Buying a Flat with Disputed Major Works Fees

AirJoe

Hi all,

Long time lurker looking for some Leasehold advice (I am also working through lease-advice dot org).

My mum is purchasing a flat (when I say we in this post I technically mean her) in a block of 10 and I've been helping her out. We are aware that there is some dispute over some major works to replace the roof.

The cost of the works is estimated at just over £70k and, from the invoices we've just received, this flat's share has been billed at £2k in 2014, £2k in 2015 and £3.7k in 2016. The freeholder (a company) justifies the £70k fee by including 4 estimates (approx 1 year old) and have selected the cheapest at this amount. They have also included a statement that they intend to collect £77k in total, presumably to cover any costs over the estimate.

However, the service charges on this flat indicate that they've not met this additional cost in their monthly payments. The normal service fees were being covered by a payment of £60 per month and they seemed to have increased that to about £100 per month for the last couple of years but this obviously leaves a large shortfall of about £7k.

You'll also noticed I called this a dispute earlier. A friend of the vendor's neighbour told me about it when we were viewing and we know that there are a number of flats that are withholding the money. Unfortunately I don't have the specifics of what the dispute is over (probably just the amount but who knows). It's also now been confirmed by the vendor and their solicitor.

As an aside I am aware of 4 of the 10 flats being sold STC in the last 6 months, which may be related.

My research on lease-advice suggests that any outstanding fees must be paid before completion as, even though we would not be personally liable for them, it still puts the leasehold at risk of forfeiture.

What appropriate ways are there to ensure it's paid? Our solicitor has suggested it can be paid from the vendor's equity but that feels too late in the day for me. They also suggested that we could get a reduction in price to reflect the outstanding cost but this doesn't actually settle the debt until after purchase, which may be a problem for our mortgage provider?

If it is paid in advance of completion, what are the ramifications of the other flats withholding payment? Will the roof simply fall into disrepair (to my untrained eye it didn't look that bad but what do I know) whilst we wait for lengthy court proceedings?

Tried to be thorough with my wall of text so thanks to anyone who takes the time to work though it. All replies gratefully received!

Joe

marksoton

I'd walk. There's plenty of other flats without these complications.

AdrianC

So if £2k, £2k and £3.7k have already been paid, that's £7.7k total. Assuming each flat's share is equal, then that's the £77k total bill met. If they've been billed, but not paid by the vendor, then your solicitor should agree with the vendor whether the price being paid includes the transfer of the debt (you owe it, because you're agreeing that you're buying the flat £7,700 cheaper than you otherwise would) or not (they owe it - and it's perhaps paid through your solicitor withholding the equivalent amount and paying the management company directly).

Whether other leaseholders have withheld their payment shouldn't affect your payment, because that's their debt, to be chased up with them, legally if required. The management company should do the work, and then regard the missing payments as debts from those leaseholders, rather than wait for all payments to come in.

MarkSoton does have a good point, though...

bouicca21

When I bought my flat the vendor was about £4K in arrears for ground rent and service charges. The arrears were deducted from the sale price at the point of completion by arrangement between our respective solicitors and paid direct to the management company.

AirJoe

Thanks all.

It's been billed but not paid so I think the situation may be very much like the one bouicca21 experienced.

I think I agree with marksoton too. Whether I can persuade my mum to restart the process is another matter

Very much appeciate your time in answering

Richard_Webster

I'd walk. There's plenty of other flats without these complications.

I agree with this. If there is a dispute now then there could be other problems later. Freeholder sounds inefficient at best.

AirJoe

I think I have convinced her that we should look at other options. This is not the first time we've had a purchase go wrong so it is a bit galling but if there's anything I've learnt by lurking these forums it's that, when you take the OP's emotion out of it, you lot are generally right.

Thanks for the help all! :T

Hoploz

One other thing came into my mind when I was thinking about this (yes I think about posters on this forum as if I know them personally lol)

When leaseholders pay in to a sinking fund for future works, they are normally allowed to reclaim it if they sell and the funds have not been spent. I wondered where this case would stand with that. It might be different because the money has been collected for a specific purpose rather than a general sinking fund, but it could be a complication to be hurdled. After all, why would people pay for a roof on a property they no longer own.

Finding an alternative is definitely the best option if possible.

C_Mababejive

marksoton wrote: »

I'd walk. There's plenty of other flats without these complications.

I'd run....

Pete9501

Hoploz wrote: »

When leaseholders pay in to a sinking fund for future works, they are normally allowed to reclaim it if they sell and the funds have not been spent.

Don't think this is normal at all and certainly didn't apply when we recently sold. Indeed as part of the sale I have to produce a copy of the accounts which showed a healthy balance for future works.

Pete

Rosemary7391

Hoploz wrote: »

When leaseholders pay in to a sinking fund for future works, they are normally allowed to reclaim it if they sell and the funds have not been spent. I wondered where this case would stand with that. It might be different because the money has been collected for a specific purpose rather than a general sinking fund, but it could be a complication to be hurdled. After all, why would people pay for a roof on a property they no longer own.

Are they? How does that work?