But after two auctions and several buyers dropping out, the property was sold for less than Helen thought it was worth.
What happened
Helen had an interest-only mortgage on a flat she rented out, but she had fallen into arrears on the payments. The lender had also covered ground rent and service charges to prevent the lease being forfeited and adding to the total debt.
Helen offered to reduce the arrears with money from an overseas property she’d sold. But the lender wouldn’t accept the payment without evidence of where the funds had come from.
Helen didn’t provide the evidence and her arrears grew. The lender told Helen to clear her debt in full or it would sell the flat to clear the mortgage. It added that it didn’t need to take possession proceedings – because it could use its 'power of sale' under the mortgage conditions – to sell the flat with sitting tenants.
The lender put the flat up for auction, without a valuation. But it was difficult to sell because the building it was in had issues. After two auctions and several negotiations, the flat finally sold for £75,000 less than the original reserve price.
Meanwhile, Helen had the flat valued and was trying to sell it through an estate agent. She got a cash offer for a much higher price than the lender’s. But the estate agent was still completing checks on the buyer, so the offer hadn’t been accepted. And there was no date for exchange or completion.
After having so much trouble selling the flat, the lender had doubts about Helen’s cash buyer. It was concerned that its buyer might withdraw too if there were further delays. So it sold the property leaving Helen with a shortfall. She came to us.
What we said
This was a buy-to-let mortgage. It wasn’t a regulated mortgage, and it wasn’t Helen’s home.
We looked at evidence from both parties. And we saw that even though the flat was tenanted throughout, the arrears, fees and charges had been outstanding for a long time.
Helen had offered to pay the mortgage with proceeds from the sale of an overseas property. We thought it was reasonable for the lender to ask for evidence of where the funds had come from before accepting this money to reduce the arrears.
Given the arrears – and that Helen had tried to sell the property herself without success – we also thought it was fair for the lender to proceed with its own sale of the property.
Normally we’d expect a lender to get a valuation from a qualified surveyor, but this was difficult because there were tenants in the flat. Helen’s valuation from the estate agent was more than any prospective buyers had offered – including her own cash buyer.
So, we thought it was reasonable for the lender to avoid losing the sale they’d agreed to with the buyer they’d found. And as there’d been so many failed attempts to sell the flat, we felt it was likely the lender had got the best price they could.
We didn’t uphold the complaint, but we urged Helen’s lender to work with her to find a way to pay back the shortfall she owed.