New property purchase advice request

Is there no structure for coordinating action by the tenants, for example a management limited company, which is owned by the tenants or a third party and obliged to do repairs and maintenance on their behalf?

That is the arrangement I set up on some flats I built in 2012 and where I remain the freeholder. The management company is a legal entity owned by the leaseholders with an obligation to maintain the property and seek reimbursement from the leaseholders, if necessary by means of a CCJ and a charge on their properties. I don't remember a mortgage lender having any problem with this arrangement.

If there's no management company and the leaseholders are just expected to sort out repairs and big jobs like replacing the roof amongst themselves, then presumably if there's a dispute they are free to seek mediation or take legal action against each other: you can't have a leaking roof and one leaseholder refusing to contribute financially to its repair. The principal difference is that in my case there's a management company and in the latter there isn't, but I wouldn't have thought this would ultimately stop the essentials being done, no matter how much the leaseholders are at war with each other.

Why not ask a mortgage broker to seek the views of a few lenders? Or if necessary you could seek legal advice and reassurance.

Sounds fantastic, is it in writing and not merely how it operates.

If it really is is in writing you would have something similar to having bought the freehold [before anyone corrects me, I know you don't own a share of the freehold].

Manage it yourself or appoint a manager.

In this case the FH does not have a vehicle to derive profit from maintenance so you should be able to buy the freehold and regularize the situation and thus make the property more easy to lend against.

Perhaps do that quickly, before you fall out with the other LH 🙂

I own a shared freehold flat. As Chris Amis pointed out, that's not quite the situation you would be in but is similar insofar as you and the other freeholders are responsible for managing and financing maintenance works.

In my joint freehold situation, there are 4 of us freeholders - 3 of us are enthusiastic enough but the other is completely disinterested and disengaged and hasn't even contributed to the fund for 2 years!

So lack of funding is a major problem - the building has needed a massive amount of maintenance work in recent years - a lot of which I paid directly as there were insufficient funds in the kitty and the others were unable to make contributions at the time. As well as that, this has been compounded by the fact that none of us knew much about building, surveying or other issues so didn't instruct workmen to do the correct work, as well as the usual issue of a few cowboys amongst these people. The result is the building still isn't 100% ok, and another issue to recently come to light is our buildings insurance isn't as comprehensive as it needs to be with 4 tenanted flats.
I own another flat under the more common leasehold separate freehold arrangement which is very well managed and I even approached the management company about managing the first property, but they declined...

Reply to the comment left by "Mandy Thomson" at "06/06/2014 - 09:45":

Mandy - Sounds like the bad LH is of the buy-to-let-and-hide variety, the business model for these people is all costs onto the mortgage, they expect to be sued and for the mortgage company to pay it. You should be a shareholder of the company that owns the FH, the company sues the defaulting LH, every year!

Reply to the comment left by "Chris Amis" at "06/06/2014 - 10:40":

Spot on Chris - the LH certainly is a somewhat shady character! We are all shareholders of the freeholder trust, and we are about to pursue "his" mortgage provider for the outstanding funds - but here's the thing - the flat is in his wife's name, so she takes the flack on her credit file, and he goes scot free.
The flat I own is above theirs, and unfortunately there was a leak recently from my pipes in the bathroom, causing considerable damage to their flat made worse by the fact that their tenant was away, making access difficult. They live in another part of the country, but they didn't even comment to any of the emails I sent out to insurers, workmen etc - until late one evening last week when I got a panicked text saying their tenant was threatening to withhold rent and claiming for losses!

I sometimes feel like an ambassador from the other half of the country on here...

The BTL+H model uses the fact that the mortgage company will pay any award to defend against foreclosure, since the CCJ is paid, it is cleared and does not affect the credit rating.

I know it seems bonkers but it seems to work, I can only think the mortgage companies understand it and condone it so long as the equity is high enough.

I stress it is not something I do, but I know someone who does and I was there while he was doing tax returns, I was flabbergasted by the pile of court judgements and all the cost associated with them, but guess what, they are tax deductible.

The point of all this, is just ask him if that is what he is doing, then you can quite amicably sue him via MCOL uncontested each year.

Reply to the comment left by "Chris Amis" at "06/06/2014 - 11:15":

Thanks for the tip - I'll suggest it to the trust.

Reply to the comment left by "Tony Atkins" at "06/06/2014 - 09:22":

Thanks Tony. There doesn't seem to be any arrangement in place. However I am still waiting on the solicitor to find out how it works in practice as opposed to how it works on paper.

Good idea on talking to the mortgage broker - I'll see what they say.