Selling Leasehold flat with Section 20

Lynn121

Hi
Im selling my flat and everything is in place to exchange and complete apart from the buyers lenders need to approve the section 20 repair works to the flat.  It’s been with the bank now for 3 weeks and no idea why they will confirm back, the whole chain will collapse.  We have estimates for the works and have agreed on the contractor and I will pay the flats portion towards the works.
Has anyone to experienced this and what the likelihood of the lender giving approval for us all to exchange and complete? The works are not massive and given I’m paying why would the bank refuse? 

Thanks

BernieW

A s20 notice would not normally go to a lender for approval - so I'm not sure how/why you're in this position.
As with all conveyancing delays, the only things to do is chase ... and chase ... and chase!

eddddy

The s20 details are probably going to the bank's valuer, to see if the valuer wants to adjust their valuation, as a result.

At this stage, there is no guarantee that the s20 works will be done within a reasonable period of time. So in simple terms, the bank is asking their valuer "If Lynn doesn't pay the mortgage, and we have to repossess and sell it before the s20 work is done, will the flat still be saleable in its current state and how much would it sell for?"

So, in theory, the valuer might down-value the flat - or even decide that it is unsaleable without the s20 work being done, and therefore unmortgageable.  But since you want to buy the flat without the s20 work being done, that suggests that it isn't unsaleable.

(Obviously, it depends on the scope and seriousness of the s20 works.)

ahdinko

Echoing OPs question, I'm trying to buy a new build and sell my flat with an s20 notice of a 5 year contract for major refurbishment to every block in town, mine included. Scope of the works is for "futureproofing" the blocks, some of the potentially costly items that are within the scope of the contract are roofs, electrical, etc but the actual scope of each block is dependant on survey.
I won't get my estimate for the works to my block until after the survey which is supposed to be mid 2021.
My buyer understands the section 20 situation and have reflected that in their offer. They have had their mortgage valuation done and have had a mortgage offer.

New build company suddenly has concerns to the point that they've just cancelled my reservation, about 4 weeks before we were all due to exchange. They are worried in that when the management pack is finally done and works its way to the buyers solictors and then to the buyers lender, they will refuse to lend.
I've asked my own solicitors and mortgage advisor for their opinion, both told me they'd never personally heard of a section 20 causing lending to get refused.

Anyone had any experiences or issues like this?

eddddy

ahdinko said:

Echoing OPs question, I'm trying to buy a new build and sell my flat with an s20 notice of a 5 year contract for major refurbishment to every block in town, mine included.
I won't get my estimate for the works to my block until after the survey which is supposed to be mid 2021.
My buyer understands the section 20 situation and have reflected that in their offer. They have had their mortgage valuation done and have had a mortgage offer.
New build company has some concerns to the point that they've cancelled my reservation, in that when the management pack is finally done and works its way to the buyers solictors and then to the buyers lender, they will refuse to lend.
Anyone has anything like this?

That sounds strange.

How does the newbuild company that you're buying from, know that you have a s20 notice served on the property you're selling?  Why has the new build company decided that the buyer's lender won't lend because of an s20?

Have you, by any chance, said something to the new build company that has made them nervious?

Or is it because new build developers often cancel your reservation if you're not able to exchange contracts quickly - they often want it done in 28 days. And you're not able to exchange contracts quickly enough?

ahdinko

eddddy said:

ahdinko said:

Echoing OPs question, I'm trying to buy a new build and sell my flat with an s20 notice of a 5 year contract for major refurbishment to every block in town, mine included.
I won't get my estimate for the works to my block until after the survey which is supposed to be mid 2021.
My buyer understands the section 20 situation and have reflected that in their offer. They have had their mortgage valuation done and have had a mortgage offer.
New build company has some concerns to the point that they've cancelled my reservation, in that when the management pack is finally done and works its way to the buyers solictors and then to the buyers lender, they will refuse to lend.
Anyone has anything like this?

That sounds strange.

How does the newbuild company that you're buying from, know that you have a s20 notice served on the property you're selling?  Why has the new build company decided that the buyer's lender won't lend because of an s20?

Have you, by any chance, said something to the new build company that has made them nervious?

Or is it because new build developers often cancel your reservation if you're not able to exchange contracts quickly - they often want it done in 28 days. And you're not able to exchange contracts quickly enough?

I'm doing an "assisted move" type thing with the new build company which started at the beginning of July, where they've appointed a company to middle-man the sale of my flat who arranged all the estate agents and sit inbetween me, the estate agents and the buyer. Everything goes through this middle company and they progress everything, and in return the new build company would pay the estate agent fees as an incentive.

Several estate agents appointed by the middle-man company came round to value the property in mid-July and asked questions, I told each one about the s20 (although they actually asked me before i even got round to saying it, as they all already knew about it as they are all local estate agents and the s20 affects every council and ex-council block in town which is 550 blocks). That was put in their reports that was fed back to the middle-man company, and I personally made my contact at the middle-man company aware as they had to check that the buyer was all okay with it. Although it's sounding like a manager at this middle-man has only just found out about the s20 this week and raised some alarms to the new build company. Why exactly this person has decided it's going to make the flat unmortgageable is unknown to me and I haven't been able to get an answer as to "why", just that it is their decision.

Everything else was otherwise progressing okay. I got my offer from the buyer 4 weeks ago, the middle-man company checked them out for affordability and made sure they were aware of the s20 and were happy with it. I reserved 3 weeks ago and they gave a 6 week deadline for exchange although will extend if "reasonable progress" is being made. I've instructed solicitors for the purchase and sale, filled out all the forms, paid for the management pack from the local authority, got a mortgage DIP and applied for mortgage. I'm just waiting for the mortgage offer on the purchase. My buyer has also instructed their solicitor and had their mortgage valuation and subsequent offer through on my property so there wasn't any lack of progress.

eddddy

ahdinko said:

Everything else was otherwise progressing okay, I reserved 3 weeks ago and they gave a 6 week deadline for exchange although will extend if "reasonable progress" is being made. I've appointed solicitors for the purchase and sale, filled out all the forms, paid for the management pack from the local authority, got a mortgage DIP and applied for mortgage. I'm just waiting for the mortgage offer on the purchase. My buyer has also appointed solictors and had their mortgage offer through on my property so there wasn't any lack of progress.

OK. They do seem to be acting a bit rashly. (It would be nice to be able to tell them where to go, but I guess you still want to buy the property.)

I guess all you can do is give the new build company a progress report on your sale, and confirm that everything is on track for exchange of contract in 2 weeks (or whatever timescale you believe) - but maybe you've done that already.

From their perspective - if you really can exchange in 2 weeks, that's better than finding a new buyer who will have to start from scratch and probably take 6 weeks to exchange.

But if they insist on putting the new build back on the market, I guess you could say that you'll continue your selling/buying process, and hope that you're ready to exchange (or very close to exchange) before another buyer comes along and makes an offer.

ahdinko

Thanks for the good advice Eddddy. We still love the house and want to buy it, and have done everything we can to show that progress is being made everywhere but they seem to be pretty firm in their belief that it's not going to work out. I think at this point, proceeding with our sale and hoping the new build is still on the market when we have exchanged is probably our only option other than just pulling out.

Do you know how the s20 would influence a banks lending decision? My mortgage broker basically said "never heard of it happening, and if they've valued it already and are happy on the valuation as the building stands today and have offered the mortgage, it shouldn't affect their security".

The flat and block is all in good condition (and all the local residents complaints that the works are a bit needless is another can of worms entirely) so I don't fully understand how this could actually make it all fall apart.

eddddy

ahdinko said:

Do you know how the s20 would influence a banks lending decision? My mortgage broker basically said "never heard of it happening, and if they've valued it already and are happy on the valuation as the building stands today and have offered the mortgage, it shouldn't affect their security".

It depends what the s20 is for. If it's for something like re-painting the windows, re-carpeting the communal areas, replacing the garden fencing (or something that was obvious to the bank's valuer when they visited) it shouldn't make any difference to the bank.

But if, for example, it's for structural repairs to the building - that might be a problem. Mortgage lenders don't generally lend on properties that need structural repairs.