A property owner was on the brink of losing a chunk of his portfolio following a valuation dispute which lasted around two years…. .
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div>A property owner was on the brink of losing a chunk of his portfolio following a valuation dispute which lasted around two years.
A property professional’s portfolio almost suffered a landslide after one of the properties were repossessed. Another two properties were then left hanging in the balance. The case saw the professional encounter a nasty surprise when the property he purchased was not in the condition he expected.
Mr Johnnie Mitchell intended to purchase an apartment at Plot 119 at Centenary Mill Court, Preston, in 2005.
Mr Mitchell viewed the property through a virtual simulation tool, which showed it to be in good condition.
After the property was valued between £156,000 and £160,000 by professionals, a mortgage was then obtained through The Mortgage Works (UK) PLC, at the sum of £144,000.
The property was obtained for just over £160,000 in 2005.
A few years later, Mr Mitchell fell into arrears after he claimed to B&C that his monthly mortgage payments increased.
A spokesperson from Nationwide, The Mortgage Works' sister company, told B&C that the last payment received towards the mortgage was in late 2007.
As a result of falling into arrears, the property was sold in possession in 2009 for £84,950.
According to Mr Mitchell this left a shortfall between the value of the charge and the 2009 sale price of just over £87,400.
Mr Mitchell then suspected that somehow the original valuation had been inflated. The lender did not agree.
Back in 2005 two independent valuers, one appointed by TMW and one appointed by Mr Mitchell’s broker, valued the property at a similar level.
The dispute erupted into legal proceedings as Mr Mitchell believed the lender owed him a duty of care. He alleged that The Mortgage Works was “in breach of contract” as he believed they “did not ensure an accurate valuation was provided” or give any warnings that there were any issues with the property that could affect its security.
Mr Mitchell considered the lender’s approved valuer as an agent of The Mortgage Works and expected its conduct to be “competent, accurate, reliable and trustworthy”.
At the Northampton County Court in 2012, Mr Mitchell added that the representations given to him implied that the property was in good condition, good location, contained the facilities described, and the flats individually or as a whole had no problems.
Following the purchase, he found that the property was situated in a “rundown industrial area”. It was heard that the valuer should have known the property “would not encourage the price suggested by way of the asking price” in 2005.
It was also claimed that there was a “significant” problem with the sewerage system which affected the property and that the facilities described (such as a fully equipped gymnasium) were not there.
Mr Mitchell felt he was not liable for the shortfall as he only borrowed the amount because of the lender’s valuation. He added that as The Mortgage Works was the valuer’s principal it was therefore “responsible”.
His legal representatives added that Mr Mitchell had relied upon “various representations” from the lender, especially considering he brought the property “off plan”.
In regards to the case a spokesperson from TMW stated: “These valuations are for lending purposes only and are not designed to be used for the investment decision. Case law supports the view that it is up to the investor to verify the value/conditions for themselves.”
Mark Goldstein of Cartwright Cunningham, who acted on behalf of Mortgage Works, stated in a witness statement in the Wilesden County Court that the lender had done “everything [it] possibly could” do achieve a “sensible” resolution to the issue.
Mark added that Mr Mitchell brought a claim as a result of a “third party valuer” and does not have a real prospect of success. He stated that the third party valuer was and is a member of the Royal Institution of Chartered Surveyors and was independent of Mortgage Works.
After looking at the evidence, the judge ruled against Mr Mitchell.
A draft order was made in November 2013 where orders were placed upon two of his properties in Ranelagh Drive and Kenton Road for the security of the outstanding sums due to the lender.
In the order it stated that if Mr Mitchell gained supportive evidence that the lender cause the losses suffered, he could launch action against them.
Soon, he launched proceedings against the lender however his application was dismissed. He was also ordered to pay £4,763.28 to cover costs.
On the 1st July 2014, the County Court at Barnet issued a warrant for the possession of Mr Mitchell’s Ranelagh Drive property at the request of the claimant. The eviction was stated to take place on the 19th August 2014. Mr Mitchell tried to suspend this warrant, however his application was dismissed.
Mr Mitchell has commented to B&C that he raised around £150,000 to pay off the outstanding debts to Mortgage Works at the end of September, and therefore the case is now closed.
Mr Mitchell stated that he has got in touch with his local MP. He plans to look into why the police and the Serious Fraud Squad never responded to his enquiries and is also looking to hold a demonstration outside a Nationwide bank.
Reflecting on the case, Mr Mitchell commented he felt he “…has been treated in a very underhanded way as there is no role and responsibility and feels the justice system has been unfair.”
In its response to this case, the Mortgage Works maintained that there was no overvaluation, stating that the courts found in its favor on seven occasions.
It added: “While we sympathise with the situation Mr Mitchell finds himself in, we believe the independent valuations were a fair reflection of the property’s value at the time of purchase, as such there are no grounds for a repayment of the shortfall…”
“A combination of factors affected the market value of the property at this time, not least the recession.”
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