Help! Offer accepted but local authority search reveals planned future major works

wuzzlefazza

Hello all,

I'm new to this forum and hope some of you would kindly offer some advice on our current predicament. Any insight or advice would be very, very much appreciated.

We're FTBs and my girlfriend and I have recently had an offer on a flat accepted for £328k, £7k below the listed asking price of £335k. It's one of three flats in a converted redbrick Victorian terrace building where the freeholder is the local council. 2 of the flats (incl. the one we're about to purchase) are privately owned with the remaining 1 being used for local authority housing so I guess previously the whole building/all 3 flats were local authority.

Our solicitor recently came across a letter from the council dated Sep.'09 which revealed that within the next 5 years the council, as freeholder, would be looking to undertake major exterior renovations works on the building with an estimated cost of £15,000 per flat!

Of course this has come as a shock to us and we're not sure on whether to proceed with the purchase or not. There isn't any more info other than that there are no defined works planned yet but we really don't want to worry about being hit with a £15k bill somewhere down the line.

The flat was purchased by a developer in Oct. '09 (so he must have seen this major works letter) who has done a nice job as the interior is completely brand new and revamped (albeit we don't know what state it was in before) - he is the vendor now.

We can't really afford a potential £15k bill nor want the looming thought of potentially being hit by one. Also, even if the planned works don't happen by the time we plan to sell, potential buyers in the futures would surely be put off by it just like we are now?

Considering the vendor/developer purchased only 4 months ago he's looking at making a gross profit of £89k!

Is negotiating the asking price down £15k in light of this potential cost the way to go? Is there any 'standard practice' when something like this crops up during the conveyancing process? What would you do in this situation??

We'd be really grateful for your opinions and advice. Thank you in advance.

G_M

I have no doubt that the vendor is well aware of this planned expenditure.
There is little you can do about the renovation, or the cost - it's a major downside to buying where the council is the freeholder.

Either budget for the extra £15K.
Or negotiate a price reduction with the seller.
Or walk away.

BitterAndTwisted

Erm, you as first-time buyers can afford to buy a FLAT for £328k but you don't think you will be able to afford a £15k repair-bill in the next five years? Something is very wrong or there's something I haven't understood properly.

PasturesNew

BitterAndTwisted wrote: »

Erm, you as first-time buyers can afford to buy a FLAT for £328k but you don't think you will be able to afford a £15k repair-bill in the next five years? Something is very wrong or there's something I haven't understood properly.

£328 + 3% stamp duty at £10k + £2k other costs.... £340k

It adds up doesn't it

wuzzlefazza

Hi all and thanks for your replies.

We can afford the monthly repayments on the flat and have saved up for the deposit + costs such as stamp duty, solicitors fees and some furniture but like most people who have saved, this would be the bulk of our savings gone. So, potentially being demanded to pay £15k upfront would be a severe shock to the wallet.

Is it typically the case that if the vendor is fully aware of the such potential costs that the asking price is then negotiated down?

G_M

It is typically the case that when the buyer becomes fully aware of such potential costs he attempts to negotiate the asking price down.

Whether he succeeds is another story....

Doubtless you will let us know in due course!

david29dpo

Leasehold = future problems most of the time. Buy a freehold house.

blckbrd

If you're very keen to buy this particular property, negotiate the price. You may not agree a reduction of the full £15k but some is better than none and if a solicitor is involved you have already incurred costs.

I've not heard of an LA demanding full payment in advance of the works. Either an estimated bill will be issued once works commence or payment will be after the works have finished.

There are generally payment plans available - 2/3 years interst free plus additional years bearing interest. Look for information on the LA website in the leaseholder/major works section or ask the vendor to supply it.

Depending on the council, there may be programme information covering the next couple of years so you may be able to find out if the works are due to start soonish (fairly likely if they are Decent Homes works) or nearer the 5-year timeline.

For £15k I'd reckon a new roof and windows plus external/communal repairs and decorations on the type of property you describe. Might increase the value of the property, might not but may help you decide how much less to offer.

A developer looking for £89k profit on an ex-LA property makes me want to utter words that would make my mother disown me (again!). Haggle, haggle, haggle...

olias

So the LA is planning on spending £45000!!!! on the exterior of a terraced house? What are they planning to do, rebuild it!

Seriously, I cannot believe £328000 for a converted flat (leasehold!) in a terrace, with another flat being LA tenants, is a good investment for a FTB. I would strongly suggest a freehold house is the way to go. Surely for that money you can get one, even in London!

I would think twice.

Olias

dander

Personally, If the section 20 has been issued stating there will be major works, then I would consider the cost to be entirely the responsibility of the vendor. I would be feeling very concerned that the vendor has not been upfront with you about an upcoming bill like this, it is absolutely impossible that he didn't know about it. I would immediately reduce my offer by the £15k and if he doesn't accept that, walk away. You made your offer on the information available to you at the time and the information has now changed substantially.

Dr.Shoe_2

328K is a lot of money for a flat in a converted house... especially one that "needs" 15K to bring it up to Decent Homes standard. I really would look elsewhere, look for a new build flat as the developers are desperate to shift them and might pay the first 2 years interest and other costs. Even in the same neighbourhood you could probably get far more bang for your buck.

Personally I think you're being ripped off in any case.