Hackney Flat Owners Trapped by £850k Debt 2026

Key points

• Leaseholders in a block of flats in Upper Clapton, Hackney, say they are “trapped in unsellable homes” because of an £850,000 debt owed by the developer, Restoration Hackney Ltd, to Hackney Council.
• The outstanding sum includes approximately £700,000 in Section 106 contributions and about £150,000 in Community Infrastructure Levy (CIL) payments, which should have been collected after the sale of the 14th flat in 2017.
• The council has not recovered the money despite issuing several demand notices over more than eight years, with the most recent enforcement action only taken in 2024.
• Mortgage lenders are refusing to finance any flat in the building because, if Restoration Hackney Ltd goes bust, future leaseholders could be liable for the freeholder’s debt.
• Seventeen leaseholders in the Upper Clapton block have appealed to Hackney Council for help, including asking for a meeting and a guarantee that they will not be held liable; these requests have largely gone unanswered or been refused.
• As reported by the Local Democracy Reporting Service (LDRS) via the Hackney Citizen, Richard Bell, 38, and his wife Anna, 34, saw their sale of a one‑bedroom flat collapse after solicitors were told by mortgage providers that they would not lend on the property.
• The council acknowledges the leaseholders’ frustration but says it cannot guarantee the private developer’s debts for fear of creating a precedent and is instead exploring further legal avenues to recover the money.
• A Freedom of Information request revealed Hackney Council is owed around £2.9 million in unpaid developer contributions across the borough, of which roughly £1.2 million has been secured in the past year.
• Lawyers for the leaseholders have argued that in‑house enforcement of the debt has been “unlawful and irrational,” and that the statute of limitations has now run out on the £150,000 CIL portion, while the £700,000 Section 106 remains enforceable and therefore still a risk to leaseholders.

East London (East London Times) April 2, 2026 – Leaseholders in a block of flats in Upper Clapton, Hackney, are warning they are “trapped in unsellable homes” after an £850,000 debt owed by the building’s developer, Restoration Hackney Ltd, to Hackney Council has left the properties unfinanceable.

The 17 leaseholders say they can no longer sell because mortgage lenders refuse to lend on any flat in the building, citing the risk that future owners could be held liable for the freeholder’s outstanding Section 106 and Community Infrastructure Levy (CIL) payments should the developer go bust. In emails and letters to the council, they have pleaded for a guarantee that they will not be pursued for the debt, but these appeals have either gone unanswered or been explicitly refused.

Why are these flats now unsellable?

Mortgage lenders treat the £850,000 outstanding debt as a financial “overhang” on the building, which effectively blocks standard residential finance.

As explained by the Local Democracy Reporting Service (LDRS) in its coverage for the Hackney Citizen, banks’ due‑diligence checks reveal that, if Restoration Hackney Ltd were to enter liquidation, leaseholders could be called on to satisfy the unpaid Section 106 and CIL obligations.

Richard Bell, a 38‑year‑old leaseholder, told the LDRS that he and his wife Anna, 34, were only weeks away from completing the sale of their one‑bedroom flat when their buyers’ solicitors were told by the lender that no mortgage would be offered.

“Understandably, he had to pull out,”

Bell said, describing the moment as the point at which the couple realised they were “effectively trapped” in a property they could no longer convert into a deposit on a larger home for their two‑year‑old son. Other leaseholders in the block have reported similar experiences, with offers collapsing or potential buyers withdrawing once the finance issue became clear.

How did the £850,000 debt arise?

The debt stems from conditions attached to the original planning permission granted by Hackney Council for the Upper Clapton block.

As reported by the Hackney Citizen, the borough agreed to let the developer build the flats on the condition that it pay about £700,000 in Section 106 contributions—payments negotiated between councils and developers to offset the impact of new housing on local services—and approximately £150,000 to the Community Infrastructure Levy.

The council registered these obligations as local land charges against the property, binding on the freeholder. According to the LDRS, an agreement was struck that the Section 106 money did not have to be paid until the 14th flat was sold, after which the freeholder would have 20 working days to meet the liability. That sale went through in 2017, yet the payments have not been cleared in the years since, despite the council having had the legal tools to enforce them.

Why has Hackney Council not collected this money?

Leaseholders argue that the council’s delayed enforcement has turned a developer’s failure into a residents’ crisis. The Hackney Citizen, citing an FoI request, reports that Hackney Council has issued two demand notices for the £700,000 Section 106 payment, separated by about five years, and three letters demanding the £150,000 CIL.

The council first sent a collection notice in 2018, but did not take further action for several years until issuing another notice in February 2024, by which time the lending climate for the flats had already hardened.

Bell told the LDRS that the couple were “appalled” the fees had not been paid and accused the council of “taking a lax attitude” towards collecting the money.

“Right now, they’re effectively letting the developer off but punishing us as leaseholders,”

he said. A Freedom of Information request revealed that Hackney is owed roughly £2.9 million in unpaid developer contributions across the borough, of which about £1.2 million has been recovered in the past year, suggesting systemic slippage in enforcement.

What has the council said to leaseholders?

Hackney Council has repeatedly refused leaseholders’ requests for a guarantee that they will not be pursued for the developer’s debt.

As reported by the Hackney Citizen, Bell wrote to the authority in September asking it to underwrite the liability and was told the council would not provide such a guarantee. Later, when the council finally replied to further emails some weeks after the Bell sale had collapsed, officials said they were taking action to recover the money from the developer, but by then the mortgage deal was already dead.

In a statement to the Guardian, a council spokesperson said:

“We understand the frustration of leaseholders facing difficulties selling their properties as a result of the previous and current freeholder not paying substantial contributions due to the council.”

The spokesperson added that the council has an obligation to ensure all developers operating in the borough meet their financial obligations to support local services and infrastructure.

“We will support residents however we can,” the spokesperson said.

“Unfortunately, we are unable to guarantee the debts of a private developer as it could set a precedent for other developers to avoid paying debts in the future. We are exploring further legal options to make sure the outstanding payments are made.”

A senior officer also told the LDRS that the council had held “several meetings” with the new owner of the site, who took over Restoration Hackney Ltd in 2024, but no payment has yet materialised.

Could leaseholders actually be liable for the debt?

A key fear for flat owners is that they could be called on to pick up the £850,000 bill if the developer goes bust. Lawyers acting for the Bell family and several other leaseholders have warned that this is a live risk, which is why mortgage lenders are so cautious.

However, there is now a split in how the two legs of the debt look in law. As outlined by the Hackney Citizen and the LDRS, solicitors Judge & Priestley have advised that the statute of limitations has now run out on the £150,000 CIL portion, meaning the council may no longer be able to recover that sum from the developer or third parties.

“That’s money toward parks, playgrounds and roads that Hackney residents are never going to see,”

Bell lamented.

The £700,000 Section 106 contribution, by contrast, remains within the council’s lawful power to pursue, which also means leaseholders still face a residual financial risk if the debt is ever enforced against the property. The leaseholders’ lawyers have written to the council accusing it of acting “unlawfully and irrationally” in how it has administered and enforced the liabilities, arguing that the council’s own failings have increased the exposure of ordinary homeowners.

Why haven’t leaseholders been given a meeting?

Residents say not only is the council refusing guarantees, but it is also failing to engage with them directly. Bell told the Guardian that the group of 17 leaseholders had repeatedly asked for a meeting, and in some cases even requested a face‑to‑face discussion with senior officers, but these requests were either not answered or flatly declined.

“We’re appealing to the council on a human level,” Bell said, “and they’re refusing to assist us.” He described the refusal to meet as “baffling and cruel,” arguing that the council could, at minimum, give some comfort that it would not pursue individual leaseholders for the freeholder’s failure.

The council has not publicly explained why it has declined to convene a forum with the affected owners, even as the crisis has attracted wider media attention.

How does this fit into wider developer‑debt problems in Hackney?

The Upper Clapton case sits within a broader pattern of unpaid developer contributions across the borough. The FoI data obtained by the LDRS shows Hackney Council is owed about £2.9 million in outstanding Section 106 and CIL payments from various schemes, with roughly £1.2 million recovered in the past year. That suggests the £850,000 tied to Restoration Hackney is one of the largest single unrecovered developer debts in the area.

Campaigners and local journalists have previously raised concerns about how the council manages developer obligations, including whether it truly exerts its full leverage when companies fail to pay.

In the context of the Upper Clapton block, residents say the scale of the unpaid debt and the length of time it has gone uncollected show that the council’s approach has been “woefully inadequate” and has now directly harmed ordinary homeowners.

What options do these leaseholders now have?

At present, the main options available to leaseholders are limited. Cash buyers exist, but they are rare and often demand steep discounts, turning the flats into de facto “accidental leasehold prisons” for those who cannot afford alternative finance. Some leaseholders are considering legal challenges against either the council or the developer, relying on the advice that the council’s enforcement conduct may be “unlawful and irrational,” but this route is costly and uncertain.