‘We’re trapped’: developer’s unpaid debt leaves London flat owners unable to sell | Housing

L.Owners of properties in east London say they are “stranded in unsellable homes” because the building developer owes £850,000 to Hackney council, which has left the building unpaid for eight years.

Seventeen leaseholders living in a block of flats in Upper Clapton appealed to the council for help but their demands, including requests for meetings, were ignored.

Rich Bell, 38, is one of the owners of the house. She was expecting to move out of her one-bedroom apartment last year as she outgrew her after giving birth to her first child. The sale was “fairly advanced” in the process but was halted when lawyers encountered a problem.

It was revealed that the building’s developer, Restoration Hackney, had failed to pay more than £850,000 in Section 106 contributions (payments agreed between developers and local authorities to reduce the impact of new developments) and community infrastructure levies. This outstanding debt meant that if Restoration Hackney went bankrupt, the block’s leaseholders would be responsible for the bill.

Bell said his lawyers “were convinced for a long time that this was just an administrative error,” but it soon “became clear that this was not an error and that this was the truth.” At this point, the buyer of Bell’s flat was informed by his lawyers that he could not take out a mortgage on the property due to the risk of being liable for the debt. “He understandably had to withdraw,” Bell said.

Other leaseholders in the block were also unable to sell their homes because mortgage providers were unwilling to provide loans for any flats in the building. Bell said his neighbors, including families, were “virtually trapped in unsellable homes” due to the city’s inaction.

“We are in a situation where we are trapped in the building as a result of the contractor’s actions, but the situation is made worse by the city’s inaction,” Bell said.

The debt had been owed since June 2017, after a 14th flat in the building was sold, before the block was completed the following year, under the terms of an agreement between Hackney council and Restoration Hackney. The council issued a debt collection notice in October 2018 but took no action for nearly six years, waiting until February 2024 to issue another notice. The bill remains unpaid. “The council has refused to explain why it has been unable to collect this debt,” Bell said.

Owners of flats on the block have appealed to Hackney council for a guarantee that they will not be pursued for the owner’s debt, allowing them to sell their flats. The council has so far refused to give such a guarantee. He also refused to meet with affected homeowners. “We are asking for humanitarian assistance from the Council, but they are refusing to help us,” Bell said.

Bell was trapped in the one-bedroom apartment with his wife and two-year-old son. “We think we need more space. We still share a bedroom with him, but we’d really like to be able to give him his own bedroom,” she said.

The situation affects Bell’s family. “We’d love to have a second child, but we can’t have two kids in a one-bedroom apartment. It’s not going to work. It’s pretty damaging to our family life and our ability to make the choices we want to make in our own lives,” she said.

He added: “I find it quite maddening that the actions of this developer and the council mean that I cannot give my child a bedroom. It is quite maddening.”

Bell said the saga “shines a light on how the lease system can trap people in really strange ways.” “Who expects you to buy a flat and then find it completely unsellable for reasons beyond your control?”

A Hackney council spokesman said: “We understand the frustration of leaseholders who are having difficulty selling their property because the previous and current owner has not paid significant contributions to the council.

“We have a duty to ensure that all contractors building in the borough are paid to help maintain the services and infrastructure that residents rely on. “Although we have contacted and discussed with both, the freehold ownership of the block has changed and neither the previous nor the current owner has yet to pay the amount due.

“We will support residents where we can. Unfortunately, we cannot guarantee debts from a private developer as this could set a precedent for other developers to avoid paying debts in the future. We are exploring further legal options to ensure outstanding payments are made.”

Restoration Hackney did not respond to a request for comment.