Is this conspiracy to commit fraud?

Reply to the comment left by "Dylan Morris" at "23/06/2017 - 11:33":

Clearly states in the original post that it is an Exchange Deposit.

Reply to the comment left by "John Constant" at "23/06/2017 - 11:44":

Im not sure how they could conceal the fact it is a newbuild from the surveyor? As he would have to visit the property to value it?

It is actually a conversion, commercial to residential, not sure if that is relevant or not, and assume it is still considered a new build?

Yes, lenders would consider this in the same class as a new build.

Occasionally, some valuers (at the request of the lender) do "Desktop" valuations if there is a significant deposit. Valuers do not always visit the site.

I'm not sure whether or not it's classed as a new build is actually the problem given the reasonable ltv. Seems to be the property itself is unsuitable for mortgage purposes as the valuer has identified location, saleability and lack of comparables. as being the issues.

The following is my take on this (with the limited information available) as a mortgage valuer working for upwards of 200 lenders.
I have no idea where this property might be but the more I hear it seems likely to be a conversion of offices over the supermarket in which case thy will be treated by a surveyor as a new property.
Firstly it should be made clear that all lenders have fixed criteria regarding lending and part of the valuers job is to know these (or at least where to find them) and to decline the property if it does not fully comply.
Some lenders criteria preclude lending on flats over commercial premises at all and others will only lend if the flats have a separate secure access. Most will not lend if there is a staircase to an open deck at the rear.
Criteria will normally require that the valuer state that there is a market for properties of this type in the area - if there is no evidence of any demand except for the properties in the block then many valuers will decline the flat.
Part of the evidence for demand is sales of similar properties in the area (not in the block itself) listed on Land Registry and if there are none then the conclusion that there is no proven market.
You should also be aware that valuers use various online databases, most commonly Rightmove, to research values. Previous valuations of the same property together with the value supplied to the lender are listed. Quite understandably valuers look at this information and if there are several valuations either with a zero value or value left blank they will question what's going on. It is also possible to see the activity log for each comparable property and if there are similar results for other flats in the block then the alarm bells will start to ring.
If there have been completions but the property logs don't show any valuations then a high percentage of cash purchases would also cause concern.
Personally I would then talk to local agents and seek additional information - the agents tend to be much closer to the up-to-date situation and will hear all the gossip.
If this is indeed a new property or conversion the valuer will also have requested sight of the Council of Mortgage Lenders incentive declaration (CML) form and if this was not provided then the majority of lenders require us to decline the property as suitable security.
If the CML form was provided but did not reveal incentives which were offered then, in my view, this is fraud and is a criminal offence.
It should be noted that valuers are required by the law and by lenders to make clear any concerns they have as to the honesty of the transaction by using a suspicious activity reports, normally to lenders regarding money laundering, fraud etc. In addition lenders require reports of other potentially fraudulent or criminal activity as this would obviously affect their lending decisions. It has been necessary for me to submit such reports in the past, most recently when I discovered a small, well lit, heated and ventilated crop of plants in a roof void!
In conclusion, without all the information it's difficult to comment specifically I would be making more enquiries of any trade bodies for the developer, selling agents and broker.
I hope this has been of some assistance

This is awful. You have really been let down. But I doubt whether this would count as fraud but if they stated that the property would be mortageable as part of the work they did, then you could have grounds for legal action. I suspect that the small print might have wording to protect them against such eventualities, however.

Have you considered other ways of getting the financing? Such as remortgaging your own home.

The only other question is whether you are actually over-paying for the new build, in which case you might be better off cutting your losses.

Further to H B's comment above I would be a bit wary about "cutting your losses" particularly in what I believe may become a challenging market. I infer that you have exchanged contracts and paid your deposit but you need to be aware that if you do not complete you may be liable for more than the deposit. If the sellers proceed to sell in a falling market and the price does not reach the price you agreed to pay you will be liable not only for the shortfall but also for the costs incurred for re-selling which could be agents fees, legal fees, advertising etc., for interest charges from the date you failed to complete on the full amount which is likely to be several percentage points above bank rate (check your contract for the exact amount) and other costs and expenses.
Even if your deposit covers the whole amount you might not see it returned for months.
You need to concentrate on the misrepresentation and if this is proven you should be able to get the full deposit back, perhaps with interest payable by them.
If you have all your facts recorded and verifiable you might like to think of going to the papers (or at least threatening it) to see if that helps towards a resolution.

Reply to the comment left by "H B" at "24/06/2017 - 11:47":

I cannot be certain without reviewing all the papers but it is very likely that statements made to the Buyer by the sourcing company are not contractual unless confirmed and accepted by the Seller. This would be done formally between solicitors. Well-advised sellers universally include a provision in the contract such as:

"The Buyer acknowledges that in entering into this contract the Buyer does not rely on, and shall have no remedies in respect of, any representation or warranty (whether made innocently or negligently) other than those set out in this contract or contained in any written replies by the Seller's Solicitors to the Buyer's Solicitors".

So unless Christian had the statement that the property would be mortgageable confirmed in writing by the Seller's Solicitors he is unlikely to have a remedy against the Seller. He might have a claim against the sourcing company or against the individual who gave the assurances. This would be for negligent mis-statement. Such a claim is not at all straightforward even assuming the sourcing company/individual are still around and worth suing. Unless the statements are in writing and not covered by disclaimers it is going to be hard to prove precisely what was said and to disprove that Christian was told he needed to form his own view on mortgageability.

Hi Christian
I have just re-read your original post. I strongly advise you instruct a solicitor to help you. The paragraph:

“Please note that the developer contributions being offered can affect the lending (the value of the contributions would be seen as cash incentives and as such would be taken off the purchase price) so we would have to ensure they weren’t made known to the valuer. I’ve made (broker at sourcing company) aware of this, so that he is up to speed and we would ensure that the developer didn’t disclose this on his paperwork too.”

is appalling. The writer is inviting you and the developer to commit mortgage fraud. You have to be careful here not to risk being accused of blackmail but I would go in very hard against the sourcing company and point out that what they have proposed is illegal and that you require full repayment of their fee, return of deposit and cancellation of the contract. Alternatively, that they lend the money to complete the purchase. If you don't get satisfaction then you should report the matter to the police.