What to negotiate when it is al guessing

heytoki

Hello all,

I am buying a flat where the freeholder has issued a section 20 Notice. That comunication was sent to the leaseholders on the 19th of May (my offer was accepted mid March and the agency told me that there were not major works planned in the building).

The leaseholders are now in a stage called "nomination of contractors" which the deadline is the 22nd of June. I have contacted myself the project manager of these works and she told me that they will publish costs at the end of July. Then there will be another 4-5weeks till second consultation and another 5-6 weeks till the consultation concludes.

The managing agent has confirmed that at the end of 2014 they had a reserve fund of 25k, but they haven't confirmed if that will be used to offset any major expendidure and either confirmed the actual fund reserve they have now.

My solicitor has requested a 10k retention. And it is here when things are getting hot. Estate agent called me yesterday to tell me that suggestion is unaceptable and he is asking me why i have suggested that amount. What i said is that we dont know anything about the costs of the maintenance works.

As they are not going to accept the 10k retention, dont really know what to do? Shall i suggest another amount? i.e. 7k or shall i wait until the end of July to see what are the estimate costs of the works?

Thanks

Hoploz

I would assume they need the full amount as a lower amount on completion could put their onward purchase in jeopardy. 10k is a lt to have to find at the last minute.

You probably don't want to hear it, but (deep breath) You will be the one to benefit from the work. The seller won't benefit at all from it. Therefore why should they pay towards it? There, I've said it. Sorry!

Having said that, I do understand that you don't want a huge bill when you have just bought a new place yourself and you didn't know about it to start with. And they can't even tell you the likely cost at this stage. So I do get that this is a big spanner in the works.

Do you know what the work is? I think you're going to have to sit it out and wait until the management company is able to provide more detailed info on the costs per flat, and how much will be covered by the sinking fund. At least the seller was also not aware, so nobody has been hiding this, it's just bad luck. The letter could have come the day you completed, after all.

Or if your seller is inclined to get things moving quicker then they will have to accept some sort of retention, amount to be agreed.

heytoki

Thanks Hoploz,

i understand that the seller will not benefict from the works, but most of them are re-decoration of places that has been used by her during the time she has lived there. When you buy something you want that thing in good condition right?

i have the report of the jobs to be carried out but i dont have the expertise to know how much roughly the bill will be. Also, nobody in the deveplopment has dominated any contractors which would have been helpful in order to have an idea.

I have contacted the project manager of these works and ask her to see if they require the funds before starting the works and also when the leaseholders will be asked for more service charge (dont think she will give me that info thou, but i tried..).

Regardless the reply i might have from the project manager, i will indicate my solicitor that the next step for me will be wait until we have further information. However, i dont know what will be the reaction of the seller....

Mallotum_X

Can you delay until costs are known.

Your seller is unlikely to be able to find a replacement buyer that quickly, especially as there is a bill of unknown amount coming the buyers way.

Dont get into conversation with the agent over this, let the solicitors deal with it. The agent wont be interested in reaching a "fair" deal but just to get the most for his client.

I would want to wait this out.

heytoki

At the moment i dont know how the seller will react when i say that i want to wait until the costs are known. The state agent already called me to tell me that my attitude was unaceptable and i should go ahead despite the works. I could see that he is just trying to close the deal in order to get the commison. I will not get into more conversation with them, thanks for the advice.

eddddy

FWIW - whilst the EA is telling you that your attitude is unacceptable because you want a £10k retention...

...he/she is probably telling the seller that their attitude is unacceptable because they wont agree to the £10K retention.

And he/she is just hoping that one or both of you will give in and compromise.

heytoki

Mallotum_X wrote: »

Can you delay until costs are known.

Your seller is unlikely to be able to find a replacement buyer that quickly, especially as there is a bill of unknown amount coming the buyers way.

The seller has comeback and say that she will not wait until the cost are know (which will be around end of July). My solicitor has told me that i have two options:

1- Proceed and take on the risk of the works
2- Decide not to proceed

If if decide the first option, we will have to notify this to the lender. So what i think is that the lender will comeback and ask how much are the costs and how i am going to pay for that. Am i right?

eddddy

heytoki wrote: »

...
If if decide the first option, we will have to notify this to the lender. So what i think is that the lender will comeback and ask how much are the costs and how i am going to pay for that. Am i right?

Quite possibly. But, the bigger question would be whether you actually want to take on that risk.

And realistically...

- would they find another buyer who would be happy to proceed with a unquantified section 20 hanging over the property?

- and would that other buyer be ready to exchange before end July anyway?

TBH, it sounds to me like the EA is just trying to bully you into doing something that most people wouldn't do.

I guess one option is to say that you won't proceed any further at the moment - so they can put it back on the market. And if the property is still available at the end of July, the s20 is quantified by then, and you haven't found another proptery by then - you will resume the purchase negotiations then.

Red-Squirrel_2

heytoki wrote: »

The seller has comeback and say that she will not wait until the cost are know (which will be around end of July). My solicitor has told me that i have two options:

1- Proceed and take on the risk of the works
2- Decide not to proceed

If if decide the first option, we will have to notify this to the lender. So what i think is that the lender will comeback and ask how much are the costs and how i am going to pay for that. Am i right?

3. Call her bluff.

This issue isn't going away, and it'll take a lot longer than the end of July to get another buyer to the position you're in now, even if they don't care about the huge potential bill (unlikely).

I suspect the seller is just trying to pressure/scare you into taking a silly risk.

heytoki

My solicitor has told me that the seller is likely to accept a retention of 5000K. I will not go back to him yet as i will think about this during the weekend.

I have been trying to get more information contacting the project manager of the Works. The maintenance Works will be done in 3 phases. However, at the end of July they will publish costs for the total project.

i got back to her and asked if the leaseholders will be asked for the extra expenditure (there are between 25k and 28k in the reserve) at the beginning of the project or as the different phases begin. She couldnt advice on that as she suggested to contact the managing agent (no response so far).

I have asked around to people with a few properties and they have told me that kind of Works could be between 30k and 70k. Most of the works are redecoriation and some repointing in some areas.

There are 14 flats in three blocks and the share for the flat im buying is 7%. So i think that if we take into consideration a bill of 100k (in the worst case) and 25k will be used to pay, that means we have 75k divide between 14 which is £5,350

As per above; i have some doubts. How long does the retention last? Until all the cost are published? or until the managing agent ask for the money to the leaseholders?

KRB2725

It is pointless guessing the figures. You don't know that 100K will be the worst case and you don't know if they are intending to use, some, none or all of the reserve.

I would follow the advise of others and wait until the end of July.