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Stuart J
Stuart J, Property Solicitor
Category: Property Law
Satisfied Customers: 23698
Experience:  Senior Partner at Berkson Wallace
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I am in the processing of purchasing a residential property.

Customer Question

Hi there
JA: Hello. How can I help?
Customer: So I am in the processing of purchasing a residential property. We have a lender for our mortgage. We have agreed with the vendor that he will give us £19k back on completion in cash. This is because our surveyor flagged up numerous works needed doing for the property. Now the issue is the lender will not agree to this arrangement. I want to know if there's a way we can legally agree for the vendor to give us the £19k in cash which is OK with the lender or goes around their need to approve the transaction of handing us the money.
JA: What steps have you taken so far? Have you prepared or filed any paperwork?
Customer: We are very underway in the purchase. Searches are done, surveyor is done, etc. Did you mean something else?
JA: Have you talked to a lawyer about this?
Customer: Yes our solicitor said he is asking his senior solicitor but I'm waiting to hear back. I wanted to get a second opinion if possible. It's so important for us. I know people usually negotiate money off the purchase price but we want the cash so we can pay for the works.
JA: Is there anything else the Lawyer should know before I connect you? Rest assured that they'll be able to help you.
Customer: Many thanks, ***** ***** that's all at the moment but they may have specific questions I can help with of course.
Submitted: 12 days ago.
Category: Property Law
Expert:  Stuart J replied 12 days ago.

Hello. Thank you for the question. It is my pleasure to assist you with this today.

Please bear with me as I will be online and off-line from time to time and therefore, may be delayed getting back to you. You will receive an email when I reply.

How has the figure of £19k been decided?

and how do you know he will pay it?

Customer: replied 12 days ago.
Hi Stuart, the surveyor report estimated £25k of works and we negotiated to £19k.
Customer: replied 12 days ago.
We only have this as a verbal understanding so far via the property agent.
Expert:  Stuart J replied 12 days ago.

If you want the GBP19,000 back on completion, to be legally enforceable, and it needs to be written into the contract but your lender will want to know about it if you have a mortgage.

If the lender won’t agree to it, and you do it between you on the QT, then you breached the mortgage conditions and potentially commit mortgage fraud.

The normal way of dealing with this is for the purchase price to be reduced by GBP19,000.  It has exactly the same effect so I don’t know why that’s not being done although the lender may want to revalue.

Thank you for letting me assist you with your legal question.  I am glad that I was able to help.

I am not certain whether that answers the question for you or not, but I am happy to answer any specific points arising from this.

It will be my pleasure to help you again either further with this or any future questions you have

Kind regards

Customer: replied 12 days ago.
Thanks Stuart. The reason we don't want to reduce the purchase price is because that doesn't give us the cash we want to do the works. It simply reduces our mortgage liability. We want to know if there's a way for the vendor to legally give us a cash such that the lender is satisfied or (and probably an easier option as the lender has said no already) in a manner which goes outside the remit of the lender's need to approve but is still legally valid of course and not fraud in anyway.
Expert:  Stuart J replied 11 days ago.

I appreciate that, but that’s something you would need to negotiate with the lender.

There is no legal way of dealing with this is you are proposing, unless the lender agrees, without you committing potentially mortgage fraud and even then, even if you kept it quiet, they didn’t pay, you would not be able to enforce it.

Customer: replied 11 days ago.
there is no legally enforceable way for the vendor to pay me £19k without the need for lender's approval? Is there not a scenario we can have to facilitate this payment so that it doesn't cause an approval issue for the bank? I.e. it's being given as a gift or we produce invoices of works carried out and he is reimbursing us for those costs. the £19k can be coming from the vendor's personal savings and have nothing to do with the money being lent to me.
Expert:  Stuart J replied 11 days ago.

You have to disclose this to the bank otherwise as I have said before, you potentially commit mortgage fraud.

You can do what you like between you but it doesn’t change what I said earlier and it also means that it isn’t enforceable because the contract is illegal.

The gift is fine provided your mortgage lender agrees.

From the lender’s point of view, why would the Seller simply give you GBP19,000 as gifts?

There is no way of dealing with this which does not breach the lenders lender’s conditions.  The question is actually not uncommon.

Customer: replied 11 days ago.
Thanks Stuart that's helpful to know.
Expert:  Stuart J replied 11 days ago.

It was my pleasure to assist you. Please come back if anything else crops up and needs clarification.
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