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edited 1 October 2021 at 10:29AM in Bankruptcy & living with it
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  • kaMelo
    kaMelo Posts: 2,363 Forumite
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    edited 20 August 2021 at 1:28PM
    I read that quite a lot of people are considering bankruptcy due to massive bills for work to fix cladding issues.

    Just out of interest (I don't own a flat) what happens if they do this? The property is worth £0 so can't be sold. The freeholder is unlikely to get the money needed to fix the problem, or the money for on-going fire watches and the like.

    Can the occupant keep that property? Presumably eventually the cladding will be fixed and it will be worth something again. Chances are that will after the bankruptcy... But can the freeholder just try to charge them for the work again? It will probably be a multi stage process lasting years with payments along the way, or they could delay it.
    You can't just choose to go bankrupt, you have to be bankrupt.  If, and I really don't know what will actually happen, the freeholder invoices the leaseholder for the cladding renovation in accordance with the lease agreement and they don't/can't pay it it will be up to the freeholder to decide what to do.
    This may be in the form of direct legal action or they could apply to the mortgage provider for payment due to breach of the lease agreement. Who would in turn apply to the mortgage holder for payment, failure to pay would default the mortgage and ultimately could end up in repossession, or enter into a a payment plan with the leaseholder plus numerous other options, all assuming the Government doesn't step in at some point.     

    No one really knows is what I'm trying to say, but what is not going to happen is a person goes bankrupt and is able to sit it out for six years in their cladding free flat and have the asset at the end of it. (Unless the Government/builder/AN Other covers the costs)
  • Minkym00
    Minkym00 Posts: 770 Forumite
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    edited 20 August 2021 at 1:36PM
    The first thing to say is that an EWS1 for is not (yet at least) a statutory requirement. So I don’t see how a freeholder can retrospectively amend the lease agreement to include it, and then bill the tenants for the work. If a tenant declares themselves bankrupt for being unable to pay a debt for cladding work then I would assume the work has actually been done. In which case the property would follow the normal rules and the OR could sell it any any point in the next three years if it has any equity. If not, it is re-vested.
  • [Deleted User]
    [Deleted User] Posts: 0 Newbie
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    edited 1 October 2021 at 11:27AM
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