Selling a property quickly to get out of a mortgage

Rising interest rates have dominated the headlines recently, with the Bank of England estimating a million households could see their monthly mortgage repayments increase by £500 over the next three years. If you are affected, you may even be thinking about giving up your property so you will no longer have the burden of a mortgage.

‘Becoming mortgage-free would certainly help ease any immediate financial pressures,’ agrees Philip Walker, Head of the Conveyancing team. ‘Unfortunately, that process is rarely easy or straightforward and, whether you are already at risk of losing your home or just want to reduce your outgoings, it is important to get the right advice first.’

Your liability may not end with your ownership

Some borrowers believe they can get out of a mortgage by simply handing the keys back to their lender. However, this is a misunderstanding. You can still be liable for the debt even after you no longer have any interest in the property.

To understand this, it can help to think of your mortgage in two parts. First, there is the money your lender advances you to buy your home. The mortgage, or loan, agreement deals with this. This is a type of contract, setting out your obligations as borrower, such as the payments you must make. In addition, your lender will take a charge over your home as security for their advance, and any other sums which you may owe them, such as interest.

Ultimately, the charge gives the lender the right to sell your home if you default under the loan agreement. This process is often loosely referred to as ‘repossession’. When the lender sells your home, their charge will usually be released. However, your liability under the loan agreement will continue until all the money you owe is repaid. Property prices have been falling, and if the net sale proceeds are less than you owe the lender then they can pursue you for the shortfall.

What happens when a lender sells my property?

If your lender repossesses your property, they should sell it for the best price reasonably obtainable. Often, this will be through an estate agent, but they may choose to auction the property instead. However, their duty is only to take reasonable care. This means they may agree a price lower than you think the property is worth. In general, an unoccupied property in what is known as a ‘distress sale’ is likely to achieve less than a sale by an owner-occupier.

Your lender must send you the net proceeds of sale, if there is any surplus after repayment of your mortgage and their expenses. If there is a shortfall, you will need to discuss with them how you will repay it.

Selling your property before your lender repossesses

It is usually better to sell your home yourself, and repay your mortgage directly, than to wait for your lender to repossess it. Selling voluntarily gives you more control over the process. You should know at the outset how much money you will have after paying off your mortgage. This should also limit the impact on your credit rating, which could affect your future ability to get a loan. Everybody’s circumstances are different, so it is important to take independent advice.

If the sale proceeds will be insufficient to repay your mortgage, you will need your lender’s agreement to the sale. Most lenders will look upon requests sympathetically if you involve them early on. If your lender unreasonably refuses your request, you may be able to apply to court for an order for sale.

Review your finances carefully

If you are struggling to pay your mortgage it is important to get the right advice. Lenders will want to avoid repossession where possible, so contact yours early on. They may be able to offer ways to help, such as switching to an interest-only mortgage or extending your term. You can also find sources of free debt advice at https://www.gov.uk/debt-advice.

Alternatively, you may just want to reduce the cost of borrowing by downsizing or selling a second home or investment property. However, you should still ensure your figures stack up and take advice from the relevant experts. To start with, you will need a realistic estimate of the price your property is likely to sell for, together with the sum required to clear your outstanding mortgage and all the associated sale costs. Your lender should be able to give you a redemption statement. This will tell you how much you need to pay off your mortgage, while our solicitors can give you an indication of the sale costs. If you are planning to save money by downsizing or moving to a cheaper area, you will also need to work out your acquisition costs.

Only when you have this information can you assess whether your plans are viable.

Selling to a cash home buyer

You may have seen advertisements from companies offering to buy properties for cash. The offer of ready money can be very tempting. However, these companies are unregulated, and it is important to ensure any you deal with are reputable. Even if they are genuine, the price they offer is likely to be below market value.

If you are considering such an offer, speak to our solicitors first. We know the local market and can check out the paperwork to ensure the offer is genuine and that there are no hidden pitfalls.

Making sure your property is ready to sell quickly

A quick sale is especially important if you are under pressure to reduce your financial commitments, as each day you will be paying interest on your outstanding mortgage.

Fortunately, there are several things you can do to progress your sale. Making sure your property is presentable and competitively priced should help attract buyers. Before accepting an offer, consider how quickly the buyer can complete. You may prefer a cash buyer for this reason, but your estate agent should always check their credentials by asking for proof of funding.

Speak to our solicitors as soon as possible, so that they can review your position and alert you to any concerns before problems arise. They will help ensure your property is ready for sale legally. This can involve remedying any defects in advance, for example, by taking out a title insurance policy for a breach of planning permission or another restriction.

As part of the conveyancing process, your buyer will also require a lot of information about your property. So, it is a good idea to collate as much of this as possible in advance. Your solicitor can tell you what is required and give you an idea of the likely timescales.

How we can help you

Being under financial pressure is tough enough without the additional stress of having to sell your home. While we may not be able to solve all your problems, our experienced conveyancers understand the need to move quickly and to ensure your sale proceeds smoothly. The process may, at times, feel emotionally draining, but we will always make it our priority to keep you informed and to address your concerns.

For further information, please contact Philip in the Conveyancing team on 0191 297 0011 or email wb@kiddspoorlaw.co.uk.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

A home with outside space appeals to many of us, but it may be hard to find somewhere affordable with a garden and, even then, you may not want the responsibility of its upkeep. A balcony or roof terrace could give you that much coveted al fresco space without the maintenance headache.

‘It is certainly an attractive proposition,’ agrees Philip Walker, Head of Conveyancing at Kidd & Spoor.  ‘As a result, many developers are now incorporating balconies and roof terraces into their new builds, or owners are adding their own. However, there can be legal pitfalls for the unwary.’

Here he looks at some of the things to consider.

Is the balcony or roof terrace included?

If the property has a roof terrace or balcony, it may seem natural to assume it is included in the sale. After all, it physically appears to be part of the property; the agent may even have used it as a selling point.

Sadly though, things are not always that straightforward. Sometimes, the seller’s title does not extend to a particular feature. Perhaps the documentation was not correct in the first place, or maybe the seller or their predecessor added the feature without properly checking they owned the space.

This can be a particular issue with flats, where the title relates to a space carved out of a larger building. For example, someone may own the top floor flat, but not the roof. Indeed, the building’s owner will often retain ownership of the roof, or it will form part of the common areas. If the title does not include the balcony or terrace, or give adequate rights over it, you may have problems getting a mortgage or selling your home in the future. In a worst-case scenario, you may even have to restore the apartment to its original condition.

It is important to mention any feature like this to your conveyancer early on, and they can quickly check the seller’s title at the Land Registry.

Does the property have a flying freehold?

If part of the house extends over land or property the seller does not own, it may be a ‘flying freehold’. This could be a balcony jutting out over a neighbour’s drive or a roof terrace over another apartment, (or a cellar in an older house which runs under another property).

Flying freeholds have a bad press, with some banks refusing to lend on them. This is because it can be difficult to establish a right of physical support, or the necessary rights of repair. However, this is not always so, as many flying freeholds are long established and do not cause any problems in practice.

Our conveyancing solicitor will be able to explain the potential impact, and help you assess any risk. If the area affected is small, then even if it is not correctly documented, your lender may still be prepared to accept it.

Who is responsible for the balcony or roof terrace?

Sometimes, it is not ideal to own a feature outright. For example, in an apartment block with a balcony running along its length where each flat has the benefit of an individual section. In this scenario, you would usually have a lease of the inner shell of your flat, including the surface of the balcony.

The building owner, or management company, would then be responsible for the structure, the apartment owners sharing the cost of any repairs through the service charge. In contrast, if your lease includes all the balcony, you may be liable for all the cost of repair. This could be so even if you do not have the necessary rights over other properties to carry out those repairs.

When buying an apartment, your solicitor should also check what rights the landlord retains. For example, if you share a roof terrace with other residents, the landlord may have the right to take this space back if they want to redevelop the building. Occasionally, the landlord may have this right even if you own or have exclusive use of that space.

Are all the necessary consents in place?

Any addition to a property should comply with planning and building regulations, otherwise you risk the local authority requiring its removal. If the feature is well established, you may take a view on the likelihood of enforcement action or insure against this risk. In some cases, you may be able to apply for a certificate of lawfulness which would regularise the situation.

Your solicitor can advise you of your options. Bear in mind, non-compliance may indicate issues which are not purely legal. For example, the lack of building regulations consent for a roof terrace may indicate wider issues; you may want to ask your surveyor to confirm it is safe and can bear the additional weight.

Your solicitor should also check the seller’s title to see if the work required any other consents. For example, there may be a restriction in favour of a neighbouring property, or a leasehold property may require the landlord’s consent. Failure to comply with these restrictions could result in legal action or the landlord trying to terminate the lease.

How we can help

Our solicitors will identify any potential problems and can propose constructive solutions. For example, if the roof terrace or balcony is not included in the seller’s title when it should be, this could be:

• asking the Land Registry to remap the extent if there is an error in the register;
• taking out title insurance cover; or
• getting a deed of variation, in which the landlord corrects the omission of the balcony or terrace from the original lease.

The most appropriate approach will depend upon the property, and the transaction, including your desired timescale. For example, a deed of variation may be the best technical solution but could take several months and require the agreement of third parties. So, title insurance may be an acceptable compromise. This is the type of issue we would always explore with you, appreciating both your individual circumstances and the need to sometimes be pragmatic.

For further information, please contact Philip in the conveyancing team on 0191 297 0011 or email wb@kiddspoorlaw.co.uk

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

If you are a homeowner, or looking to buy, the very word subsidence may fill you with dread or visions of sinkholes which hit the newspaper headlines. According to the British Insurance Brokers Association, subsidence is a common issue affecting an estimated 20 per cent of homes in some way. But what exactly is it, and should you be worried?

‘It is natural to be concerned if someone mentions subsidence, but most instances are at the less serious end of the spectrum,’ says Philip Walker, Head of the conveyancing team with Kidd & Spoor Solicitors . ‘It is important to keep things in perspective, and your professional advisors can help you assess and manage any risks effectively.’

Here Philip answers some of your questions.

What is the difference between subsidence and settlement?

Subsidence is when a building’s foundations move because the underlying ground conditions change. Typically, as the soil sinks this damages the property’s structural integrity and cracks appear as walls shift and floors drop.

Not all cracks in a building will be down to subsidence though. Some movement over time is normal, especially when a building is new. This is called ‘settlement’ and happens as the ground adjusts to a building. The underlying soil does not sink but becomes compressed under the additional weight. Settlement is not usually a problem because it does not affect the property’s integrity.

What causes subsidence?

Subsidence can be down to the type of soil a property is built on. Some soils, like clay, will shrink and expand with changes in their moisture content, especially in extreme weather like a flood or a prolonged heatwave. Nearby trees may exacerbate this problem, as during dry periods their roots extract more moisture from the soil, creating additional instability which can affect the soil supporting a building’s foundations.

Other causes include poor construction, previous mining activity, and water leaks, which can wash soil away from a building’s foundations.

How do I know if my home has subsidence?

Cracks in a wall are often the first signs of subsidence. If they appear suddenly or are more than 3mm wide, you should seek professional advice promptly. Otherwise, monitor the cracks carefully. If they do not change, this could be down to settlement.

Typically, subsidence cracks create a zigzag pattern which follows the mortar line in the brickwork. Other indicators include: sinking or sloping floors; misaligned windows or doors; ripping wallpaper which is not attributable to damp; noticeable leaning; or an extension which is cracking or breaking away from the main property. If you think your property may have subsidence, you should discuss this with a qualified surveyor. They may be able to reassure you or offer advice on how to fix the problem.

How do I know if the property I wish to buy has subsidence?

As a buyer, you will lack the detailed personal knowledge the seller has. Instead, you will have to rely on your own observations and your professional advisors.

Getting the right survey is very important. Remember, your lender’s valuation is not the same as a survey. A valuation may identify major structural issues, but its aim is to reassure your lender the property is sufficient security for their loan. To get a fuller picture, you should obtain a comprehensive survey from a qualified surveyor.

Your solicitor also has a key role to play in helping you assess the risk. Their conveyancing searches and enquiries may reveal whether subsidence is an issue or requires further investigation. For example, a standard search will establish if your property is in a coal mining area or affected by brine workings. A more comprehensive environmental search could show the wider potential for ground subsidence.

The property information form, which the seller completes, should also give details of any remedial works that have been carried out, like underpinning, as well as insurance or warranty claims. Further investigation should reveal the extent of any problem.

My home has subsidence, what can I do about it?

The most important thing is to get the right advice. A qualified surveyor can identify the cause of subsidence and how best to fix it, for example through removing any offending tree roots or underpinning. You should also check your insurance policy and any warranties, such as National Housing Building Council (NHBC) certificates. A claim under these could cover the cost of any necessary remedial works.

Many insurance policies cover the cost of repairing damage caused by subsidence, subject to an excess. However, they may not do so if your home has suffered from subsidence before. So, it is important to check your policy and to notify your insurers as soon as you know there is an issue.

Must I tell a buyer about subsidence when I wish to sell?

Despite the adage buyer beware, honesty is the best policy when it comes to subsidence.

Firstly, your buyer may discover the issue through their own survey and enquiries. Being upfront, rather than leaving your buyer to find out themselves, can build trust and good will. Secondly, the information you provide in the property information form must be correct. An answer which is wrong or misleading means you could be liable for misrepresentation. In a worst-case scenario, you may have to compensate the buyer for the difference in value.

If your home has had remedial work done, then providing details can reassure the buyer. This is especially so if there is a guarantee or warranty and you can assign the benefit to them. Likewise, a report or other evidence the subsidence is historic may allay concern.

In addition, a history of subsidence means your buyer may struggle to get insurance cover. Ensuring your policy does not lapse and transferring the benefit to them may be the most viable option; few buyers will buy a property they cannot insure.

The property I am buying has a subsidence issue, what should I do?

Talk to your professional advisors. Your surveyor can give you some idea of the likely physical impact, for example if the subsidence is historic then it may be of little effect in practice.

Sometimes, you will need to know more before you can make an informed decision. For example, if the seller’s answers to pre-contract enquiries reveal they, or a previous owner, has made a claim under an NHBC guarantee, your solicitor should make further enquiries. The outcome may reassure you, as remedial works may have corrected the problem. More rarely, those investigations may reveal an ongoing problem, or a situation which could worsen in the future. In that case, you may want to negotiate a price reduction to reflect the additional risk, require the seller to remediate, or decide to look for another property.

How we can help

Our conveyancing solicitors have handled the sale of many properties with a degree of subsidence, and there is usually a pragmatic remedy. We understand the key issues, and can keep your transaction on track even if it throws up some unexpected issues.

For further information, please contact Philip Walker in the  conveyancing team on 0191 297 0011 or email pw@kiddspoorlaw.co.uk

With the Renters Reform Bill aiming to strengthen tenants’ rights, and interest rates and economic pressures squeezing property investment returns, more and more landlords are leaving the private rental market. There have been claims in the media of a landlord exodus, and if you are a residential landlord perhaps you have been thinking about selling up too.

‘The environment for landlords is certainly very different from a decade ago,’ agrees Philip Walker, Head of the Conveyancing team with Kidd and Spoor Solicitors Limited.

Now could be a good time to reappraise your investments, however selling any property generates plenty of issues and a rental property has additional challenges, such as tenancy arrangements, deposits, and capital gains tax.  As well as legal advice it is important to seek financial advice in advance.

Recent and future changes

Several recent reforms have affected landlords financially. These include the reduction of relief on mortgage interest payments, changes to capital gains tax and the introduction of higher rate stamp duty land tax for buy-to-lets.

You may also be concerned about proposed future regulations, such as:

• Energy efficiency proposals – The Government is looking at plans to require all rental properties to meet a new minimum standard for energy efficiency with an Energy Performance Certificate (EPC) rating of C or above for domestic rental properties. Some landlords cite the potential cost of upgrading an old property as their reason for selling.
• The Renters Reform Bill – At the moment, most residential leases are for a fixed term, usually six months or a year. Provided you follow the correct procedures, you can get your property back at the end of that period. Under proposals set out in the Renters Reform Bill, you will lose this ability and your tenant will have the right to stay in your property. To evict them you must show specific grounds, for example, that they are antisocial or have built up rent arrears. Significantly, the Bill contains provision for landlords to get their property back if they intend to sell.

While these potential reforms may hasten some landlords’ decisions to sell, these proposals are not yet law. Their details could change, and there would usually be a transitional period before they become effective.

Deciding how to sell your rental property

If you decide to sell one or more rental properties, you must also decide whether to do so with vacant possession or with your tenants in place. An ex-rental property with vacant possession could appeal to both investors and owner-occupiers. In contrast, selling with a tenant in situ will generally limit your market to other landlords. On the flipside, you should benefit from the rent right up until the completion date.

Ultimately, the choice depends upon your personal circumstances and the nature of your property. For example, an apartment in a popular city centre may attract lots of interest from investors. In contrast, a rural cottage with a sitting tenant could struggle to sell. You should study the local property market and talk to local agents for advice. Your decision will also influence the legal structure of your transaction, so it is a good idea to discuss your plans with your solicitor early on.

Selling with your tenant in place

This can often be quicker than selling with vacant possession, and there is a lot you can do to help ensure the transaction goes smoothly.

Your buyer will effectively step into your shoes as landlord. Part of their due diligence will involve checking there are no problems with the tenancy. Their solicitor should raise these in their pre-contract enquiries, but making your own checks and collating the relevant documents in advance will help. For example:

• check you have a valid Energy Performance Certificate (EPC) for the property;
• ensure the gas and electrical safety certificates are up to date;
• find the original tenancy agreement;
• provide evidence the rent payments are up to date; and
• obtain proof you have protected your tenants’ deposit in the mandatory protection scheme.

There may be other things you will need to provide, particularly if your property is a house of multiple occupation (HMO), and your solicitor should discuss this with you. Your solicitor will also need to provide the buyer with some additional items on completion, such as a rent authority letter, and give notice to the tenant of their change in landlord on completion.

Selling with vacant possession

If you agree to sell with vacant possession, you must ensure your tenants have left by the completion date. If they have not, you may have to pay compensation to your buyer. Should the tenant fail to leave, the buyer could rescind the contract and you would have to return their deposit.

How to ensure the tenants leave at the right time depends, to some extent, upon your relationship with them. If they are amenable, they may agree to leave shortly before exchange. You then know you will be able to give vacant possession on completion.

However, they may decide to leave earlier which would mean a longer period without rent. There is also a small risk of being left with an empty property if your sale falls through at the last minute.

If your tenants do not agree to leave, then the situation is more complicated. You must comply with a formal procedure to bring the tenancy to an end. This involves giving your tenants the correct notice, generally two months. Your tenants should leave on or before the expiry of that notice, and you can then exchange contracts confident you can give vacant possession.

Meanwhile, until exchange, there is still a chance that your buyer could change their mind and you could find yourself with an empty property.

In theory, you could delay giving notice until exchange and then completion could take place two months later, when the notice expires. You should then receive rent right up to completion, and there would be virtually no risk of a void period or your buyer changing their mind. However, problems would arise if your tenants refused to move out. You would then need a court order to evict them, which can take several months, meaning you would be unable to give vacant possession on completion.

We would not usually advise this last option. However, if your buyer is agreeable, it may be possible to negotiate a conditional completion date, which is something your solicitor could explore. You would then only be obliged to complete once your tenants have actually left.

How we can help

Selling a rental property inevitably involves many variables, all of which can impact on timescales. If your tenants are cooperative and your is buyer flexible, the chances are that your transaction will proceed quickly and smoothly.

Selling an investment property raises additional legal issues to selling your own home, so it is important to instruct a solicitor who is experienced in this area and who can give your transaction their individual attention.

For further information, please contact Philip Walker in the Conveyancing team on 0191 297 0011 or email wb@kiddspoorlaw.co.uk

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

It can be a stressful time for families when advised that they need to sell their parents’ home due to ill health or because equity is required to fund care home fees.

When acting under a Lasting Power of Attorney (LPA) and it does not specifically prevent the selling of property, then you may already have the authority to go ahead and place the property on the open market for sale, deal with the necessary forms and distribute the net sale proceeds.

If there is a restriction in the LPA which prevents you from selling the property, you may need to make an application to the Court of Protection stating why it is in the best interests of the person you act for to sell the property. This must be done before the property is placed on the open market to prevent delays with any proposed sale.

Once the Court is satisfied that the property should be sold, they will make an Order providing the authority to sell the property. This is required by the solicitor dealing with the sale before they can take instructions.

Any appointed Attorney must ensure that they are acting in the best interests of the person who lacks capacity. It is essential the property is not sold at an undervalue.

Care should also be taken if property is jointly owned and only one of the owners lacks capacity. This can happen where a property is owned by a husband and wife and one party lacks capacity. If the spouse has been appointed, as their sole Attorney, then the Court of Protection needs to appoint another party, a trustee, to act on their behalf. This can be a lengthy and costly and cause delays to a sale.

If you are selling a property or you are appointed as an Attorney, contact Philip Walker on pw@kiddspoorlaw.co.uk or Neil Shearer on ns@kiddspoorlaw.co.uk. Alternatively, please call 0191 297 0011 with your query.

“JENNIFER is a fantastic addition to our family department and to Kidd and Spoor” said Philip Walker, director at Kidd and Spoor.

“I am delighted that Jennifer has joined us.” “I am confident our clients will be well looked after” added Philip.

For generations over more than 150 years, Kidd and Spoor have led the way as the premier solicitors in North Tyneside. The family team, headed by Jo Scott, continues to thrive and attract repeat business, founded upon unrivalled levels of client care.

Jennifer will be working with Jo and the rest of the family team at Kidd and Spoor, to maintain and build upon their productive family department. She can be contacted by telephone on 0191 2970011 or by email at jb@kiddspoorlaw.co.uk