Reassurance or concern - views welcomed

BobBayliss

I have a deposit down on a new-build. I am a cash buyer, and we are moving towards exchange of contracts. Four of the twelve flats have been sold to date - so they are not selling like hot-cakes - the block is overlooking a railway line and on the corner of a main road, though it does benefit from being very close to the town and station.

I have now received a copy of the lease. My solicitor (appointed for me by the Estate Agents as my legal fees are being paid for me) has flagged up the following:

The Developer will not be more specific about what constitutes "reasonable" in terms of service charges for maintenance of the block, provision for anticipated future work etc. My solicitor has asked for an amendment stating that "reasonable" should be as is determined by a majority of the lessees - this has been refused.

I am concerned that there is nothing to prevent the service charge rocketing after year 1. Also at the moment only 4 of the 12 flats have been sold - until the rest are sold would we be liable to foot the whole bill, or just 1/12 of it?

While the Developer has agreed to an independent snagging inspection (New Build Inspection) taking place between exchange and completion, they say they will need to see a list before agreeing to remedy any defects which this may identify.

Is this reasonable of them, and does it give me enough protection?

The Local authority have advised that the property is in an area that is affected by Radon Gas. My solicitor advised that in order to ascertain if this property is affected by high levels of Radon, I would need to have it tested. I have requested an Information Pack from the Health Protection Agency, but should I not insist that the vendors test Radon levels before exchange, or is this more of a precautionary disclaimer that I should be prepared to deal with over a longer timescale?

The water and drainage search has revealed that foul water and surface water from the property drains into the public sewerage system - again, is this a potential deal-breaker, or just something to cover themselves?

Finally, my solicitor points out that it is possible that the builder will take a considerable time to complete the building or may not complete it at all despite contracts having been exchanged. The flats seem more or less done with all fixtures and fittings in place - but the builders seem to be taking ages to make progress on finishing off outside (landscaping, perimiter walls, scaffolding still up...nothing much seems to have moved outside the block since my offer was accepted in November, though they are currently projecting that it will be ready to complete by late February.
My solicitor says that to try to deal with these potential problems they have invited the builder's solicitors to agree a longstop completion date and are awaiting their response. I am not quite sure what this means, but does it sound sensible?

I should be grateful for any thoughts or advice about the points I have raised.

BobBayliss

Sorry - one last thing I should have mentioned....the builders do not apparently have NHBC cover, though they do have Premier which my solicitor says is equivalent although I have read that some mortgate lenders are sniffy about it (which may be an issue if I want to sell)....any views on that?

Hopejack

I personally would not proceed. The thing I read on here again and again is never use a solicitor appointed by the builder - they never have your interests at heart.

Some of the issues you mention could well be an issue when you come to sell - NHBC is the main recognised body having said that, anyone who has tried to claim from them knows it's a bit like a car warranty (and only last 10 yrs anyway) - looks great on paper but doesn't cover much when you get down to the nitty gritty. Radon, could be an issue but if you can test and it's OK then fine. Some people will be put off by railway line, some see it as a pro being near the station....

I don't think they are being unreasonable saying they need to see a list of snagging issues - otherwise how do they deal with them? They may disagree with the list I guess...

Re the service charges, I've never owned a flat, but the development I bought on years ago did have some and a friend bought one, her maintenance was kept the same even if the other flats were not sold. Having said that, I think nearly all the flats were sold by the time she completed anyway.

For me there are too many grey areas. I would pull out. Depends on what you want the property for I guess.

Milliewilly

I would be running away.

How much deposit have you risked? Living in a block that has only 1/3 capacity residents would bother me from a security point plus the risk of it not being completed at all is too much.

Flats are in abundance. I would cut my losses and buy one in a block thats completed instead and try to negotiate hard to recoup the lost deposit on the first one.

DVardysShadow

Re radon, I would not worry if it is not a ground floor flat.

LydiaJ

There are many threads on here from people who have exchanged on new-builds that weren't built yet, and then found that completion is delayed, their mortgage offer expires, and they are unable to complete. These contracts tie you in to complete whenever the builder happens to feel like finishing the building, with no get out for you or penalty for them if they delay for ages. Quite apart from the other possible problems, I wouldn't exchange on anything if I didn't know if I would still have a mortgage offer in place by the time of completion.

ETA Thanks Hopejack for pointing out that the OP is a cash buyer and doesn't have to worry about mortgage offers. All the same, I agree with you I wouldn't exchange in this situation - even with cash, you still end up tied into a contract that the builder can delay indefinitely.

OP - A longstop date would help, but it depends how far away it is, and whether you'd be prepared to wait that long, unable to buy something else if it comes up, and perhaps find you still don't get to buy the property if they don't complete on time.

Hopejack

But Lydia - the OP is a cash buyer so not an issue. However imo that means the OP has an even bigger bargaining tool to go elsewhere! Deposit of course will be lost - depends on how much that was, whether he wants to lose it. I certainly would not exchange at the moment, if still interested then I would wait, if they have sold as little as they have they are not in a position to be pushy (but will be of course!).

G_M

'reasonable' service charge - be warned. you'd be vulnerable.
Empty properties - yup, could impact your service charge, esp if they stay empy
No NHBC - dodgy
longstop agreement - if this means commitment to complete external works etc and is pinned down, fine. If not, beware
drainage into public sewerage system - normal. Where do you expect it to go?
radon - not a problem unless you're on ground floor

MrsMoo2U

Hi, I have just completed on a new build apartment. I had none of these problems and the whole block sold. I would say though that I did have some issues with the valuation for mortgage purposes. Mortgage companies are being very reluctant to give a mortgage on new build apartments and surveyors are finding any reason to down value. I am currently disputing the valuation on mine. I know that you are a cash buyer but take this into account if you want to sell on others might need a mortgage for it. I would only say that if you are asking these questions then you have concerns. Listen to your instincts. Not sure how much reservation deposit you have put down but I am sure that it will be buttons compared to the full cost of the apartment. If you are a cash buyer think about if you would spend all of that cash on another item if you were unsure and then make up your mind about whether you are prepared to walk away and lose a smaller amount - ie the deposit. Also I would do some more independant research on the builder. Find out about other development they have done and go and speak to the people who bought from them to see if they had any problems.
Good luck I hope it all works out.

Fire_Fox

Does your solicitor have specific experience in the field of leaseholder properties and service charge disputes? The term "reasonable" comes from the Landlord-Tenant Act 1985, this can be determined by a Leasehold Valuation Tribunal in case of dispute.

Service charges invariably increase exponentially in the five years or so after a development is completed, it's normal for them to be set artificially low to attract buyers. I suggest you look at service charges levied at similar but older blocks in the local area to find out what the average is - this information can often be gleaned from estate agents.

If you had to wait for the majority of leaseholders to agree the level of service charge nothing would get done; I know of a couple of blocks that self-manage and there are ALWAYS some very vocal/ short sighted/ mean individuals. There will be covenants in the long lease that require the freeholder/ managment company to undertake repairs and maintenance - this cannot be breached regardless of whether there is any money in the pot.

Everything leasehold here: www.lease-advice.org/publications

BobBayliss

Thank you to those who advised so far. My original deposit was £1k, and I have so far paid about £400 in search fees etc. I suspect that if I were to pull out the Developers would refuse to pay any for any of the legal work done on my behalf so far, which may take it up to say £3k.

Given the circumstances I have outlined, on balance, would others stick or twist? Is there anything in particular I ought to insist on as a condition of staying on board?