Staircasing for £nil valuation - cladding hangover - advice please

howardmeer

caprikid1 said:

Lunchbox said:

caprikid1 said:

Personally I hope you lose as I am sick of our housing stock being given away at huge discounts and family's with genuine need sitting in bedsits.

Many Housing Associations build and run these Shared Ownership properties through their own ‘investment’ arms earning huge profits, selling to people who genuinely cannot afford to purchase outright and gradually ramping up rent and service charges to well above market range. They also take huge cuts of all contracts charged back to residents for services and tend to have rather questionable procurement processes. It’s in no way comparable to right to buy.

Everything about housing associations is quite dodgy, my father did a dissertation on them and spent a large amount of time studying them. Huge amounts of government funding is sucked into these organisations and who knows where a lot of it goes ! As corrupt as a lot of major charities, they are very difficult organisations to get information on as they are not regulated like companies or charities,

The HA states it's "not-for-profit", yet makes substantial profits from collection of rents and service charges etc, and pays it's Executive staff more than the PM!  I find it really difficult to understand how a HA (a fairly simple business model) needs to pay its senior staff like it is some private international bank!
Also, service charge has risen 150% since 2018 (no kidding. Its been put down to rise in 'insurance' costs) and rent has increased by 8% just this year (between 4% and 6%  annually since 2018).
Make no mistake: these HAs are 'businesses' just like any other...  nothing social about them.

howardmeer

user1977 said:

howardmeer said:

k12479 said:

howardmeer said:

Surveyor confirm compliance with Red Book and RICS advice at time of valuation, i.e. a legitimate valuation and not just "I don't know, so will just put £0"; it was fully reasoned.

Have any cladding-affected property transactions occurred for £0? I doubt they have, however, I imagine many cladding-affected properties will have changed hands to cash buyers for real, albeit discounted, values. I think the claim that your valuation is legitimate would be hard to defend.

As far as I can see (Rightmove, Zoopla, Land Reg data) nothing has sold in my block since mid-2019 (so before the non-compliant cladding was discovered). I'm pretty sure even cash sales would show up somewhere on these sites, so if I am right, this supports my assertion that in fact properties are worth nil in current state because nothing has sold.

The RICS guidance will probably have something to say on this, but I doubt that logic works - a slow (or non) moving market doesn't mean the properties are valueless. Everybody could simply be biding their time (and a large proportion I expect are mortgaged, so can't be sold for any less than the current mortgage balance).

You would be right if 'no sales' were the only criteria the surveyor used, however it was a combination of several factors, the main ones being the HA could not confirm the cost or time frame for remedial works, and importantly, there was no guarantee the costs would not be recharged to the owners (at that time in 2020).
The surveyor did not base his valuation solely on the fact that no sales had taken place.... it was on specific points and according to him, in compliance with RICS guidance published at the time re cladding valuations....
So if you think about it, who would buy a flat (even at a discount) which had a totally unknown and unlimited future liability? If bought (in 2020), the HA could have said "Right, you now owe us £100k as your share for the cost of the remedial works that we'll collect through the service charge and if you don't pay, we will repossess you without any compensation for the share you have just bought. And if you don't pay, we'll also notify your mortgage lender who has a right to pay us and just add the cost to your mortgage!". 

DE_612183

Have you looked at the Housing Ombudsman site?

Found this on there:
Where building owners have been unable to provide assurance on compliance, surveyors are refusing to provide a valuation – returning a zero valuation on properties within affected buildings. This effectively halts the sale, staircasing or re-mortgage process leaving residents in high-rise blocks unable to complete the transaction.  

What that seems to say to me is that the zero valuation is equivalent to "no valuation" rather than it actually being monetary value.

Maybe worth your while contacting the HO and seeing what they say about the situation.

howardmeer

DE_612183 said:

Have you looked at the Housing Ombudsman site?

Found this on there:
Where building owners have been unable to provide assurance on compliance, surveyors are refusing to provide a valuation – returning a zero valuation on properties within affected buildings. This effectively halts the sale, staircasing or re-mortgage process leaving residents in high-rise blocks unable to complete the transaction.  

What that seems to say to me is that the zero valuation is equivalent to "no valuation" rather than it actually being monetary value.

Maybe worth your while contacting the HO and seeing what they say about the situation.

Thanks DE_612183 - I'll do that.

k12479

howardmeer said:

k12479 said:

howardmeer said:

Surveyor confirm compliance with Red Book and RICS advice at time of valuation, i.e. a legitimate valuation and not just "I don't know, so will just put £0"; it was fully reasoned.

Have any cladding-affected property transactions occurred for £0? I doubt they have, however, I imagine many cladding-affected properties will have changed hands to cash buyers for real, albeit discounted, values. I think the claim that your valuation is legitimate would be hard to defend.

As far as I can see (Rightmove, Zoopla, Land Reg data) nothing has sold in my block since mid-2019 (so before the non-compliant cladding was discovered). I'm pretty sure even cash sales would show up somewhere on these sites, so if I am right, this supports my assertion that in fact properties are worth nil in current state because nothing has sold.

I'm afraid that doesn't really support your zero-value claim much. Constraining your search to your block only is highly selective. If a flat with cladding issues two roads away sold for >£0, regardless of whether it's more/less desirable than yours, then your argument fails. If £0-valued flats the other side of the city or even in different cities are selling for something, then your argument doesn't really stand up.

GDB2222

howardmeer said:

k12479 said:

howardmeer said:

Surveyor confirm compliance with Red Book and RICS advice at time of valuation, i.e. a legitimate valuation and not just "I don't know, so will just put £0"; it was fully reasoned.

Have any cladding-affected property transactions occurred for £0? I doubt they have, however, I imagine many cladding-affected properties will have changed hands to cash buyers for real, albeit discounted, values. I think the claim that your valuation is legitimate would be hard to defend.

As far as I can see (Rightmove, Zoopla, Land Reg data) nothing has sold in my block since mid-2019 (so before the non-compliant cladding was discovered). I'm pretty sure even cash sales would show up somewhere on these sites, so if I am right, this supports my assertion that in fact properties are worth nil in current state because nothing has sold.

That’s a terrible argument. Nothing has sold because most owners are mortgaged up to the eyeballs and are not able to take even a 10% or 20% drop in value without going bankrupt.

And, of course, I would have bought your flat for more than £nil, as I would have bought through a limited liability company.  

What you have is a purely legal argument, based on a ‘surprising' valuation,  and you need to pay a lawyer to read the documents and advise you. 

caprikid1

"What you have is a purely legal argument, based on a ‘surprising' valuation,  and you need to pay a lawyer to read the documents and advise you. "

Unfortunately I think the OP thinks he is going to find the magic bullet on an internet forum that will get him a free flat.

howardmeer

GDB2222 said:

howardmeer said:

k12479 said:

howardmeer said:

Surveyor confirm compliance with Red Book and RICS advice at time of valuation, i.e. a legitimate valuation and not just "I don't know, so will just put £0"; it was fully reasoned.

Have any cladding-affected property transactions occurred for £0? I doubt they have, however, I imagine many cladding-affected properties will have changed hands to cash buyers for real, albeit discounted, values. I think the claim that your valuation is legitimate would be hard to defend.

As far as I can see (Rightmove, Zoopla, Land Reg data) nothing has sold in my block since mid-2019 (so before the non-compliant cladding was discovered). I'm pretty sure even cash sales would show up somewhere on these sites, so if I am right, this supports my assertion that in fact properties are worth nil in current state because nothing has sold.

That’s a terrible argument. Nothing has sold because most owners are mortgaged up to the eyeballs and are not able to take even a 10% or 20% drop in value without going bankrupt.

And, of course, I would have bought your flat for more than £nil, as I would have bought through a limited liability company.  

What you have is a purely legal argument, based on a ‘surprising' valuation,  and you need to pay a lawyer to read the documents and advise you. 

Thanks GDB2222 - never considered the limited liability a purchase through a Ltd would offer a Buyer. Very good shout!

The issues around no sales and the reasons why are all fair - but that is why the Lease insists on the instruction of an independent RICS surveyor to carry out a valuation; it's their job to give a valuation taking all these things into account. That is what the SO did and £nil was the valuation given.

Have had a lawyer read the terms of the Lease, the HA official Guidance on Staircasing and the written instructions from the HA when starting the process - the reply is that the argument is sound. However, without a similar case or example, it is new territory and so the lawyer could not give a clear view on the likelihood if success.

What SO is trying now, is explore what other people's experience has been with "valuation disputes" before proceeding....

user1977

howardmeer said:

user1977 said:

howardmeer said:

k12479 said:

howardmeer said:

Surveyor confirm compliance with Red Book and RICS advice at time of valuation, i.e. a legitimate valuation and not just "I don't know, so will just put £0"; it was fully reasoned.

Have any cladding-affected property transactions occurred for £0? I doubt they have, however, I imagine many cladding-affected properties will have changed hands to cash buyers for real, albeit discounted, values. I think the claim that your valuation is legitimate would be hard to defend.

As far as I can see (Rightmove, Zoopla, Land Reg data) nothing has sold in my block since mid-2019 (so before the non-compliant cladding was discovered). I'm pretty sure even cash sales would show up somewhere on these sites, so if I am right, this supports my assertion that in fact properties are worth nil in current state because nothing has sold.

The RICS guidance will probably have something to say on this, but I doubt that logic works - a slow (or non) moving market doesn't mean the properties are valueless. Everybody could simply be biding their time (and a large proportion I expect are mortgaged, so can't be sold for any less than the current mortgage balance).

So if you think about it, who would buy a flat (even at a discount) which had a totally unknown and unlimited future liability? 

Lots of people do - you see e.g. landlords buying cheap properties (with common charges, structural problems or redevelopment schemes etc hanging over them) and pocketing whatever rent they can get in the meantime, and taking a gamble on what happens in the future.

Unless you think there's actually some certainty that the leaseholders' liability will be greater than the value of the flat? (in which case surely the true value is negative, rather than zero!)

As others have suggested, I would view the "zero" valuation as meaning "we can't provide a valuation because of the amount of uncertainty involved", not "we're certifying that the value of this property is precisely nil".

howardmeer

k12479 said:

howardmeer said:

k12479 said:

howardmeer said:

Surveyor confirm compliance with Red Book and RICS advice at time of valuation, i.e. a legitimate valuation and not just "I don't know, so will just put £0"; it was fully reasoned.

Have any cladding-affected property transactions occurred for £0? I doubt they have, however, I imagine many cladding-affected properties will have changed hands to cash buyers for real, albeit discounted, values. I think the claim that your valuation is legitimate would be hard to defend.

As far as I can see (Rightmove, Zoopla, Land Reg data) nothing has sold in my block since mid-2019 (so before the non-compliant cladding was discovered). I'm pretty sure even cash sales would show up somewhere on these sites, so if I am right, this supports my assertion that in fact properties are worth nil in current state because nothing has sold.

I'm afraid that doesn't really support your zero-value claim much. Constraining your search to your block only is highly selective. If a flat with cladding issues two roads away sold for >£0, regardless of whether it's more/less desirable than yours, then your argument fails. If £0-valued flats the other side of the city or even in different cities are selling for something, then your argument doesn't really stand up.

Fair point k12979.

I've looked as best I can - there are some sales in the surrounding area, however I can't tell if those properties had cladding issue - you have to compare like-with-like.  Obviously compliant properties will sell without this issue, but then would it not be for the HA to raise that point, which they have not...