Ex-LA leasehold, major works & retention of funds

newland_archer

Hi all, my partner and I are facing a dilemma and would really appreciated any input.


We have put an offer in for an ex-Local Authority flat in a nice four floor block in south-east London. Since then have found out about major works planned for 2019/20. This is predominantly about replacing tenant kitchens and bathrooms, but includes communal work as well. The survey for this has not started and therefore no formal notice of estimate etc served.


There is a lift in the block that has been taken out of service seemingly permanently (all access welded shut etc). Before the survey is undertaken, the council will not comment either way on the long term intentions around the lift.


We have read horror stories about section 20s being served for replacement lifts and have considered pulling out. The seller has offered to put £20k into retention with the solicitor for 2 years.


This feels very generous - but we're trying to balance it with the fear of having much higher section 20s being served on the property once survey for planned 19/20 major works is undertaken.


Any thoughts on the proposal? Should we be snatching it out of their hands or running in the opposite direction??

eddddy

The lease will essentially be your contract with the freeholder.

What does it say about the lift?

• For example, does it essentially say that there is a lift, that the freeholder will maintain it, and the leaseholder will have to pay a share of the costs?

• Or does it make no mention of a lift (because the lift has been sealed) and therefore, no requirement to pay a share of maintenance.

• Or does it give the freeholder the option to bring it back into service, and the leaseholder has to pay (which would be unusual terms - but who knows?)

Ex-LA flat leases are notorious for high service charges.

FWIW, if you want to proceed with the purchase, I would push to convert the £20k into a price reduction rather than a retention.

Then there's no scope for argument about what the retention can be used for, and no worry if the refurb takes longer than 2 years.

newland_archer

thank you, that is very helpful. we have thought of the price reduction but it doesn't really help us because we can't convert it into ready cash without decimating our LTV and therefore our interest rate (we are first time buyers).


we will review the lease accordingly.

Tom99

The lease may not mention the lift, nor say the roof, but costs to repair still come under the service charge.
Only if the lease specifically removes the lift costs from the service charge ignore it.

Lioness_Twinkletoes

Personally, I'd not touch it with a bargepole. I have worked in Leasehold Services for 10+ years and can tell you that the Major Works bills can (and do) exceed £30k per flat. Roofing works, lifts, communal repairs such as gutters, fascias, painting, balconies, windows, doors are all prohibitively expensive. Scaffolding costs alone are eye watering - before you factor in the actual works.

As you quite rightly say, a reduction in the asking price is no help to you in the event of a huge bill - but retentions are hugely problematic as well. Depending on how the LA manage their service charge collection, you could ask the vendor to pay the £20K onto their service charge account. It can just sit there as a credit. BUT you are still in the position of possibly having to dig very deep into your pockets in the future - and I am assuming that one day you're going to want to sell it on....

If you still want to go ahead, read the lease carefully, get advice from the Leasehold Advisory Service and talk to your solicitor. Also, read the LA's website for information on any repayment plans they offer - Enfield offer a total of ten years (depending the size of the bill, it's on a sliding scale and 10 years is for a bill of £32K plus) - but they charge interest after the first two years.

My advice though, is to walk away.

AlexMac

I agree most of the advice above, but based on my experience of owning two ex Coun il leasehold flats, also in SE London, I'd question Eddy's concern that all "Ex-LA flat leases are notorious for high service charges"...

My two, owned for over 20 years and 7 years respectively, have averaged £500-£800 p.a for routine service charges, plus, every 6-7 years or so, a £4-£5k Bill for external decs, new windows or other one-offs; which seems fair. But maybe I'm lucky to be with Greenwich, a very effective Council in terms of the Housing Dept's leasehold management and communication .

BUT... and it's a big but, that lift would worry me? I can't see it being left unrepaired for ever, and cannot imagine that lift repairs would be excluded from service charge apportionment? I deliberately bought my BTLs in low maintenance, low rise, 3-4 storey walk up blocks of standard construction; brick walls/ pitched tiled roofs. So if, when you eventually sell on, you might find that similarly risk-averse buyers would be cautiously reluctant.