When you see a 3 bed house in London for sale at a guide of £80k you know something’s wrong…but curiosity got the better of me and I had to go and take a look.
Prior research had shown the house had been on sale for £160k a year ago but it had not sold and had been taken off the market and was now going to auction…that is never a good sign.
Anyway, off I trotted and I was pleasantly surprised!
I knew it was an ex council house but the area and the estate looked well cared for and tidy:
The house was never going to win any design awards and the flat roof was not ideal – but it was OK
It came with a garage underneath…bonus!
It had 3 reasonable sized bedrooms. A bright orange lounge with a rather strange built up stage and feature wall (and carpet which looked like grass!!)
And a great sized kitchen/diner – although the wood cladding looked rather suspect and the homemade electrical extension looked dodgy:
But nothing that could not be sorted!
OR SO I THOUGHT!!!
Convinced it was a goer I sent the papers to my solicitor to check.
Well that was the glitch. It was a freehold house with a leasehold interest – but the leaseholder was missing – and you were NOT buying the lease!
In layman’s terms – when you buy a flat you buy the leasehold and then you pay ground rent and service charges to the freeholder. You owning the leasehold means you get to live in the property for the length of the lease. With me so far? Well, here you owned the freehold but somebody else owned the leasehold. That means somebody else should/ could be living in the house. This meant that effectively you were squatting in the house!!! And to cap it off – the garage which the house was built on was also leasehold – and owned by somebody else entirely!
My solicitor was rather perturbed by my choice:
“Sam, you have brought me some complicated properties – but this is the worst so far”
Unabated I decided to continue in my line of optimism
“Yes, I understand your concerns, but what can be done about it?” I enquired
“Well” she replied “The best thing would be to get an indemnity policy so that if the missing leaseholder turns up and stakes a claim in the property – you are now effectively squatting – then you would be covered for the market value of the property. After 10 years you could then make a claim for adverse possession”
I liked it – a solicitor who saw the problems, coughed and spluttered, and then came up with a viable solution!
“So that’s us sorted then – that’s what I’ll do!” I replied
“Oh there’s just one more thing Sam” She cautioned
“I doubt you’ll get lending on this and it will be difficult to sell – you might want to speak to some banks before you bid…”
“Ah” I replied “That’s a slight fly in the ointment”
I proceeded to call the bank, explain the situation and send them the documents to get their thoughts. I was very stressed as it was 3.30pm and the auction was 11am the next day!
4.45pm my phone rings. It’s the bank manager
“We’ve had our specialist security sector look at this and they’re happy to lend as long as you take out the indemnity policy for full market value” He explained
“Yippeee!!!!!!!” I was chuffed!!
Off to auction I went…..
So given the guide was 80k, given the legal issues, given you will be squatting in the house, given most banks wouldn’t lend, given it was a nightmare property to try and even sell I figured I would get a bargain! I was planning to rent it for the next 10 years and at a rent of approx £950 pcm I was thinking it would be a good investment….
But so did everyone else….I didn’t even get to put up my hand as it sailed past my £120k limit and sold for £138k…
Ah well obviously I wasn’t cut out to be a squatter!!!!