Sale falling through - what shall we do with this complete turkey of a flat?

ginger_chocolate

OK so this is long - but anyone who enjoys a soap opera might go for it...

So back at the end of August, we accepted an offer on our flat. It was a little below our asking price, which was itself below what OH paid for the flat back in 2003. The flat has a problem in that it's a leasehold with no maintenance agreement. It has buildings insurance that covers things like fire and criminal damage, but general wear and tear is supposed to be the responsibility of the leaseholders - there's no formalservice charge and no management company. We have spent years trying to engage the other leaseholders into buying the freehold and/or setting up our own management company and resolving the issue, but had no success (in some cases being met with quite hostile responses). In the end, desperate to move, we just put it on the market at a price that we felt reflected the problems (a good £30-40k below typical prices for the area) and were upfront with potential buyers. We accepted an offer after two weeks. We then went looking for a house to buy, found one, had an offer accepted, and paid for a survey, all good.

But the sale of our flat has just fallen through. After two separate valuations by two separate lenders, our buyer has discovered that he can't get a mortgage because of the lenders aren't happy about the lack of maintenance arrangements and the "general condition of the development". If we put it back on the market, unless we can find a cash buyer, it's likely the same thing will happen again.

We've spoken to our mortgage broker, and it looks like we can probably still go ahead with our planned purchase (although it's going to set us back weeks on the timeline) - albeit applying for an 85% mortgage rather than the 35% one we'd planned for. The house we hope to buy is near the low end of our budget, we earn good salaries, have few expenses, and the mortgage on the current flat is tiny (the minimum payments are about £80 a month) - so although it's not ideal, we think we can run the two mortgages together relatively comfortably if we have to. Unless anyone can think of a reason we should absolutely not do this?

The bigger problem, is what on earth do we do with this absolute turkey of an unsellable flat?! It seems to me as if we have two options:
- put it up for auction and hope a cash buyer will take it on despite the problems. I like this option as I really want to cut our losses and be shot of the problem, but OH isn't keen, as he knows he stands to lose lot of money if we do this as it could sell for half of what he originally paid for it.
- Rent it out until it falls apart, we die, or something changes to make it more sellable (like our fellow leaseholders finally accepting the need for action). Obviously we wouldn't get a buy to let mortgage, so we'd need to find the money to pay off the remaining mortgage (about £9000) so we could own it outright. We could afford to do this now, but it would eat into the deposit we have for our new place. We could potentially borrow money from family. Or we could pay it off gradually over the next couple of years whilst it sits empty.

So I guess the question is : what would you do in this seemingly impossible situation?

Cakeguts

Put it into an auction and get rid of it.

Slithery

Yep. Auction it off.

barbiedoll

If it were me, I’d keep it for now and rent it out. (Do take advice though, and read the excellent guides on this forum, written by real-life landlords!)

I only say this because it’s hard to lose money on property in the long-term (depending on location etc) and if you get decent tenants, you’ll be able to hang on until the lease situation changes and maybe then sell for a profit if you want or need to. I owned a flat when I met my husband and if we’d had access to £20,000, we could have kept it, rented it out to (among others) my sister, my brother, my newly-divorced friend, and my mum. I know it sounds indulgent, but a “spare” place is always handy, and you can make money from it when you’re not using it.

But.....Is the building in a bad state of repair? Does it need, or will it soon need, expensive repair work? Is the roof sound? If you’re looking at huge bills, and reluctant fellow leaseholders who just want to bury their heads in the sand, then get rid now and don’t look back.

davidmcn

As above, what is the actual state of repair? Presumably there are ways of getting maintenance compulsorily done if it's significant and urgent? But unless you actually want to be landlords I would tend towards sticking it in an auction for someone who wants the, er, challenge.

xylophone

What exactly does your lease say about the responsibilities of the freeholder and of the leaseholders to each other?

Has no other occupant managed to sell?

Are the other occupants aware that if they wish to sell they will encounter problems?

ginger_chocolate

It's not literally falling apart or anything, but there are considerable cosmetic problems on the exterior. Residents do bits of work from time to time - painting, replacing lightbulbs etc, and when some local kids damaged the back door a while ago, it was covered by insurance. The general appearance of the block dodn't seem to put off potential buyers anyway, as wehad quite a bit of interest. I wouldn't buy it personally though.

Red-Squirrel_2

Get rid, auction it.

The situation isn't going to be resolved easily if at all, and the lease will only get shorter and the disrepair greater.

bouicca21

What's the rental market like in your area? Do you really want to take on the hassle of learning how to be a landlord?

ginger_chocolate

The lease says that each of the 6 leaseholders takes 1/6 of the responsibility for maintenance of communal areas - the freeholder has no responsibility for maintenance. The last sale was around ten years ago. We have tried to explain the situation to other flat owners - some acknowledged the issue but aren't in any rush to do anything about it and our repeated attempts to get them involved in setting up a management company or residents association went nowhere. Others have ignored our approaches.and one actually told us to f-off when we attempted to discuss it. Trying to resolve the issue is a non-starter - it took us two years of trying to accept this.

hb2

I'm another who says 'get rid'. If no-one is going to deal with repairs, the flat won't be any easier to sell down the line and, meanwhile, you will have been spending money on keeping it up to scratch to fulfill your obligations as a landlord.