Is this conspiracy to commit fraud?

Is this conspiracy to commit fraud?

10:04 AM, 22nd June 2017, About 6 years ago 29

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I used a sourcing company to source me a newbuild flat. I was given assurances by the sourcing company that the property would be “mortgagable” before I exchanged contracts. The properties have now been built, however, we have been unable to obtain finance. We have used the in-house mortgage broker, as recommended by the sourcing company, however several lenders/surveyors have refused to lend on the properties.

The developer has now proposed that they issue notice to complete within two weeks, and if we are unable to complete within two weeks, we are given a further six months to obtain finance. This is completely unacceptable – we only exchanged because we were told by the sourcing company that we would be able to mortgage these properties (we have email proof of this). We cannot afford to complete with cash.

We are now in a difficult situation. We have obviously put down 10% as an exchange deposit, and also paid a fairly large fee to the sourcing company. The sourcing company initially suggested that the properties would be remarketed as cash only, and we would be refunded both our exchange deposits, as well as the sourcing fees, but this was never formalised.

The sourcer and broker have acted poorly throughout, repeated broken promises and poor communication. They claim to be acting in our best interests, but at the moment seem only to be be interested in protecting their own fees.

I also received the below email from someone at the sourcing company-

“Please note that the developer contributions being offered can affect the lending (the value of the contributions would be seen as cash incentives and as such would be taken off the purchase price) so we would have to ensure they weren’t made known to the valuer. I’ve made (broker at sourcing company) aware of this, so that he is up to speed and we would ensure that the developer didn’t disclose this on his paperwork too.”

There were a number of incentives offered, such as free legals, stamp duty paid, free property management for six months. This in my mind amounts to conspiracy to commit fraud, which is a criminal office, and can carry very heavy fines.

I made a complaint about the broker because he was so bad at communicating with me, he never replied to emails, never answered the phone, and did not seem to be taking this seriously at all. We have been told several times that the next mortgage lender was very likely to lend, only for them to decline. Four separate surveryors have visited so far, all have declined to lend. Since then, the broker has not communicated with me at all for a period of one month.

I am really at a loss as to what to do now.


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John Constant

11:45 AM, 23rd June 2017, About 6 years ago

Reply to the comment left by "Dylan Morris" at "23/06/2017 - 11:33":

Clearly states in the original post that it is an Exchange Deposit.

christian kemp

11:46 AM, 23rd June 2017, About 6 years ago

Reply to the comment left by "John Constant" at "23/06/2017 - 11:44":

Im not sure how they could conceal the fact it is a newbuild from the surveyor? As he would have to visit the property to value it?

It is actually a conversion, commercial to residential, not sure if that is relevant or not, and assume it is still considered a new build?

John Constant

12:03 PM, 23rd June 2017, About 6 years ago

Yes, lenders would consider this in the same class as a new build.

Occasionally, some valuers (at the request of the lender) do "Desktop" valuations if there is a significant deposit. Valuers do not always visit the site.

Dylan Morris

12:14 PM, 23rd June 2017, About 6 years ago

I'm not sure whether or not it's classed as a new build is actually the problem given the reasonable ltv. Seems to be the property itself is unsuitable for mortgage purposes as the valuer has identified location, saleability and lack of comparables. as being the issues.

Nick Pope

11:14 AM, 24th June 2017, About 6 years ago

The following is my take on this (with the limited information available) as a mortgage valuer working for upwards of 200 lenders.
I have no idea where this property might be but the more I hear it seems likely to be a conversion of offices over the supermarket in which case thy will be treated by a surveyor as a new property.
Firstly it should be made clear that all lenders have fixed criteria regarding lending and part of the valuers job is to know these (or at least where to find them) and to decline the property if it does not fully comply.
Some lenders criteria preclude lending on flats over commercial premises at all and others will only lend if the flats have a separate secure access. Most will not lend if there is a staircase to an open deck at the rear.
Criteria will normally require that the valuer state that there is a market for properties of this type in the area - if there is no evidence of any demand except for the properties in the block then many valuers will decline the flat.
Part of the evidence for demand is sales of similar properties in the area (not in the block itself) listed on Land Registry and if there are none then the conclusion that there is no proven market.
You should also be aware that valuers use various online databases, most commonly Rightmove, to research values. Previous valuations of the same property together with the value supplied to the lender are listed. Quite understandably valuers look at this information and if there are several valuations either with a zero value or value left blank they will question what's going on. It is also possible to see the activity log for each comparable property and if there are similar results for other flats in the block then the alarm bells will start to ring.
If there have been completions but the property logs don't show any valuations then a high percentage of cash purchases would also cause concern.
Personally I would then talk to local agents and seek additional information - the agents tend to be much closer to the up-to-date situation and will hear all the gossip.
If this is indeed a new property or conversion the valuer will also have requested sight of the Council of Mortgage Lenders incentive declaration (CML) form and if this was not provided then the majority of lenders require us to decline the property as suitable security.
If the CML form was provided but did not reveal incentives which were offered then, in my view, this is fraud and is a criminal offence.
It should be noted that valuers are required by the law and by lenders to make clear any concerns they have as to the honesty of the transaction by using a suspicious activity reports, normally to lenders regarding money laundering, fraud etc. In addition lenders require reports of other potentially fraudulent or criminal activity as this would obviously affect their lending decisions. It has been necessary for me to submit such reports in the past, most recently when I discovered a small, well lit, heated and ventilated crop of plants in a roof void!
In conclusion, without all the information it's difficult to comment specifically I would be making more enquiries of any trade bodies for the developer, selling agents and broker.
I hope this has been of some assistance


11:47 AM, 24th June 2017, About 6 years ago

This is awful. You have really been let down. But I doubt whether this would count as fraud but if they stated that the property would be mortageable as part of the work they did, then you could have grounds for legal action. I suspect that the small print might have wording to protect them against such eventualities, however.

Have you considered other ways of getting the financing? Such as remortgaging your own home.

The only other question is whether you are actually over-paying for the new build, in which case you might be better off cutting your losses.

Nick Pope

14:38 PM, 1st July 2017, About 6 years ago

Further to H B's comment above I would be a bit wary about "cutting your losses" particularly in what I believe may become a challenging market. I infer that you have exchanged contracts and paid your deposit but you need to be aware that if you do not complete you may be liable for more than the deposit. If the sellers proceed to sell in a falling market and the price does not reach the price you agreed to pay you will be liable not only for the shortfall but also for the costs incurred for re-selling which could be agents fees, legal fees, advertising etc., for interest charges from the date you failed to complete on the full amount which is likely to be several percentage points above bank rate (check your contract for the exact amount) and other costs and expenses.
Even if your deposit covers the whole amount you might not see it returned for months.
You need to concentrate on the misrepresentation and if this is proven you should be able to get the full deposit back, perhaps with interest payable by them.
If you have all your facts recorded and verifiable you might like to think of going to the papers (or at least threatening it) to see if that helps towards a resolution.

Ian Narbeth

12:21 PM, 12th July 2017, About 6 years ago

Reply to the comment left by "H B" at "24/06/2017 - 11:47":

I cannot be certain without reviewing all the papers but it is very likely that statements made to the Buyer by the sourcing company are not contractual unless confirmed and accepted by the Seller. This would be done formally between solicitors. Well-advised sellers universally include a provision in the contract such as:

"The Buyer acknowledges that in entering into this contract the Buyer does not rely on, and shall have no remedies in respect of, any representation or warranty (whether made innocently or negligently) other than those set out in this contract or contained in any written replies by the Seller's Solicitors to the Buyer's Solicitors".

So unless Christian had the statement that the property would be mortgageable confirmed in writing by the Seller's Solicitors he is unlikely to have a remedy against the Seller. He might have a claim against the sourcing company or against the individual who gave the assurances. This would be for negligent mis-statement. Such a claim is not at all straightforward even assuming the sourcing company/individual are still around and worth suing. Unless the statements are in writing and not covered by disclaimers it is going to be hard to prove precisely what was said and to disprove that Christian was told he needed to form his own view on mortgageability.

Ian Narbeth

12:33 PM, 12th July 2017, About 6 years ago

Hi Christian
I have just re-read your original post. I strongly advise you instruct a solicitor to help you. The paragraph:

“Please note that the developer contributions being offered can affect the lending (the value of the contributions would be seen as cash incentives and as such would be taken off the purchase price) so we would have to ensure they weren’t made known to the valuer. I’ve made (broker at sourcing company) aware of this, so that he is up to speed and we would ensure that the developer didn’t disclose this on his paperwork too.”

is appalling. The writer is inviting you and the developer to commit mortgage fraud. You have to be careful here not to risk being accused of blackmail but I would go in very hard against the sourcing company and point out that what they have proposed is illegal and that you require full repayment of their fee, return of deposit and cancellation of the contract. Alternatively, that they lend the money to complete the purchase. If you don't get satisfaction then you should report the matter to the police.

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