Purchasing flat with upcoming Section 20

sugarsponge

Hello everyone,

I'd like to field some opinions on a flat I'm just about to buy.

My offer was accepted in September 2018 (yes, eight months ago!). The flat is very good value for the area but at the top end for flats in the block. It has a 996 year lease (apparently this cost £14k to extend), £5 per month ground rent, and the flat itself needs no work doing to it. The valuation survey and homebuyer's report agreed with the purchase price.

Before I made my offer, the vendor told me about an upcoming Section 20 that would cost about £2k. This was fine by me, considering the price of the flat, the fact that I won't have to pay for a lease extension, and I won't have to do any immediate work to the flat.

Anyway, one of the main reasons for the long delay in conveyancing has been due to the management company not being able to supply info on this upcoming Section 20. Exactly why it has taken so long is unclear - both me and the vendor have had problems with solicitors who are not good communicators. But the management company have now provided an estimate for the work based on a Statement of Estimates that the previous management company compiled in 2016 (a Notification of Award was not issued at that point, presumably because management changed hands). This estimate does indeed come to just over £2k.

My mortgage lender is happy to proceed with these old estimates. My solicitors have sent me their reports for me to sign, and after this we will be ready to exchange/complete.

Am I taking too much of a risk? I'm expecting the actual cost of works to be slightly higher than the estimate, but I'm not expecting it to skyrocket, seeing as the work they are costing is exactly the same as before. But, the new costs haven't been confirmed.

Also - could/should I ask for £2k of the purchase price? I know this is the logical thing to do, but I've built up a good rapport with the vendor over the past eight months, and she did tell me about the costs before I put in an offer - I don't want to risk jeopardising things at this crucial point.

Thanks in advance for your opinions!

da_rule

Underestimating - Yes, the s.20 estimates may be less than the estimates, but if it’s too much more you could argue that it is unreasonable. You haven’t actually said what the works are. In some cases works uncover additional works that are needed, sometimes these works are needed before the original works can complete. Therefore, the landlord would either have to commence new s.20 consultations or apply to the First Tier Tribunal for dispensation to not consult (if the delay would cause hardship or the works were emergency works etc), if these additional works would cost more than £250 for at least one flat.

Discount - You can ask for anything you want. The question becomes, is the question worth potentially jeopardising the purchase for? Also, I’d be more concerned with the legal costs you’ve incurred in the last 9 months!

The lease extension was obviously done through the informal route. Have you therefore checked for ground rent increases etc?

sugarsponge

Thanks for the reply da_rule. On what legal grounds could I argue that the costs are unreasonable? The works are: asbestos removal and replacement of communal boiler and water tanks, and electrical repairs (so there are actually two Section 20s, totalling c. £2k altogether). Could you explain a bit more what you mean by the rest of your first paragraph?

As far as I know, I won't be charged any extra legal fees than what I was quoted, as my solicitors haven't had to do anything extra, they've just had to wait ages for the vendor's solicitors to answer queries... though obviously I will now double check this!

What do you mean about the lease extension being informal? The current vendor paid £14k for it.

Thanks a lot!

MovingForwards

How many flats in the block? As each flat will be paying 2k so you will know how much overall they estimate it to cost.

da_rule

Informal means that he did not follow the statutory procedure, as, if he had done, there would have been no ground rent. It’s perfectly fine, but sometimes landlords build in rent increases in the informal route, which they cannot do under the statutory regime.

Unreasonable just has its common meaning. The costs exceed what you would reasonably expect to pay for the works carried out.

sugarsponge

MovingForwards - Thanks for your reply. The apportionment of the flat I'm buying is 3.9% of the overall cost. So the overall cost (including VAT and fees) is about £50k.

da_rule - Thanks for clarifying. I'll ask my solicitors to double check this, (Also FYI the vendor is a 'she' )