16 Forumite
    Seventh Anniversary 10 Posts Combo Breaker
    it transpires the service charges from 2011 were retrospective, only just invoiced recently.

    If my partner genuinely does not have the money (and she doesn't) what are the implications to her if she doesn't pay the invoice nor the mortgage (ie flat gets voluntarily repossessed).

    At the moment it seems lime the best option, though not one we want to pursue. How many years would her credit history be affected for?
  • Annisele
    Annisele Posts: 4,835 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    At the moment it seems lime the best option, though not one we want to pursue. How many years would her credit history be affected for?

    Potentially for the rest of her life - lenders are allowed to ask if you've ever had a property repossessed or been made bankrupt.

    Usually it's better to sell the property yourself if at all possible. If the lender sells it, you'll (usually) have to pay the lender's costs - which can be quite expensive. (Lenders do operate 'assisted voluntary sale' schemes, where they pay the costs - but those things also hammer your credit rating).

    If the property is sold for less than the mortgage amount (either by you or by the lender), then the lender will come after your partner for the shortfall.

    Is your partner in a position to take out a personal loan for £6k-£10k ish, so she could sell the property and meet the shortfall with a loan?

    Can you release any equity against your current property?
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