Britannia and ex local authority houses

jamesp31

Has this happened to anyone else? We are looking to move house, have sold ours, and found a bigger, ex local authority house just along the road. I contacted my current provider, Britannia, as I am currently in a 5 year fix. They agreed to a further loan and to port existing mortgage. Great. All going ok, formal offer is made. Weeks have passed while solicitors do their stuff. Then, just as we are about to exchange contracts, Britannia withdraw the offer, on the basis that they do not lend on ex local authority properties because of a restriction meaning that only people who have lived or worked in the county can buy (criteria we satisfy, however if they repossessed the house they think they would have trouble shifting it). hey are effectively forcing us to find another lender which I will gladly do and never ever go near Britannia or Co-op bank again, despite working for them. I am refusing to pay the ERC. My point is, at no point in the application process were we asked if it was ex local authority, and we certainly never thought to mention it. Why was it allowed to get this far? If we had known this at the start we would of found another lender straight away.

kingstreet

Ex-local authority isn't really the issue.

The issue is there's a S106 agreement covering the property which means the re-sale prospects are reduced in the event of repossession.

Have you investigated the possibility of the S106 agreement being removed, with your solicitor?

jamesp31

Having spoken to the housing association myself, the restrictions are permanent and won't ever be removed

davidmcn

I wouldn't blame the lender here, it's a rather obscure restriction and there are 1001 potential problems with properties - you can't expect them to run through a checklist of everything. At some point you need to assume that the borrower is proposing to buy an easily marketable property.

Though I would have expected your solicitors to flag it up at an earlier stage - were the titles not available until the last minute?

jamesp31

I don't know about the titles, however the mortgage valuation which Britannia would definitely of seen clearly states it's an ex council house, so why did they go ahead and make the formal offer to us?

kingstreet

As I said, the issue isn't the fact it's ex-LA, it's the presence of the S106 which is not a normal feature of an ex-La purchase/sale.

The S106 will not have come to light until your solicitor analysed the title to the property.

Leon_W

There is quite a bit about 106's on the CML website (Council of Mortgage Lenders). http://www.cml.org.uk/cml/policy/issues/166 towards the bottom.


I fear it wont help you but it gives an insight into why lenders aren't keen on restrictive covenants.


Basically it's a can of worms. With more borrowers wanting to borrow than there are funds available it's hardly surprising that lenders take the easy route and avoid 106's.

davidmcn

jamesp31 wrote: »

the mortgage valuation which Britannia would definitely of seen clearly states it's an ex council house

Does it clearly state that there's the planning restriction? Ex-council isn't relevant, as the vast majority of council houses don't have a similar condition.

jamesp31

It's not section 106, but section 157 which restricts who is eligible to buy the property. However today I have recieved good news, britannia have changed their minds

ethank

Section 106 means there is a planning requirement