Ombudsman Complaint Conclusion

Hello

In a previous post I talked about how we felt let down by a mortgage advisor we used at a very well known estate agents. So much so that we put a complaint in with the Financial Services Ombudsman (FSO). I have yet to write what the outcome of this was. So here goes...

The response letter arrived the day we picked up the keys to the house, which was awful timing (also Friday 13th). We opened it before we left and quickly skimmed over it. The news was not good. The response was that they were siding with the estate agent. According to them 'as with any large purchase we would expect the consumer to do their own research'. I quite agree and we did do our own research, but it was a case of finding what we wanted to find and not feeling the need to research further than that. We had trust in the mortgage advisor that she would advise us on the best purchase for our needs. She had asked us about why we wanted to buy our own place and what we were looking for. To a lay person this would give the impression she was advising us on more than just the mortgage.

The news did put a dampener on our moving day, but I can honestly say I don't regret pulling out of purchasing the flat. Even though we lost over £1000 it was worth it to not end up in a property that within a few months we would have hated. As the saying goes 'you live and learn' and my goodness we learnt a lot. Over friendly mortgage advisors aren't always what they seem. If they are getting a hefty commission for signing you up they won't have your best interests at heart. I had so much more faith in our next advisor who was not charging us for his services. We have gone on to recommend him to 7 or 8 people. On the other hand we will forever slate the well known estate agents and tell others to avoid them at all costs. We have since found out from someone who was selling a house with them that they have some very small print that says they will take a percentage of the original listing price rather than the actual selling price. So they could put your house on the market for £220,000, but it sells for £200,000, they will get commission on £220,000. Says it all really!

We could have contested the FSO's decision, but with moving we forgot and missed the deadline. I don't really think it would have done any good anyway. At least now we are happy in our new home where we don't pay an extortionate service charge, we have a garden and stairs and we are allowed pets.

TTFN

House Buying Terminology

Hello

In this post I'm going to explain some of the terminology you will encounter when buying a house. Some of the terms might be really obvious to some of you, but they weren't to me. I'm sure I'm not the only one!

"No Chain"- this one might be obvious but when we were looking for our house we only understood what it meant when an estate agent mentioned it. A property that has "No onward chain" is the best scenario to have as it means the seller is not dependent on another house purchase to move out. So they might be going into rented accommodation, they are selling a buy-to-let, or moving in with family for example. When there is a chain it can make the whole process very lengthy (8months plus in some cases) and unstable. Each person in the chain has to find somewhere else to buy, which can take a while. There is also the chance that one part of the chain falls through, delaying things further. Obviously you aren't going to buy a house purely on this basis, but if you had two houses you couldn't decide between and one was no chain then that would probably influence your decision. First time buyers are also not in a chain which makes them very desirable to sellers. If you are a first time buyer you can use this to your advantage. As you can move quickly the seller is more likely to accept your offer ;)

"Leasehold"- I have covered this in more detail in this post but will do a brief definition here. Leasehold means that you are in an agreement with the owner (freeholder) that you can occupy the property for a period of time (usually about 100 years maximum).

"Freehold"- Again I went into a lot of detail about what freehold means in this post. Freehold means you own the property and land it sits on 'absolutely'. So you are free to do with it what you want (subject to planning permission).

"Conveyancing"- We had no idea what this was before we started our purchase. Unfortunately those that work in the industry assume that you know what this means so don't explain it unless you ask. Conveyancing is concerned with all the legal documentation that is required to purchase a house. As I understand it you could do this yourself, but it is much easier and more sensible to employ someone who knows what they are doing (although it is not cheaper!). You can employ a conveyancer or a solicitor that specialises in conveyancing. It costs an awful lot of money for what seems like not a lot. But it is very important. They will liase with the sellers solicitor/conveyancer, obtain information on the cost of running the property, check planning permission, conduct 'searches' (explained more below), sort out boundary or rights of way issues. This is all done so that you can make an informed decision about whether to go through with the purchase.

"Searches"- This was another thing that we didn't understand, yet had to pay £250 for! As the name suggests they are searches of databases and records. But what are they searching for you may ask. They check to see if the property is built on a coal mining area, radon area (some dangerous gas), to see if you might have to pay for the upkeep of a church (this is called a Chancel check/search), bankruptcy search and a Land Registry search, amongst others.

"Exchange of Contracts"- this is the point at which you become legally responsible for the property and can no longer pull out of the purchase without serious ramifications (you will have to pay compensation to the seller and vice versa if they pull out at this stage). Buildings insurance needs to be arranged for this date.

"Completion"- yey you finally own the property and can pick up the keys!! This is the day you have spent months waiting for. It should take place one to two weeks after you have exchanged contracts.

"Stamp Duty"- Or Stamp Duty Land Tax (SDLT) to give it its full title. This is that horrible and hugely costly tax that the lovely people in government want you to hand over (as if you haven't spent enough money already). I will be doing another blog post which will explain this in more detail. But basically if you purchase a property costing £125,000 or more you will have to pay stamp duty.

I hope this is useful, TTFN!

Leasehold Vs Freehold

Hello

I wanted to write a post about what leasehold and freehold mean. We came massively unstuck because we didn't do enough research on this before going ahead with our flat purchase. DISCLAIMER I am writing this as I understand it from reading the leasehold contract for the flat we were buying. Each contract might be slightly different. This blog post is written to provide you with a basis for doing your own research. Please feel free to add comments (politely) if you feel I have got something wrong. So here goes;

Leasehold

- Leasehold means that you own the right to live in the property for a set period of time (the length of the lease). When we were looking to purchase the flat we did some research that suggested it meant that you own a small box (flat) inside a larger box (whole building). This is not the case. The person who owns the freehold owns the land, building and each flat.

- The length of the lease determines how long you can stay in the property. Leases are usually 100+ years to begin with. As the length of the lease that remains gets smaller the value of the property reduces. Once you get down to 70-80years left the flat will be unsellable as no mortgage lender will lend on a lease this short. You can pay to extend the lease but this may cost upwards of £15,000!

- Leasehold applies to virtually all flats in the UK. Those that are freehold are difficult to get a mortgage for.

- You pay off a mortgage.

- Buildings insurance may be set up by the freeholder, rather than you having to arrange it. But it may not be the best or best value insurance.

- There are restrictions on hanging your washing out on balconies and getting your own satellite dish. There should be a satellite dish on the building that all leaseholders can use.

- You cannot make structural changes to the property.

- You will most likely need to get permission for pets and wooden floors.

- There are rules on how late you can play loud music (this is one of the few advantages of a leasehold)

- You will have to pay ground rent (approx £100+/year)

- You will have to pay service charges for the maintenance of communal areas. This is the killer. There are no guidelines or protection for tenants* with regards to how much can be charged for these services. The flat we looked at had a service charge of £130/month. This was basic, if the accumulated funds weren't enough for the work done that year they could ask for additional money from each tenant. You have no option but to pay these charges. if you do not pay you will be charged interest until you do.

- If you do not follow the rules set out in the contract you could be evicted.

- You may need to get permission to decorate your home.

- Structural issues to the building as a whole will not be your responsibility, but you will have to pay a share of the cost.

- You might be subject to inspections and the freeholder can enter the property if they so choose.

Freehold

- Freehold means that you own the building and the land that it sits on (once you have paid off the mortgage).

- Most houses in the UK are freehold.

- You pay off a mortgage

- Buildings insurance is arranged by you. It may be an essential condition of your mortgage if you have one.

- You can make structural changes as long as you get the correct planning permission and follow building regulations.

- You do not have to pay ground rent or services charges, but you will be responsible for maintaining the whole property.

- You cannot be evicted from the property.

*An organisation called the Leasehold Valuation Tribunal will look at disputes, but from my research they are not very helpful.

I hope you find this helpful if you are unsure whether to go for a leasehold or freehold property.

Property Purchase Part 1

Hello

For my first proper blog post I thought it would make sense to tell you about my house buying experience so far. I'm going to do it in two parts as its a long story. So here goes...

My boyfriend and I were getting fed up with renting for several reasons;

1. Its dead money. Only the landlord is benefiting from it.
2. We weren't allowed pets.
3. We were being inspected every 3 months, which we felt was a big invasion of our privacy.
4. We couldn't decorate the place.
5. Most importantly we could be evicted at any time. We had been in a nice little flat for only six months when the owner decided they wanted to sell so we had to leave. Then my sister was renting somewhere for a few months when the same thing happened to her. It is horrible to have to leave your home when it isn't your choice.

With all this in mind we decided the time had come to start looking for our own home. We had quite a good deposit saved up so we took the plunge. After some thought we decided that a flat would probably be the best option, as at the time we didn't think we would be able to afford a house, and the mortgage payments would be lower so we would have more disposable income. We weren't searching for long when we found a really nice flat. It had two bedrooms, an ensuite, was in a really nice area on the outskirts of a town and it was only 7 years old so very modern inside. After a couple of viewings we put an offer in which was accepted almost immediately (the owner had found a previous buyer, but we were told it fell through because the buyer's circumstances changed). We were encouraged to see the mortgage advisor at the estate agents that were advertising the property. We were happy with this as she was a really nice girl and seemed very knowledgable and efficient. On our first meeting she showed us this glossy book about the house buying process and said she would be there to help us every step of the way. 'Great' we thought!

So she arranges us a good mortgage,  for which we were accepted and put us in contact with their associated conveyancer. Lovely job. Everything was going smoothly. At this point we also paid their 'lifetime broker fee' of £349 which meant for any subsequent house sale or purchase were could use the estate agents services for free. This is when things started to change. On our next meeting with the mortgage advisor we talked about insurances. The standard ones offered are life insurance, critical illness cover and income protection. All of which are designed to protect you if something happens and you can't work/die (and therefore can't pay the mortgage). This is when our mortgage advisor started the hard sell. What a change in character that was!

In between all this we had emailed her with a question. The reply we got was very different to precious exchanges. She was quite blunt and basically said 'This isn't something to be asking me, go to your conveyancer'. Again this was quite a character change. It seemed like once she had our money the service dropped. Aside from all this the flat purchase was going well. We had paid the conveyancer for the searches and the mortgage company for their valuation.

After a few weeks we got 'the stack' containing the contracts, results of the searchers and any other information required about the property. This is where it all fell apart...

As you may be aware most flats are leasehold. Those that are not are very difficult to get a mortgage on. What we didn't realise was that you don't actually own the flat. You own the right to live there for an extended period. With this comes a whole set of other potential problems (I will be doing a separate blog post on this). Subsequently after reading 'the stack' we realised that a leasehold was not what we wanted. After much agonising and at great expense (£1300 in fees) we pulled out of the sale. We were also angry at out mortgage advisor as we felt she should have explained leasehold and freehold to us at the very beginning. Had we know we wouldn't have gone for the flat. As first time buyers we were naive and thought she would advise us, especially as we had explained our frustration with renting. But it seems she was only thinking about her commission.

As a result we lodged a complaint with the company in the hope of getting at least some of our money back. After a month of investigation they sent us a letter stating that our mortgage advisor had done a fantastic job- she had set us up with a mortgage. End of. They wouldn't be giving us our money back. We have since referred our complaint to the Financial Ombudsman and our awaiting their decision. I'll do an update blog with the result of this. Keep your fingers crossed :)