Mortgage company informed of Seller’s dispute with freeholder

kl1985

Hi everyone, we are in the process of buying a leasehold property. Everything has been going smoothly until just before Christmas when we found out that the freeholder was wanting to charge the seller £3.5k for the landlord pack. They, quite rightly in my opinion, refused, as this was an extortionate amount of money for something which should cost far less than this! Unfortunately it hasn’t been resolved and now our solicitor has told our mortgage lender (Santander) about the dispute. She has said that we probably won’t hear back until the end of next week, so now I’m really panicking that we might lose the mortgage offer, and the house. Has anyone had any experience of anything similar? Thanks so much! K

eddddy

I guess a key question is - what do you think about this?

Most freeholders charge about £200 to £500 for a management pack. So it sounds like the freeholder is ripping-off the sellers. Are you happy about buying a property where the freeholder rips-off leaseholders (i.e. you, in future)?

rachel230

Do you know who the Freeholders are?

Katiejane13uk

This is outrageous but unfortunately not unheard of. Freeholders are exploiting leaseholders all over the place. There is so many examples of this in the National Leasehold Campaign group who are working to highlight these issues to government.

Good luck in 'buying' a leasehold property as leasehold is not the same as outright ownership. This is only one small part of how the system is used as a cash cow. What is your ground rent and lease terms ??

kl1985

Thanks for the replies. 

We are looking at it as ‘forewarned is forearmed’, and should we come to sell in the future we will challenge the fee far earlier in the process-our solicitor has advised us that courts generally find the reasonable cost to be £500, and out of principle I’m willing to go down that route. 

Our solicitor has said she’s happy with the terms of the lease and doesn’t think there is anything else he could do. 

Do you think I should be worried about the mortgage lender being informed? 

princeofpounds

Yes, the mortgage lender may decide not to lend on the property or demand a lower LTV. It's hard to predict. Unfortunately there's little you can do here. 

It's a pathetic area of law and very sad that multiple governments have done precisely nothing about it. 

The vendor can go to Tribunal to challenge the fees as unreasonable, and would win, but that will take months and cost in legal fees anyway. But what they can't do is force the freeholder to answer enquiries, so it may be pyrrhic victory. I feel sorry for them.

Most freeholders are ok to do it, because they get a nice - if not extortionate - fee for the work and it doesn't change their life much otherwise. But this freeholder may have other motivations, or just trying the extortionate approach (which will probably mean they get nothing in the end).

GDB2222

eddddy said:

I guess a key question is - what do you think about this?

Most freeholders charge about £200 to £500 for a management pack. So it sounds like the freeholder is ripping-off the sellers. Are you happy about buying a property where the freeholder rips-off leaseholders (i.e. you, in future)?

It strikes me as weird that people get so invested in a property that they’re buying. This is such an obvious sign of a freeholder that you want nothing to do with! Surely, the thing to do is buy a different property? Who wants to buy into a continuous conflict? And, the solicitor is probably rubbing her hands with glee at the thought  of a client who is going to litigate on a matter of principle.  

AdrianC

Seems to me you've got a simple choice. Pay the freeholder pack price, or walk away from the purchase.

If the freeholder hadn't told the lender, your surveyor (who also acts for the lender) certainly should.

Until you exchange and complete, it's not your problem to persuade the freeholder that the pack price is too high. It's the vendor's problem. There are always other properties.

eddddy

kl1985 said:

Do you think I should be worried about the mortgage lender being informed? 

If you want, you can ask the solicitor why she felt the mortgage lender needed to be informed - and what advice the solicitor gave to the mortgage lender about this. (Because the solicitor is acting for the mortgage lender, as well as acting for you.)

Normally, the mortgage lender would be concerned with anything that makes the property difficult to repossess and re-sell (i.e. if you don't pay your mortgage).

Maybe the solicitor is just warning the mortgage lender that,if they repossess and resell, it looks like they'd have to pay £3.5k for a management pack. Or maybe the solicitor is warning the mortgage lender that this may put off future buyers.


But TBH, mortgage lenders often tend to rely on solicitor's advice - so it may depend on exactly what your solicitor said to them. e.g. "I think this will make the property difficult to re-sell", or "I don't think this will impact on the saleability of the property".

loubel

Is that really just their fee for providing the pack or could the seller be in arrears that they are requiring to be paid before providing it? If the first then I'd walk/run away from this property regardless of whether your lender is willing to proceed as the freeholder sounds awful! 

davidmcn

What's your LTV percentage? From the lender's point of view, this suggests they may have an unexpectedly large cost to get the property sold if they repossessed - but if you have sufficient equity, they might regard it as being your problem rather than something likely to lead to them suffering a shortfall.