The Mortgage Works Return of Property

Hi Mike

Yes, I have multiple properties on a single mortgage account with TMW and I did run into a problem when I came to sell one of them. However, in fairness to TMW it was resolved quickly and efficiently.

My story is that some good friends wanted to buy a specific property as their next home but couldn't afford to do so at the time. I agreed to help. They gave me £10,000 deposit as a sign of their commitment and I purchased the property and rented it to them until they could afford to buy it from me. The arrangement was that when they could afford to buy the property off me the price would be £10,000 more than I paid. During my ownership I would retain any rental profits, however, there wasn't much. It was far from a commercial deal, more a favour to friends. Obviously they would do well out of the deal if the property went up in value and it did - happy days, everybody was a winner 🙂

To fund the purchase of the property I had added it onto my facility with TMW and taken an 85% LTV mortgage. The property cost £215,000 and therefore the sale price, a few years later was £225,000, even though it was worth more.

When my friends were eventually ready to purchase the property we applied for a redemption figure from TMW and were shocked when it came back way more than the sale price of the property. At first we thought it was a mistake. I was expecting the redemption figure to be £187,500, i.e. the mortgage advanced to purchase the property having been 85% of £210,000. I don't recall the exact figure they requested but it was nearer to £300,000 which made no sense to me at all.

It's a few years back now so some of the details are a little fuzzy I'm afraid, however, I think the issue was based on their assessed value of the portfolio being in negative equity. I could have disputed this formally but instead I decided to negotiate. Litigation is expensive and the starting point would have been to pay to have the entire portfolio valued which would also have been punitive.

Fortunately, at that time, one of my former contacts from my broking days was still their head of lending. He's since moved on sadly, otherwise I'd have been able to see if I could do anything to help you. I explained the problem to him and made a proposal to reduce the loan by the entire net sale proceeds of the property. In truth, that deal suited me at that time anyway but I didn't let them know that. At the end of the day, that's the deal they went for. The logic I put to them was that even if my property portfolio had halved in value, getting back £210,000 when they had only advanced £187,500 to purchase the property, was overall, still a very good deal for them. I didn't even try to argue that I wasn't in negative equity, even though I know I wasn't, because I knew they would give me the run-around if I took up that fight. My strategy was to beat them with their own logic. However they crunched the numbers their position was better based on the deal I put to them.

Sometime, it's a case of picking your battles.

Mark, Thanks. Unfortunately not quite what I was looking for. I had two properties on the loan. I sold one and rang TMW to tell them the contracted sale date and to ask about the process to release the security on the property: what would I have to pay them? I was told that the letter to provide the figure would take 15-20 working days to issue and that the LTV, after the property was released from the portfolio, would need to be 86%. A drive by valuation was required. Great! Both properties had increased in value by 70% giving current LTVs of 50%. The sale was in 50 calendar days time. Simples!
Now this situation is not a standard redemption process. The loan continues and the interest rate payments continue until such time as TMW recalculates the new payment figure. So accrued interest issues are not applicable. This process is more akin to a new property purchase. TMW wants to be sure that its security – the remaining property – is still a good risk. So one might expect ‘the figure’ to part redeem the loan would be valid for at least as long as a new mortgage offer – typically 3 months or more. WRONG. I was not told in my call that it would be limited to 30 days from when they generated the number. The letter was issued early - after only 10 working days - and it did not cover the sale date. I had been misled in the call. I did not notice the small print. Nor did my solicitor. (I am not blaming the solicitor for something I did not spot.) TMW said that the fact that they did not produce the letter to cover the advised sale date is irrelevant. I should have noticed their mistake timely and got back to them timely. Effectively they are saying we are not interested in your sale date. We will issue the letter when we feel like it. You just ask us to produce the letter and hope that it covers the sale date. If it doesn’t you ask us again. Oh and we make it very difficult for you because we tell you it takes 15-20 working days but in actual fact it can be 10 or 30 working days. (10 being the first case, 30 being the second case).
Some will say ’you should have read the letter’. However this process is fundamentally flawed and not fit for purpose – it is not fair and reasonable. If I had noticed on receipt of the letter that the sale date was not covered, TMW could not guarantee that a new letter would be issued in time to cover the date of sale. The 30 day case I mentioned above was the second request where it was ‘expedited’ three times and no revaluation was undertaken. Moreover I pointed out I knew how the figure was calculated and the number could not change. No this was the same for everyone they would have to calculate it all over again. It did not change.
Oh and if they had issued the letter within the 15-20 working days from the first request then it would have covered the sale date.
Why post? If I am right about the process being unfit for purpose then others will have found that trying to guess when to request the letter is very very difficult.
The Financial Conduct Authority (Business) Principles state:
(6) A firm must pay due regard to the interests of its customers and treat them fairly.
(7) A firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading.
(9) A firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgment.

Reply to the comment left by "Mike W" at "19/09/2013 - 13:08":

Mike

That's far more straight forward that the way you explained it when we spoke on the phone for an hour this morning. I appreciate there are other factors which also wound you up but your summary above is the nub of the issue from what I understand and ending up costing you circa £1,000 in unnecessary legal fees and expenses. On the basis that TMW's procedures are ruled to be flawed, which from reading your post they appear to be, my judgement as a layperson would be that you should be entitled to receive an apology and compensation for losses you have incurred.

Good luck with your case with the Ombudsman and remember, TMW have no right to take a case adjudicated against them by the Ombudsman to Court but as a consumer, you do have that right.
.

Q1 - Mark how did you mitigate/calculate CGT on your sale?

Q2 - Mike I' think you're saying that the amount for redemption of part of the portfolio mortgage is issued in a letter and should be for the date of completion of the sale. If it wasn't on that date how does it matter, as it wouldn't vary by very much? I think I have not understood, sorry.

Reply to the comment left by "Puzzler " at "21/09/2013 - 13:34":

The gain was only £10k so in this instance it was under the annual exemption figure.

More details about mitigating CGT generally here >>> http://www.property118.com/landlords-buy-to-let-property-investment-strategy/capital-gains-tax-relief-on-a-property-you-have-lived-in/ and here >>> http://www.property118.com/landlords-buy-to-let-property-investment-strategy/landlord-tax/

One extra very quick bonuus tip. Did you know that if you are married that it's possible to add your wife onto the deeds on the day of sale to benefit from 2 annual CGT allowances? Must be a spouse by marriage or Civil Partnership for this to work though so you can't add infinite numbers of third parties. Also, no point changing your religion either, only one wife counts LOL

Reply to Puzzeler:
The letter issued by TMW with the 'part redemption figure' is only valid for 30 days. They didn't listen to me when I called. I told them the date of sale but they just issued the letter when they felt like it. So it didn't cover the date of sale. Great customer service!
I rang them up pointed out their error and they said they would have to calculate a new figure. I said but you have used the valuation at purchase (7 years ago). The current valuation is twice that. Property prices are not going to halve in 1 month. All payments on the mortgage are made by direct debit and have been paid: the number won't change. TMW said they would have to calculate a new figure - it is the same for everyone.
TMW calculated a new figure. It was the same as the previous one. TMW is stupid. A child could have worked out that a historic number would not change. TMW managed to delay me getting the sale proceeds and increased my solicitor bill - damages of approx £1000.
Moto of TMW: 'common sense lending'