Unadopted Road - mortgage refused

sloop1

We're selling a house which was built about 18 years ago and is on a road of about 100+ other houses (including some housing association homes). It was built by a huge national builder, and the road is unadopted. Responsibility for the drains has been taken on by the local water company. All repairs, maintenance, street lights etc is done by the builder. There's no service or maintenance charge to the residents, if something goes wrong (eg a streetlight blows) the builder is notified and they come out and fix it. The council are due to adopt the road but it may be another 18 months.

Our buyers had a mortgage offer in principle, then it was withdrawn at the last minute due to the unadopted status. We received a form about 8 weeks ago from their solicitor asking about things like charges (none), who owns the street (the builder), who has access (everyone, inc general public), ease of access (easy, it's off a main road). The road is well maintained, properly finished (not an unmade road) and looks just like a normal road. The form kept asking about things like whether access would ever be denied etc - it felt as if is was a form aimed more at properties in rural settings or unmade roads.

We've been told by our estate agents and our solicitor that this unadopted status is very common with new build estates. 

The buyer's mortgage company/solicitor (we're not sure which) asked for 3 indemnity insurances to be paid - one for about £250, one for about £150, and another for about £5k. We've agreed to pay the £250, the buyers have agreed to pay the £150, but we're refusing to pay the £5k as our solicitor is saying it's nonsense and not necessary. But even so their mortgage was declined.

Our buyers are now trying to get another mortgage - they're using a mortgage advisor who doesn't seem to be great - but this has been the situation for about a week now and we have no idea what's happening. Their solicitor is awful, the buyers seem to be totally confused, and their mortgage advisor is impossible to get hold of. They're insisting they really want the house and are trying to sort out a new mortgage, but we're at risk of losing the house we want to buy because this has been going on so long now.

Is it usual for mortgage companies to refuse to loan on a new-build type estate/street if it has unadopted status?

I keep seeing things about banks not wanting to lend on streets that have unregulated maintenance charges for the residents (this has no charges at all) or on streets where access could be denied or the road is unmade or rural and pothole ridden - but none of this applies to us. The builder is one of the biggest builders in the country (in the top 5), so it's not like the houses were built by a fly-by-night company that might go bust.

We bought the house 10 years ago and none of this was mentioned to us and we had no problem getting a mortgage. There are 3 houses for sale on the road currently, and the last one to sell was about 6 months ago (and seemed to go through fine). So houses are being bought and sold, but we're starting to think that they've all suddenly become unmortgageable or something!

We were told that the two indemnities would mean the mortgage could go through, but it appears not to be the case. The £5k insurance seems to be coming from the buyers solicitor rather than the bank though, so we're very confused as to how that's affecting them getting a mortgage!

Anyone have any thoughts?? 🙏

nicmyles

The builder has been maintaining this road for 18 years? For free? That makes no sense at all and I can understand why a lender may be dubious. Was it some sort of planning condition?

Are the houses freehold or leasehold? Is there anything (in leases, covenants, etc) that means owners would have to pay maintenance charges if they were requested? ie has the builder got any mechanism to compel payments should it decide it wanted them? 

If the council has in principle agreed to adopt the road, that may be enough for some lenders, so not sure there is much you can do beyond what your buyers are doing.

user1977

Sounds like it's your buyer's solicitor who is the problem rather than the lender. Your solicitor ought to be able to advise you.

loubel

It might be common with new build properties but you said the house is 18 years old, not 18 months. Why has the road not been adopted yet?

35har1old

loubel said:

It might be common with new build properties but you said the house is 18 years old, not 18 months. Why has the road not been adopted yet?

Is the site now complete building wise or they still building ?

sloop1

Thanks so much for your replies - yes, it's 18 years, not 18 months!

The road is complete, there's no other building happening. To be honest, we feel it's their solicitor who's caused the issue - our solicitor can't see any reason why there'd be a problem with them getting a mortgage on the property. The houses in the street are all freehold. There's nothing to say that the builder could at some point start demanding money from the residents for the upkeep.

We've found out the reason for the long delay was getting the water company to adopt the sewers - this has now been done. The builder is going to replace the streetlights in the near future to a newer design, and they are also working on a survey of the road for the council to show there has been no dilapidation in the time since it was built (the road appears to be in pretty much perfect condition). The builder has said that they are trying to get a Section 37 dedication, rather than a Section 38 (I have no idea what this means), and that this whole process is going to take probably 18 months.

Our buyers were initially trying to get a mortgage with Nationwide and our solicitor has said that, although they're one of the biggest lenders, they're one of the fussiest. They've since applied with another lender, but we're now on day 5 since it's been with their mortgage underwriters and still no news on whether it will be approved or not. So still we wait and wait - and hope the house we are wanting to buy can wait longer too. The sleepless nights and stress are starting to take their toll..!

Ironically, when we bought the house the person selling it to us used this same awful solicitor - our own solicitor didn't flag any issues when we bought it, and neither did our mortgage lender. We got a mortgage on it with no issues at all! 

RelievedSheff

Is the developer Gleesons by any chance?

They are the only developer we work with who go down the S37 route rather than S38 route for highways adoptions. The S38 process can be very lengthy and often holds up the start of building on sites. S37 is basically retrospective adoption of highways as opposed to S38 which are approved in principle prior to construction on site. 

The S37 route is likely to take more than 18 months to complete. Highways are incredibly picky with these applications. But that doesn't matter to the developer, they already have their money!!

The developer is right that the drainage needs to be adopted before the highways will be adopted. But I would query why that has taken 18 years!!

Section62

sloop1 said:

...To be honest, we feel it's their solicitor who's caused the issue - our solicitor can't see any reason why there'd be a problem with them getting a mortgage on the property. The houses in the street are all freehold. There's nothing to say that the builder could at some point start demanding money from the residents for the upkeep.

...The builder has said that they are trying to get a Section 37 dedication, rather than a Section 38 (I have no idea what this means), and that this whole process is going to take probably 18 months.

...Ironically, when we bought the house the person selling it to us used this same awful solicitor - our own solicitor didn't flag any issues when we bought it, and neither did our mortgage lender. We got a mortgage on it with no issues at all! 

Having worked in this sphere myself, I'm firmly on the side of the awful solicitor.

If the road hasn't been successfully adopted after 18 years of trying then that should act as a huge red flag.  Perhaps the awful solicitor remembers something from when they were helping the previous owners offload the problem onto you, and therefore is advising their client correctly?

If the developer is giving up on the S38 process and hoping to go down the S37 route instead then that too would be a red flag.  What does your solicitor say about this?  Have they explained the difference between S37 and S38 to you?

Being asked to pay for maintenance (by the developer) is among the least-worst possible outcomes for owners of properties along the street.  The fact the developer is a large company doesn't provide much comfort - the large developers often protect themselves by creating subsidiary companies per development, and even if they didn't do that in this case, there is nothing legally stopping them transferring the road to a new subsidiary company and then liquidating that in due course.  A private road with a defunct corporate owner is a real headache... this is why paying money to a properly constituted maintenance company wouldn't be such a bad outcome.

Your estate agents and solicitor told you this unadopted status is very common with new build estates.  They aren't wrong.  But 'unadopted' is usually either because responsibility will remain with a funded maintenance company, or it is a temporary status pending adoption.  After 18 years this estate isn't "new build" any more.

housebuyer143

Section62 said:

sloop1 said:

...To be honest, we feel it's their solicitor who's caused the issue - our solicitor can't see any reason why there'd be a problem with them getting a mortgage on the property. The houses in the street are all freehold. There's nothing to say that the builder could at some point start demanding money from the residents for the upkeep.

...The builder has said that they are trying to get a Section 37 dedication, rather than a Section 38 (I have no idea what this means), and that this whole process is going to take probably 18 months.

...Ironically, when we bought the house the person selling it to us used this same awful solicitor - our own solicitor didn't flag any issues when we bought it, and neither did our mortgage lender. We got a mortgage on it with no issues at all! 

Having worked in this sphere myself, I'm firmly on the side of the awful solicitor.

If the road hasn't been successfully adopted after 18 years of trying then that should act as a huge red flag.  Perhaps the awful solicitor remembers something from when they were helping the previous owners offload the problem onto you, and therefore is advising their client correctly?

If the developer is giving up on the S38 process and hoping to go down the S37 route instead then that too would be a red flag.  What does your solicitor say about this?  Have they explained the difference between S37 and S38 to you?

Being asked to pay for maintenance (by the developer) is among the least-worst possible outcomes for owners of properties along the street.  The fact the developer is a large company doesn't provide much comfort - the large developers often protect themselves by creating subsidiary companies per development, and even if they didn't do that in this case, there is nothing legally stopping them transferring the road to a new subsidiary company and then liquidating that in due course.  A private road with a defunct corporate owner is a real headache... this is why paying money to a properly constituted maintenance company wouldn't be such a bad outcome.

Your estate agents and solicitor told you this unadopted status is very common with new build estates.  They aren't wrong.  But 'unadopted' is usually either because responsibility will remain with a funded maintenance company, or it is a temporary status pending adoption.  After 18 years this estate isn't "new build" any more.

I tend to agree and honestly wouldn't touch a house with an unadopted road unless like you say they are still building and will be getting it in the near future..I would wonder what he's wrong with it if they haven't had it adopted in 18 years.

People pay the solicitor for advice and then when they tell you something they don't like they blame them 🤷‍♂️
It wasn't a problem for you, but you are leaving and who is to say in the future it won't be?

Hoenir

user1977 said:

Sounds like it's your buyer's solicitor who is the problem rather than the lender. Your solicitor ought to be able to advise you.

Be the lenders decision based upon their internally set criteria. Bottom line it that it's their money that's going to purchase the property. They will have to be satisfied that that the property provides suitable and adquate security for the advance. This will include their ability to sell the property in a timely fashion should the need arise. 

spoovy

I was a highway engineer in a previous life and I see red flags here too. There are any number of reasons why the HA might not want to adopt this road, many of which would be prohibitively expensive for the builder to resolve. Which seems the most likely explanation for the 18 years and counting wait to me.