Inaccurate initial mortgage valuation report.

PorettiPlant

Good morning,
I am looking for some advice/possible solutions to our current problem if possible! I'll briefly outline our situation.
We bought a flat that is composed of 2 separate self contained units. There is a one bedroomed flat and then on the floor above there is another room with bathroom which has it's own completely separate entrance.
We obtained a residential mortgage for this. I think when the valuation was done they were not told/did not look at the upstairs room so did the valuation based on the one bed flat only. We did not see this report.
We have now tried to remortgage 2 years later and due to the upstairs room we have been told we 'have made substantial changes' and as the upstairs is deemed to be lettable we cannot get a residential mortgage and are being forced to sell by our current mortgage company or threatened with legal action.

The only change we have made is some modernisation throughout and the addition of a kitchenette to the upstairs room so that it is a studio.

I just wondered where we stood legally as the initial valuation does not include the upstairs room or bathroom. We are also stuck with a property that we will unlikely be able to sell to someone who needs a residential mortgage. We could remove the kitchenette but I am not sure if that will solve the problem.

I would be grateful for any advice/options. Many thanks.

ACG

The kitchenette would make a difference as that means it is now (or could be) a self contained annex which most lenders do not like. 

I am surprised the current lender is calling in the loan, that is not the same as forcing you to sell, you could go to a different lender. They just no longer wish to lend against the property. 

The original valuation was for the lender not yourselves. So you have no recourse on that. 

Speak to your current lender, ask them if it is solely the kitchenette as that is the only alteration you made (presumably there is a listing on righmove from when you bought the property to evidence this). Removing it may appease them or if not at least allow you to remortgage elsewhere hopefully. 

DullGreyGuy

You describe it as a flat so you are a leaseholder?
Are there other flats in the building or just yours? Do they also each have an unconnected room?
Do you know how the room came about? 

Can you not just remortgage with the existing lender? Never had a valuation done when just renewing with the same lender. Are you trying to get a higher valuation or extract more monies? 

PorettiPlant

Thanks for the responses.
There are other flats in the building. It was an old hotel. It's quite a quirky place. The additional room above was a store room I think and was acquired by the owner of the flat at some point. They put a bathroom in it and used to stay up there whilst renting the main flat out over the summer period as it is by the sea.
When we bought the flat and additional room we had to do a surrender and regrant of the original lease. It is leasehold with share of freehold.

The other flats don't have this arrangement. In our block there are 6 flats.
When we tried to remortgage they sent someone out to do a revaluation and this is how the issue has come to light.
I have acquired a copy of the original valuation report and it states the property is on one floor, has one bedroom and one bathroom which is inaccurate.
I have contacted our mortgage company to see if removing the kitchenette would make a difference.
We have tried another mortgage company who have also refused to lend on a residential basis. My worry is this could be a problem when we sell. When we bought we were blissfully unaware as we were granted a residential mortgage without issue due to the valuation.

Hoenir

Was anyone informed of the conversion of a store room into habitable space?  Was your solicitor aware at the time of purchasing the flat? 

PorettiPlant

Yes the solicitor was aware and sent a letter (at the time) to the mortgage company questioning whether the valuation was accurate. I have not seen if there was a response to this letter.

ACG

Can you just be honest for the purposes of this thread?
Why did you add a kitchenette to a storage room? 

Because honestly to me it reads like you also planned on letting out part of the property (no idea which part but in all honesty it doesnt matter). In which case you have broken the terms of your mortgage and so the lender is within their rights to call in the loan. 

If you are not being fully transparent on here, the help we provide could be off. 

But you seem to want to go down the route of complaining about the valuation. This is an absolute non starter. It is not done for your benefit. So just to save you wasting time, you might as well knock that on the head. 

PorettiPlant

Yes we did want to use the top room as airbnb/short term let hence why we added the kitchenette. I’m not trying to hide that fact. 

I think if we had not been able to get a mortgage first time round based on the valuation at the time we would have likely walked away from the sale. I have contacted the  mortgage advisor to ask about this. 

Thanks for the help and advice.

ACG

PorettiPlant said:

Yes we did want to use the top room as airbnb/short term let hence why we added the kitchenette. I’m not trying to hide that fact. 

I think if we had not been able to get a mortgage first time round based on the valuation at the time we would have likely walked away from the sale. I have contacted the  mortgage advisor to ask about this. 

Thanks for the help and advice.

You have changed the property. 
What they lent on a few years ago was a flat with a storage room and bathroom. 
You now have have in essence a separate annex. 

If you are trying to find someone to blame, you need to look at yourself. 

Your causing a lot of people a headache. Put the property back to how it was, hopefully you have not put the annex part on any sites like air bnb so there will be no record of it being rented out, you should be fine. 

Hoenir

PorettiPlant said:

we cannot get a residential mortgage and are being forced to sell by our current mortgage company or threatened with legal action.

You've knowingly broken the terms and conditions of your mortgage contract. That's the issue. The valuation of the property as orginally conducted is a red herring. 

PorettiPlant

But you are allowed to let out a room on a residential mortgage. Wouldn’t this be equivalent since it is classed as one property?
anyhow, i appreciate you taking the time to gave some impartial advice.