FTB of Leashold flat - Basement not demised, Property Misdescriptions Act breached??

RankAmatuer

Have become bit of an avid reader of reader of these forums over last month or so while going through fun of first house purchase, problems have really come to a head today so would greatly appreciate advice from anyone who's been through similar situation.

Story so far...

My girlfriend and I saw a victorian ground floor flat (converted 2 story terrace) in east london, which was advertised as a 2 bed split-level property with converted basement. As she'd told the estate agent (Felicity J Lord) that the single most important thing in property she was looking for was a dedicated space to use for martial arts training, the agent suggested we look at this, even though fair bit above our budget. The place turned out to be almost ideal, although the basement was divided into 2 rooms with archway between them, as dry lining covered supporting brick pillars. We told the agent that if it was possible to knock the room through into 1 then we'd be interested. Agent got back and said the vendor reckoned could be done although was definitely supporting wall. Agent then got a local builder to quote on the job (about 3k). On this basis we put in an offer, and after some haggling got reasonable price we thought. We set everything in motion, mortgage approved, basic bank valuation done, didn't get full survey as knew there were some damp issues we'd agreed to deal with to get offer accepted and wanted own survey done on basement conversion feasibility so spent money on these instead. Then the bombshell...

Our solicitor gets in touch and says that in course of trying to see if building regs / PP etc were approved for original basement conversion, he'd discovered that the basement was not included on the lease as part of the demise. The basement conversion was done by previous owners to current vendors and all they'd done was dry-line walls and carpet the room. Apparently the current vendors had looked into getting a deed of variation to include basement but for whatever reason this didn't happen. They therefore got indemnity insurance to cover their use of basement or to prevent their liability for it (not sure exactly). As we had stated from initial viewing that major structural alterations to the basement were an essential part of wanting the place, and both agent and vendor had discussed aspects of this, we were flabbergasted that they thought the sale would somehow go through without us noticing they had no legal claim to basement, and so no work would be possible. Our solicitor wrote to theirs stating that they would have to obtain and pay all costs of getting this deed of variation before we'd exchange. 2 weeks of nothing, during which we're told our EA had moved branches (promoted apparently), then receive letter saying they are not prepared to get DoV and believe indemnity insurance is sufficient and property is worth agreed price with current lease....

Our solicitor has advised that we would probably get the DoV ourselves (Freeholder is a Old Ford housing assoc, although was tower hamlets council when they bought place), but would take few months and low thousands in fees. He's written back to vendors asking if would seek preliminary indictaion from freeholder if they'd approve DoV, but expects them to refuse as even enquiring would apparently invalidate their indemnity insurance. In which case he advises pulling out of sale, and seeking to recoup costs incurred so far from agent as reckons they've definitely contravened property misdescriptions act by advertising basement as part of property. My take is given how much we've been talking with them about basement, they don't seem to have 'taken all reasonable steps' to ensure accuracy of info, i.e. that flat includes basement, even if were initially unaware this must have come up at some point before our solicitors found out, surely?

Any advice anyone has on this massively appreciated - Should we ring agents and tell them to pressure vendors to stop being difficult about DoV as otherwise we'll be pulling out and sueing them / reporting to trading standards? Surely it's in their interests to get vendors to sort this out? (Vendors were pushing to exchange 1st dec, complete week later as 1 has already emighrated to japan and other leaving country at xmas).

P.S. Apologies for rambling post, just wanted to give much relevant info as possible..

antrobus

RankAmatuer wrote: »

Our solicitor ... advises pulling out of sale, and seeking to recoup costs incurred so far from agent as reckons they've definitely contravened property misdescriptions act by advertising basement as part of property.

I'd be very much inclined to follow that advice.

You could of course inform the vendors that the sale is indeed off unless they obtain the DoV or cut the sale price by sufficient to cover your costs of obtaining the same and the risk that you won't. Can't see many other options available.

Richard_Webster

They will have trouble selling to anyone else. Buyer will be all keen as will agent, and then 2-4 weeks down the track when the buyer's solicitor has read the agent's particualrs and read the lease and concluded the basement is not included - it all grinds to a halt again. If the sellers are really stupid this could happen two or three times before the penny drops that they are not going to sell the place without sorting it out properly.

OP needs to explain this to the sellers and make the point that if they want to sell it all they must organise the deed of variation.

You could threaten to report the EA for trade descriptions - that might induce them to agree to substantially reduce their commission to pay for the cost of the D of V.

However I think you do need to be careful with the EAs - it is not normal practice for EAs to look at deeds so they would normally rely on what the seller said. Whether you would have a remedy direct against the seller for a negligent misstatement resulting in financial loss (Hedley-Byrne v Heller) is an interesting question - but the costs of bringing a test case would be far more than your loss - so an unlikely way forward!

RankAmatuer

Thanks for advice Richard. This is what we can't understand, how do they possibly think they can get away with this. They are maintaining that this indemnity policy is sufficient and with this alone the property is still worth what we've offered - however with no legal claim to about 40% of the area of property can't see how they really believe this. So frustrating... We know they want quick sale so can't imagine they want to risk this falling through, but if they can't wait for DoV we are prepared to take place without it and do ourselves provided they reduce price to cover costs and risk of it not happening, but seems it's all about fact that indemnity insurance is nullified as soon as contact freeholder to enquire into likelihood of this being granted - so bit of catch-22 for them, which I'd imagine is why they aren't budging. Is there any way through this you know of, and if we got reduction and took it on ourselves would we be potentially liable for bringing conversion up to standard as soon as we tried to get DoV, i.e. nullify our own insurance which presume we'd need to get initially?

ILW

EA may not be to blame, they only work on what they have been told by the vendor.

MobileSaver

ILW wrote: »

EA may not be to blame, they only work on what they have been told by the vendor.

However now that the EA is aware that the particulars are incorrect it should be possible to persuade them to update the property details by reminding them of their obligations under the Property Misdescriptions Act.

If nothing else this may encourage your seller to come to an agreement as presumably it's unlikely they'll have much more interest at the current price once the basement issue is made public.

ILW

MobileSaver wrote: »

However now that the EA is aware that the particulars are incorrect it should be possible to persuade them to update the property details by reminding them of their obligations under the Property Misdescriptions Act.

If nothing else this may encourage your seller to come to an agreement as presumably it's unlikely they'll have much more interest at the current price once the basement issue is made public.

True but the OP appeared to be asking about suing the EA.

Grindle_2

I can’t see what the problem is unless you are going to use the basement as a business premises. You don’t make this clear in the post. You say there is an indemnity insurance on the flat which I presume is transferable and will cover the costs of any problems with the title. It is going to be unlikely that the freeholder will try to claim the basement back. Is the entrance to the basement through the flat? If so how would the freeholder gain entry or access to it?

I had a similar problem with some land attached to a house I bought. Southern Electricity had access over it and it was not completely clear if this affected who owned it. The indemnity insurance was only a couple of hundred pounds.

It is improbable that the insurance will ever need to be used, and if it is you are covered.