Completion how do i deal with this and who is in the wrong

canaldumidi

You've still not even hinted at how you were misled. "the numbers were presented to us made sense" in which case what changed?

[Deleted User]

Ultimately if the advice was correct then you would be borrowing the £100k extra regardless.  They have offered to cover any fees you have to pay to get this further money.  At this point the advisor has admitted a mistake was made and done what is needed to put it right.   Once this is done you will be at the same point you would have been at if the initial advice was correct.  

If you pull out of the transaction as you cant afford the extra then you probably have a case against the advisor that you wouldnt have exchanged had the advice been correct in the first place.  

Until a loss actually materialises you have nothing to claim.   I probably wouldnt sign a form saying you wont chase further losses as you dont know what these might be

Section62

Jammie01 said:

However clearly we were mislead by the IFA, he is the professional!

He is, but as BTL is a business, so are you.

That comment isn't to attach 'blame', but to point out that this isn't a straightforward case of a lay/uninformed client being misadvised on a purely residential purchase.

As such, those whose job it is to work out 'who is in the wrong' before deciding what resolution is appropriate might take into account that a £100k hole in your business plan isn't necessarily the sole responsibility of the IFA (or the solicitor either).

I'd guess ultimately it will depend on the exact extent and nature of the advice the IFA was being asked to give.  E.g. Who was it who thought BTL was a good idea in your circumstances?

SDLT_Geek

Is part of the £100K difference the extra 3% stamp duty land tax which I expect is due on the purchase as a consequence of retaining your old home?

A "nuclear" mitigation strategy might be to sell your old home after all.  There would not be many buyers who would do it in the timescale.  I do not suppose the builders would take it in part exchange if offered it at a price they liked? 

That strategy would wipe out the extra 3% SDLT on the price, which might help with any price reduction you have to offer on selling your old home.

GDB2222

SDLT_Geek said:

Is part of the £100K difference the extra 3% stamp duty land tax which I expect is due on the purchase as a consequence of retaining your old home?

A "nuclear" mitigation strategy might be to sell your old home after all.  There would not be many buyers who would do it in the timescale.  I do not suppose the builders would take it in part exchange if offered it at a price they liked? 

That strategy would wipe out the extra 3% SDLT on the price, which might help with any price reduction you have to offer on selling your old home.

Don't they have 3 years in which to sell the old home and reclaim the extra 3%? So, although they have to fund the extra money for the time being, they can reclaim it eventually.

For 3% to equal the whole of the £100k, the new home would have to cost £3.3m. That's not impossible, but ...

AdrianC

Can you give values on the properties, and the amounts of money borrowed, please?

Because without those, this makes no sense at all and there is nothing we can sensibly advise.

£100k gap in funding is not a minor error.

TripleH

Did you get your IFA to explain how this works in writing or just verbally?

Have any circumstances changed from when this purchase started?

Was all information disclosed at the time and were re-workings of the funding required amended every time new details came to light?

To me you would have:

1. Purchase price of house plus

2. Stamp duty on said purchase

3. Professional fees involved in the purchase less

4. Your contribution to expenses less

5. Your 25% deposit equals

6. The mortgage you required to purchase the property.

(Above is a very simple summary).

Points 1, 2 and 5 should be fixed and known from the start point 3 plus pointc2. should equal point 4 so logic would say point 6. Should be known.

I suspect the issue is around point 5. and the confusion arising in how much money you were able to release from your other property to make the purchase (If I haven't missed anything?)

SDLT_Geek

GDB2222 said:

SDLT_Geek said:

Is part of the £100K difference the extra 3% stamp duty land tax which I expect is due on the purchase as a consequence of retaining your old home?

A "nuclear" mitigation strategy might be to sell your old home after all.  There would not be many buyers who would do it in the timescale.  I do not suppose the builders would take it in part exchange if offered it at a price they liked? 

That strategy would wipe out the extra 3% SDLT on the price, which might help with any price reduction you have to offer on selling your old home.

Don't they have 3 years in which to sell the old home and reclaim the extra 3%? So, although they have to fund the extra money for the time being, they can reclaim it eventually.

For 3% to equal the whole of the £100k, the new home would have to cost £3.3m. That's not impossible, but ...

Yes, there would be three years to sell the old home to get the 3% back, though as you say the real issue here is the cash flow problem, which selling the old home first could address.
 
Yes, I agree the extra 3% is likely to be only a small part of the £100K shortfall.  "Saving" the 3% by selling the old home first might make it more palatable to have to take a hit on the price / part exchange allowance for the old home.

saajan_12

Jammie01 said:

The way that the numbers were presented to us made sense, we novated money from property A to property B so we could get a residential mortgage on property B and Property A would have a larger BTL mortgage to cover the sum moved. However clearly we were mislead by the IFA, he is the professional!  To be clear we want to move to the new house and currently the IFA is working on a solution, we have till the 20th Oct to get this done so I am sure you appreciate that time is very short to get new mortgages arranged and meet completion. the thought of having to claim for lost money is the last thing we want. 

My guess at what's going on.. please fill in the numbers in bold and confirm if the rest is correct.

Currently you own property A as your main residence, selling for (1) and mortgage outstanding of (2)
Plan to pay off that mortgage and raise a new BTL mortgage for (3)
Plan to buy property B as your new main residence for (4) with a mortgage of (5) 
Other costs include higher rate stamp duty, mortgage fees, solicitors costs etc totalling (6) 

Before we thought (3) - (2) = (4) - (5) + (6) the left hand side is 100k lower? So we have to bolster up one of the new mortgages (3) or (5) to make up the difference? 

In terms of what would be reasonable compensation.. 
If the figures were correct from the start, you would have had to borrow the extra 100k, and you would have had to pay the interest on that portion. However what you've lost is 
- fees for applying for an additional mortgage
- additional solicitor costs
- penalties if you complete late as a result of scrambling for a new mortgage. 

[Deleted User]

pretty much every time I speak to someone wanting to rent out their old home and take a new mortgage they ave got their figures completely wrong.   Its gets confused with them thinking they arent paying off their old mortgage, they are taking a new mortgage.  So they end up double counting the same money somewhere along the line.  

Its easily done,  no excuse for a broker to make the mistake of course but I can see why a client would lean on the expertise of brokers and solicitors to make sure it is all done properly.  

99% of the time clients will just leave it up to me to make sure the money gets to the right place and they are paying me for taking the stress away from them. 

I can easily see how this can happen though.  Sounds like its fixable with a bit of time.  If its just a case of amending a figure and it still fits on rental and valuation then a new offer could be on the table in a matter of days.  With no new deed to sign then funds release might not even be delayed. 


The other alternative would be that someone made a typo submitting the application and applied for the wrong amount.  Ive certainly done that before!