"Beware of looking to buy a pocket Living property"

Before you do ANY of the basics looking at a Pocket Living property, find out about the restrictive clause you'll be required to sign up to ( an S106 covenant )

My daughter had instructed a surveyor and received a mortgage offer before she knew anything about this.

It was only when she received a call from her solicitor, who had just received a pack from the vendors solicitor, that we realised the buying a Pocket Living property would prove VERY challenging.

Her solicitor informed her that the purchase would be subject to a S106 covenants…. ‘Very strict covenants, which significantly effect the value of the property and the ability to obtain a mortgage against it’ (her words). So began our real understanding of Pocket Living.

We were obliged to disclose the Covenant to the Mortgage provider, First Direct, who reviewed it and immediately withdrew the mortgage offer.

I called the Agent (SoSales) to ask whether they were aware of this covenant. Yes, they were fully aware and understood it in detail. I asked why they had not mentioned it to my daughter. They said it wasn’t their responsibility to… it was the vendor’s responsibility. “Surely if you are aware of it, you should have told her as it impacts the ability to obtain a mortgage”? I asked…. “Well we asked her to register with Pocket Living… all the info is on their website” they replied. I also asked the Vendor, who said she thought is was the Agents responsibility.

So I personally followed the link the Agent had provided to register withy Pocket Living. It provided no information whatsoever, it was much akin to signing up to a mailing list. I started trawling the Pocket Living website for details of the Covenant. Eventually I found something, under the FAQ section.

Their statement says - 'Section 106 agreements, also known as planning obligations, are agreements between developers and local authorities that are negotiated as part of the condition of planning consent. In the case of Pocket homes, the section 106 agreement means that the home is available to buy for people who meet specific eligibility criteria. These restrictions stay with Pocket Homes in perpetuity, meaning Pocket owners are obliged to find a similar buyer when they are ready to sell’

Sounds simple enough? FAR from simple. It is in fact a 56 page document tying the buyer in to very tight clauses explaining exactly how and when they can sell the property and also the very tight rental restrictions.

This is why many of the major mortgage companies will not agree to mortgage them. In simple terms, if the buyer defaults on the mortgage, the mortgage company may have a hell of a problem disposing of the property within 6 months…. and at a value well below market value.

The Covenant also effects the real value of the property. These properties are sold, when new, at a 20% discount from market rate. The challenge here is that the asking priced in resale are only marginally cheaper…. They certainly don’t represent to 20% discount that was initially offered.

My Daughter’s second mortgage application was also offered in principle (Nationwide) and they declined when they established that Pocket Living has a 5 year ground rent review. They stated that….’ Property is not suitable security due to ground rent review occurring every 5 years;

So, having spent the best part of £1000, my daughter walked away from the purchase, knowing that this property would become a nightmare to sell.

I discussed this matter in detail with the Pocket Living resales team. I said that surely it was the obligation of their chosen Agent to disclose the S106 upfront, before expenditure had occurred. They said they would discuss with the Agent.

I also asked that Pocket Living to make the covenant very clear on their website, not hidden with a brief explanation under the FAQ section.

This will significantly affect your ability to resell, rent, or obtain a mortgage. Beware!