Former residents of the Spectrum Building in Dagenham, east London, say they are still making mortgage payments on flats that no longer exist after the block was destroyed by fire. Sarah Williams, one of the leaseholders affected, told the story to i — Property, describing how she and others remain legally on the hook for loans secured against properties that have effectively ceased to exist. It is a stark reminder that owning a flat, especially in a block with fire safety concerns, carries risks that go well beyond the usual worries about repairs or falling values.
The core problem is simple but brutal. A mortgage is a loan secured against a property, and the borrower's obligation to repay it does not automatically disappear just because the property is destroyed or becomes unusable. Unless insurance proceeds are sufficient to clear the debt, or unless a lender agrees to some form of relief, the leaseholder is still contractually bound to keep paying. Meanwhile they have nowhere to live, may be paying rent elsewhere, and have no asset to sell or remortgage against.
Why this can happen to leaseholders specifically
Flat ownership in England and Wales is usually structured as leasehold, meaning the leaseholder owns the right to occupy the flat for a fixed term but the building itself, including its structure and shared parts, is the responsibility of a freeholder or management company. Buildings insurance is typically arranged at block level, not by individual flat owners. If that policy does not pay out fully, or if there are disputes over who is liable for the damage, particularly where cladding or other fire safety defects are implicated, leaseholders can be left in a legal and financial limbo. They still owe their mortgage lender, they may still owe service charges, and they have no clear route to recovering the value of what they bought.
What this means if you own or are buying a flat
For existing flat owners, the lesson is to actually check what buildings insurance covers, who arranges it, and what would happen in a total loss scenario. Many leaseholders assume this is someone else's problem until something goes wrong. It is also worth understanding your position with your mortgage lender in advance: some lenders may be willing to discuss payment holidays or restructuring in exceptional circumstances, though none of this is guaranteed and every case will be assessed individually.
For anyone buying a flat, particularly in blocks built with materials or designs that have since raised fire safety concerns, this story is a reason to dig deeper before exchanging contracts. That means asking direct questions about the building's fire safety status, reviewing the buildings insurance policy and its adequacy, and understanding the financial health of the management company or freeholder. A conveyancing solicitor should be pushed to investigate these points properly rather than treating them as a formality.
What it means for landlords
Landlords with leasehold flats face the same exposure as owner-occupiers, but with the added complication of lost rental income if a property becomes uninhabitable. A landlord still paying a buy-to-let mortgage on a flat that cannot be let, or that no longer exists, is absorbing a double loss. Landlords should treat adequate buildings insurance and a clear understanding of the freeholder's obligations as essential due diligence, not optional extras, especially in blocks flagged for cladding remediation work.
