Jemma Forte: Hello, and welcome to what will be the 100th edition of Property Question Time, with me, Jemma Forte. And of course, that means we will have answered 600 of your property questions, and we’ve still got loads more to go.
This is the show where we answer all your queries, property related, with a trio of industry experts. And today for this very special edition, we have Paul Mahoney, the MD of Nova Financial Group. Hello. We also have Mary-Ann Bowring, who is the founding director of The Ringley Group. And last, but not least, Stefano Lucatello, the senior partner of Kobalt Law International Property Lawyers.
Right. We better kick off straight away because we have had these questions in that our viewers would like answered. Paul, I’m going to start with you, please. This person says, “I’m unemployed due to sickness, and I’m not a resident of the UK anymore. I’ve got two buy-to-let properties. One is paid worth … ” Sorry. Beg your pardon. “One is worth 250,000 and another is worth 180,000. And the mortgage is 129,000. Is it possible to mortgage a buy-to-let paid house to repay another mortgage?” So trying to shuffle money here.
Paul Mahoney: There’s a few points there. The first question would be why would they want to do that? So far as moving the mortgage from one to the other, it doesn’t … They’re still going to have that same level of mortgage, but just on a different property.
Jemma Forte: Yeah.
Paul Mahoney: Obviously, the fact they’re no longer a UK resident, and that they’re not working are two very negative factors from a lender’s perspective.
Jemma Forte: Right.
Paul Mahoney: Not to say that there wouldn’t be a lender that would lend to them because they have the two properties. And those two properties, I assume, are generating income for them in the UK, so they would be generating income. They would be doing a tax return in the UK. So some lenders might consider it. But it would be difficult and probably slightly more expensive and less favorable terms.
There’s more to look into than the information that’s been provided there, so if I were saying whether it’s possible, or whether it’s not possible. But the key question there would be why, and what benefit do they feel they’re going to get from doing that?
Jemma Forte: With that said, I’m guessing from the situation is that it’s to sort of free up some more disposable income.
Paul Mahoney: Well, if they said they’re looking to mortgage one to pay off the other, what you said there makes sense if they’re looking to take more of a mortgage than what they already owe, and to release some cash. Then the lenders would be asking what that cash is going to be used for. For example, lenders are generally okay with you remortgaging your property to buy another.
Jemma Forte: Right. That’s interesting, actually. In terms of remortgaging just because I need to get my hands on some money, some of my capital, they’re not so interested in that.
Paul Mahoney: Well, some lenders won’t even ask. Others do ask. They want to know the purpose of the use of the funds. Most won’t be okay with you paying, excuse me, most won’t be okay with you paying off things like gambling debts and stuff like that. That’s a big no-no. And others, if you say you’re buying a property, they want to know everything about the property you’re buying. There’s a very broad range of criteria out there between lenders. And again, very much accentuates the reason to get advice from somebody who knows that market, because if that particular person were to approach someone like Barclays, for example, that particular lender might say no, and there might be 19 others that would say yes.
Jemma Forte: Yeah. And I think people always think, “Oh, I’ve got this equity in my house, and it’s mine, and I’d like to get 50,000 pounds of it because I could just do X, Y and zed.” And, it’s interesting that lenders don’t think like that. They’re like, “Well, you earn X. That’s your mortgage. You’ve had your lot.”
Paul Mahoney: Yeah. It’s the lender’s money, so they’ve got the option where to lend.
Jemma Forte: This is very true. This is very true.
Paul Mahoney: Yeah. And remembering that lenders are in the business of lending. That’s how they actually make money as well.
Jemma Forte: And also, we also know that things have got maybe more cautious for good reason as well, so that people aren’t overextending themselves.
Paul Mahoney: Exactly right.
Jemma Forte: Yeah. Okay. Thank you for that one. Right.
Mary Anne, on to you. This is your first question today. This person says, “Hello. I’m trying to decide what level of survey to get. I would probably have opted for a home buyer’s one, but when looking through the attic, we noticed that one of the roof joists was badly cracked and damaged. The rest seemed fine. I’ve got no idea how big a concern this is, and apparently the home buyer’s survey won’t even go into the attic, which seems like madness to me. Apparently, they won’t even move furniture, which seems even more incredible. I’m wondering what’s to stop a vendor from disguising problems.”
Mary Anne B.: There are three levels of survey, a mortgage valuation, a home buyer’s survey, and a building survey. The home buyer’s survey is normally the type recommended for flats, and it’s kind of the middle level. However, even the mortgage valuation says a head and shoulders inspection of the attic. A home buyer’s survey absolutely requires an inspection of the attic. And the only reason that you wouldn’t inspect the attic is because it’s not demised of the flat that you’re having a look at. But that question says that the attic is part of it, so I’m assuming the attic goes with the flat, and access to the attic is from within the flat.
Jemma Forte: It certainly sounds like it, yes.
Mary Anne B.: So they’re absolutely entitled to have that inspected. However, if they’re particularly concerned about something structural, whilst a building survey is not designed for flats, a building surveyor has a high level of, perhaps, training and expertise. You could get them to bespoke a survey for you for the item that you want to have investigated.
Jemma Forte: Okay. But would a home buyer surveyor still understand about roof joists?
Mary Anne B.: Yeah. Home buyer surveyors tend to be valuers, who are clever valuers with a good concept of building tech. But a building surveyor won’t be worried about valuation at all …
Jemma Forte: Just the state of the building.
Mary Anne B.: They’ll just be absolutely experts in building tech and construction.
To answer the second part of your question is, yes, it is true. Surveyors don’t go around moving other people’s furniture. Not only because they could knock something and break something, but if you don’t … You can’t go moving bed and moving wardrobe, that’s not reality. What surveyors are trying to do is follow the trail of suspicion. If you find, perhaps, bouncy floorboards, then you’re going to check for the span of the floorboards and check other things. If you find rising damp, you would know where to look for it. If it’s on three walls, it’s going to be on the fourth anyway. It’s a trail of suspicion, so you’re looking for telltales that will lead you to follow that trail.
Sometimes we have to recommend invasive extra inspections afterwards because if we did suspect that there was a wider problem, then we would need permission from the owner to have things moved in advance, ready to have, perhaps, a contractor open up the floorboards to look underneath. But that needs special arrangements and permission of a second inspection.
Jemma Forte: Yeah. Where there’s a cupboard in a really weird place, you might think, “Why is that there?”
Mary Anne B.: Yes.
Jemma Forte: And then there’s sort of a damp patch behind it.
Mary Anne B.: But then if the cupboard’s in a weird place, perhaps to hide a crack, the crack should be showing outside, also in the room above and/or the room below, and/or the ceiling should be bowing. So a surveyor will be looking for lots of other telltale signs. But yes, there’s a danger.
Jemma Forte: Okay. So in that instance, probably a home buyer’s is going to be okay. If the attic is joined to their property, they should definitely inspect that.
Mary Anne B.: They should do.
Jemma Forte: So question why they’re not.
Mary Anne B.: Yeah.
Jemma Forte: Okay. All right. Thank you.
Right. Stefano. This person says, “I am looking to purchase a 50 year old chateau in [Morbella 00:08:14] that has had an extension done and a pool installed many years, but that isn’t reflected on the title deeds today. The owner is willing to get these title deeds updated at her cost, and we’re talking about signing a contract with a three month period to closing that would give the owner time to get the title deeds updated to actual size. Is this feasible for the owner to do within a three month time scale, and how easy or difficult is it to get title deeds updated with previous changes done to the property in Marbella?”
Stefano L: Mm, a chateau in Marbella.
Jemma Forte: A French chateau in Marbella. It’s interesting. I would say it’s probably chateau-style.
Stefano L: Chateau-style.
Jemma Forte: A few turrets.
Stefano L: Well, having lived on the costa for many years, as I was a solicitor in Gibraltar for many years, I cannot think of any chateaus in the Marbella area, but anyway, for the sake of answering the questions, let’s answer it.
Jemma Forte: It’s chateau-style. It’s 50 years.
Stefano L: Right, okay. The first thing to do is to look at the planning permissions of any property that you buy, whether you’re buying in England or abroad. That’s the first, the starting point. It’s not easy to change planning permissions and get retrospective planning permission in Spain. The first reason is that perhaps what works have been done might not be retrospectively possible to put right, as it were, to get permission for. So you could actually be opening a can of worms by going back to the planning authority and saying, “I want you to regularize what has been done 20, 30, 40 years ago.” However, this is a time limit because after a certain number of years, or before a certain period, then you can get away with these things.
So let’s say that you haven’t got away with it and you have to regularize them. You’d have to get someone from the local [foreign language 00:09:57], the local authority, the planning authority, to come round and have a look what’s actually been done. They will then assess what’s been done and they will tell you how to regularize it, if it is regularizable or put it right.
You then have to put in the paperwork. There will be some form of fee to pay and there will also invariably be a penalty to pay because the [foreign language 00:10:19], like any of the local authority, will be out to get its book’s worth, and it will want some money for putting it right.
So the contract, going back to the contract, the contract should be what’s called a conditional contract with a suspensive condition inside it, which is … that says that unless all the permissions are obtained and unless all the planning permission is regularized, then this contract will not go any further and I will get my money back. Because presumably, he has paid some form of, or is about to pay some form of, deposit. So you don’t want to be exchanging … almost the equivalent of exchanging contracts and then saying, “Ah, but I want a condition put inside it,” because it’s too late.
You need to do all that investigation. It may not be possible to do it in three months. I would actually put a long stop date of maybe six months, and-
Jemma Forte: Does it sort of worry you when somebody’s done an extension and put in a pool and not had-
Stefano L: It’s rife in France and Italy-
Jemma Forte: Particularly in Spain, or in France and Italy?
Stefano L: Yes, in France, Spain and Portugal. Especially in the Marbella area, where many years ago, things like this were done and they were done under the nose of the local authorities who would accept a payment, and it’s very famous because the ex-owner of Madrid Football Club was the mayor of Marbella when I was there, and it was rife.
Jemma Forte: Okay. Then when you come to sell, it’s just like-
Stefano L: Well, you might not be able to come to sell.
Jemma Forte: This is where you run into problems.
Stefano L: That’s the point. You might not be able to come to sell, because any good buyer will have a good lawyer with him who will investigate and say, “Hold on a minute-
Jemma Forte: Which is exactly what’s happening here.
Stefano L: … sort it out, unless we don’t go any further.”
Jemma Forte: Yeah. It’s a bit short sighted.
Stefano L: Very short sighted.
Jemma Forte: Yeah. Certainly wouldn’t happen here, would it?
Stefano L: One would hope not.
Jemma Forte: On U.K. soil.
Stefano L: No, no.
Jemma Forte: Right. Anybody got a golden nugget for me? Nice quickie.
Stefano L: Okay. I’ll go with one.
Jemma Forte: Excellent. Go on then.
Stefano L: It’s do with … we talked a lot about mortgages recently, and whether you go for a mortgage abroad, whether you go for a mortgage in England, in the United Kingdom, you should have your credit rating correct. Make sure, look through your locker of misdemeanors in the past and make sure that you’ve got everything right. Make sure you’ve got no county court judgements, make sure you’ve got no high court judgements. Make sure that everything is in order. Make sure that if you’ve got credit cards, you’re paying them up to date and that you’ve got a good track record because whether you’re getting a mortgage in the United Kingdom or one abroad, the people who are lending will look at risk and risk is even more, even higher now than it was ever was and the ability to repay even at a higher rate is always analyzed. Always make sure that you do that.
The other point is that if you get a mortgage from a bank abroad, do not think that by handing back the keys if you can’t pay the mortgage that that is the end of the matter. The French, the Spanish, the Italian banks are now coming for English people who have just walked away from their debt and thought they got away with it. So be careful.
Jemma Forte: Fair enough. Thank you very much. Excellent.
That’s it for part one of this edition of Property Question Time. Join us for more nuggets and fabulous information in part two.
Welcome back to the 100th edition of Property Question Time. Yes, that’s a lot of questions. Slightly less panelists, though, but Paul Mahoney, who is one of our experts today, you were actually there for the first ever recording, weren’t you?
Stefano L: I was.
Jemma Forte: So you’ve made it to the 100th as well. Fantastic.
Okay. So, Paul, we’re going to come to you for another question please. This person says, “I was curious. Are there any advantages or disadvantages to adding my two buy-to-let properties into my personal pension? If it’s advantageous, how do I go about it? I’m currently 45 years old, and both buy-to-lets are mortgaged.”
Paul Mahoney: It’s a good question, and you can do it if you find a pension provider who will allow it, a self-invested pension provider. However, they’ve made it un-viable.
Jemma Forte: Oh, really? Okay.
Paul Mahoney: There’s a lot of worry a few years back when they relaxed the pension rules, so far as people taking all their money out, of driving it into buy-to-let property and that pushing up property prices. So essentially what they’ve done is if you invest your self-invested into residential, direct residential property, you pay 55% income tax.
Jemma Forte: Okay.
Paul Mahoney: And you pay capital gains tax on top of that. So it’s not really a viable option, therefore nobody really does it. That doesn’t mean you can’t invest in other things. You can invest in commercial property, and that isn’t just a shop or an office. That can be purpose built student accommodation, it can be care homes, it can be hotel-style investments. There’s a range of different things that you can invest your pension into property, but it just needs to fit the rules.
You can also invest into property funds.
Jemma Forte: Sort of like isotypes?
Paul Mahoney: Well, far as a managed investment type fund, the same way as they usually invest in shares, there’s lot of property type funds out there as well. Often they’re called REITs, so a real estate investment trust.
Jemma Forte: Okay. That’s-
Paul Mahoney: There’s a range of things you can do with your pension to get exposure to property. So far as this particular question goes, and this gentleman moving his current properties into his pension, assuming they’re residential, is probably not a good idea. Even if they’re commercial, it might be quite difficult to do it, given that they have mortgages on them.
Jemma Forte: Yeah. Actually, I was … I guess most people view their buy-to-let investments as a pension, in a different kind of way, just that they’d come to sell it, wouldn’t they and use the-
Paul Mahoney: That’s right, and pensions aren’t always the best way to provide for your retirement, because it all comes down to the value … how good the investment is. Obviously the main benefit of pensions is the tax efficiency, but a common saying there is that you shouldn’t let the tax tail wag the investment dog. The investment and the returns are the most important thing. You shouldn’t invest just for tax reasons, because when you do that it doesn’t work.
Jemma Forte: Okay. Brilliant. Thank you so much.
Paul Mahoney: It’s best to make money and then sort out the tax.
Jemma Forte: Yeah. So I’d say in this case, it’s pretty clear don’t do that.
Paul Mahoney: Yeah.
Jemma Forte: It’s not worth it.
Paul Mahoney: Probably not worth it.
Jemma Forte: Okay. That was very interesting. Thank you.
Right. Mary Anne, this person says, “Our intended sale has been nothing but letdowns. What a nightmare. So the house had a survey that detected a damp problem. A quote from a builder was arranged, and in the end we had to negotiate the price down. A pain, but a problem that we can still manage. Our purchase is pretty much done, so we’re waiting on our buyers, but I’m told the buyer’s bank want another survey done. What would be the reasons for this?”
Mary Anne B.: Okay, so your sale is being frustrated because your buyer’s got to have another survey?
Jemma Forte: That’s correct.
Mary Anne B.: In short, that would generally be because the buyer’s survey is what’s called a mortgage valuation, so that’s for the benefit of the mortgage company, and there’ll be certain things there that can be flagged up as needing extra reports. Just because you’ve provided a damp estimate to the buyer doesn’t mean that their mortgage company will accept that damp report. They’re probably … following the mortgage valuation, wants the buyer to instruct for a building surveyor to go round and take a view on what’s of course the damp, what’s the remedy for the damp, how extensive is it because in a damp problem, timbers could be affected as well and there could be potentially behind the walls a concealed problem of dry rot or wet rot.
So whilst on the face of it, the buyer’s mortgage company won’t trust a quote from a builder. They’ll want a surveyor who if something did go wrong or something was undiscovered that ought to have been discovered, somebody that they can sue and hold to account.
Jemma Forte: Yeah, so there’s no comeback. It kind of makes sense to me. They’re double checking, aren’t they?
Mary Anne B.: Yeah, they are really. The mortgage valuation is for the benefit of the lender and the lender wants to tick all the boxes to feel safe. He needs to tick another box, you need to bear with it and go on the journey.
Jemma Forte: Yeah. Okay. Thank you. That seems to make sense to me.
Stefano, your question. This person says, “I am an American, non-resident of France, and I want to buy an apartment for my daughter who is a legal resident. She’s currently renting an apartment, so the new place would be for a vacation home. So she has a French bank account, and I wanted to transfer the money to her for the purchase. I don’t need to take out a mortgage, and I thought this approach would be easier than buying it in my name and letting my daughter use it. I’d like to put both of our names on the deed, but I didn’t know if this was possible since I’m not a legal resident. Are there any special legalities that I need to know of in regards to the money transfer to her bank account?”
Stefano L: Well, the first thing to say is that France does not restrict who can buy in that country, so he can buy with his daughter. In fact, it would be beneficial for them to buy jointly and to own it almost as a joint tenant. There is almost an equivalent of joint tenancy in France, which is called [foreign language 00:19:33], and the [foreign language 00:19:35] provides the same benefits as a joint tenancy does in England so that the survivor, because of the right of survivorship, would then benefit. One would hope that he would die first and then so his share would most likely go to his daughter.
By buying it jointly, it means the both of them could occupy the premises. It’s beneficial for them to buy in this manner. The only thing that would have to be noted is the origin of the funds, because if he’s providing the funds for the purposes of buying the property, then the notare, the French legal man who would do the certification and the completion, would want to be certain as to the origin of funds and that it wasn’t some form of tax avoidance or evasion or actual money laundering.
Jemma Forte: Right. Okay.
Stefano L: That is what I would do.
As regards to transfer of monies, he could gift the monies to his daughter. You can, under French law, gift, as you can under most countries, but being an American citizen, he would have to declare it to the IRS. Having gifted the money to the daughter, she can then, as a French resident, buy the property and she can put it in joint names if she wishes to.
Jemma Forte: Okay. So is French law different to the U.K. in terms of the-
Stefano L: Totally different.
Jemma Forte: Totally difference, yeah.
Stefano L: France, Spain, Portugal, Italy all use a system called the Justinian Code, which is a Napoleonic code so many years later. Wherever Napoleon conquered, he left a body of law. It’s totally different from our common law. It does … just because you are a property expert under English law does not at all mean that you will be a property expert and now the laws of the jurisdictions abroad.
Jemma Forte: Right. Okay.
Stefano L: Beware.
Jemma Forte: Yeah, yeah. Thank you very much. Okay, anybody got a little nugget for me?
Mary Anne B.: Just a reminder for landlords, really.
Jemma Forte: Okay.
Mary Anne B.: That the Tenant Fees bill has been out since late last year, and the government proposing that tenants don’t pay onward costs to get into a property. So that means the cost of checking inventory. That means the cost of referencing. That means the cost of contract admin fees. There’s been a big petition going through the industry to try to get the government to change their mind. The ministers have said that no, they won’t be changing their mind and the timetable for this to become law is May 2018. So it’s something that should go through quite quickly. Big change for landlords. They’ll need to absorb those costs, or find more cost-effective ways of operating.
Paul Mahoney: Or will they?
Jemma Forte: Ooh, dun dun dun.
Paul Mahoney: There’s a question about that because whether the landlords absorb them or whether the agents absorb them, because agents have been, in my opinion, skimming for years. The fees that agents charge, especially in London, are very high and there’s lot of agents coming out with very, very low fees now. There’s a bit of to and fro-ing there as to whether it will be landlords that absorb them or agents that absorb them. So who knows? We’ll see what happens there.
Jemma Forte: Yeah. Yeah, yeah. Interesting. Again, it’s just so sort of fast-changing, this whole industry. To keep on top of it seems quite difficult. There you go. But these people do, obviously, because they’re experts.
Right. Thank you so much. That wraps up our 100th edition of Property Question Time, so I hope you’ve enjoyed it. Of course, huge thanks to my three experts. Stefano Lucatello. Again, I just love saying that name. And then we’ve got Mary Anne Bowring and, of course, Paul Mahoney. Thank you very much to all of you.
And if you’d like to get in touch with us here and put your questions to more experts, then please do. The email address is firstname.lastname@example.org or please go and have a look at our website. Again, all the w’s, property-tv.co.uk. My name’s Jemma Forte. I’ll see you soon.