Persist and proceed or pull out and preserve

smuj03

Good morning,

I had my offer accepted on 7th January this year. A 3 bedroom flat in my local village in Essex, UK. Things went well at the start of the process, everything ran smoothly. Whilst my solicitor has been amazing, the sellers solicitor has been nothing short of useless. Cut a long story short, my solicitor raised the issue of the ground rent being double every 25 years to an amount which would change the classification of the leasehold, and I therefore wouldn't be able to sell. We requested this to be changed 14th January. 

Fast forward to today, and we are still waiting for them to change this. Just to state my position, I have been advised to not purchase the property if this does not get changed and the bank are not willing to lend on it. Just to be clear - the property is vacant, there is no chain and I'm a first time buyer.

Now with everything going on with the Coronavirus around the world, and the articles saying house prices will drop by approx 20%. My question is; should I persist and proceed with the purchase or should I pull out and preserve my money? 

I am at the stage in the process where I am just waiting for the title report and contract to be sent over so I can sign it, along with them making the amendment as described above.

Options that have been discussed;

1. Tell my estate agent I'm pulling out the deal unless I get the change made by X date and proceed with deal.
2. Talk to estate agent and say I still want the flat, but put it on pause for now - and renegotiate in X months time.
3. Pull the plug on the deal altogether and walk away. Buy after this all clears up. 
4. Stay quiet, let it take its natural course. Still buy it. 

Note: Updated incorrect information pointed out in thread. 

GDB2222

Your first sentence says that you have already purchased the flat. That’s confusing. Assuming that you have not, you certainly cannot proceed if it’s not mortgageable. 

The sellers can’t just change the lease, unless they also own the freehold. They have to negotiate with the freeholders, and that can take as long as the freeholders wish to take. 

As to pulling out, I would, but there are plenty here who will tell you not to. Clearly, if prices are set to drop 20%, it would be a shame to pay the previously agreed figure. Plenty here will tell you that paying the mortgage on the higher price doesn’t matter, and the important thing is to own your own place, even if you end up in negative equity.  I’m far too mean to consider doing such a thing.

smuj03

Apologies, poor wording from me. I meant that I had agreed the price on that date, and the process started then. 

That's the thing. The seller does own the freehold. They are 2 elderly gentlemen, who own the shop below. They are selling 2 flats above the shop, which I can only assume for their retirement pot. This is why I can't understand why they won't just change it?

Thanks for you opinion, I appreciate it. I have a question for you. Say I bought the flat for £190k. 6 months later it drops in value by 20% to £152k. But 2 years after that it's back at £190k. Am I really loosing out in the long run? Would you still not buy it?

steampowered

I would just get the EA to pass on the message that you are upset at how long this is all taking, and want a proper update as to what is going on and when the deed of variation will be entered into, else you will have to walk away from the deal.

FrugalCat

smuj03 said:

Say I bought the flat for £190k. 6 months later it drops in value by 20% to £152k. But 2 years after that it's back at £190k. Am I really loosing out in the long run? Would you still not buy it?

How long does it take you to save 48k? If it's longer than six months, you're losing in the long run.

smuj03

FrugalCat said:

smuj03 said:

Say I bought the flat for £190k. 6 months later it drops in value by 20% to £152k. But 2 years after that it's back at £190k. Am I really loosing out in the long run? Would you still not buy it?

How long does it take you to save 48k? If it's longer than six months, you're losing in the long run.

I don't understand your point? I only loose that money if I try and sell. I have no intention of selling it for at least 5 years minimum. So I see it as, will the loss bounce back within that time period? I believe so. 

GDB2222

FrugalCat said:

smuj03 said:

Say I bought the flat for £190k. 6 months later it drops in value by 20% to £152k. But 2 years after that it's back at £190k. Am I really loosing out in the long run? Would you still not buy it?

How long does it take you to save 48k? If it's longer than six months, you're losing in the long run.

£38k, actually, but I entirely agree with the idea, if not the maths. 

If you could buy that flat or a similar one for £152k rather than £190k then of course it matters. You’ll be paying back £38k + interest less in mortgage payments. 

The arguments raised By others are that you might not be able to buy more cheaply, ie the supply of properties and/or mortgages will dry up. So, they argue, it’s worth paying the £38k so as to be sure of going ahead. 

smuj03

GDB2222 said:

FrugalCat said:

smuj03 said:

Say I bought the flat for £190k. 6 months later it drops in value by 20% to £152k. But 2 years after that it's back at £190k. Am I really loosing out in the long run? Would you still not buy it?

How long does it take you to save 48k? If it's longer than six months, you're losing in the long run.

£38k, actually, but I entirely agree with the idea, if not the maths. 

If you could buy that flat or a similar one for £152k rather than £190k then of course it matters. You’ll be paying back £38k + interest less in mortgage payments. 

The arguments raised By others are that you might not be able to buy more cheaply, ie the supply of properties and/or mortgages will dry up. So, they argue, it’s worth paying the £38k so as to be sure of going ahead. 

Ah OK, I'm with you now. 

I just want to make it clear I can see both sides of the argument. I'm just trying to work out what is the best thing for me to do right now.

Yes, I could maybe buy a flat for £152k in 6 months time, or the market might dry up. Or it could be overly saturated with loads of people wanting to buy cheap, and I might not be able to find anything at all. 

Thank you all for your replied thus far. Much appreciated. 

eddddy

smuj03 said:

That's the thing. The seller does own the freehold. They are 2 elderly gentlemen, who own the shop below. They are selling 2 flats above the shop, which I can only assume for their retirement pot. This is why I can't understand why they won't just change it?

Thanks for you opinion, I appreciate it. I have a question for you. Say I bought the flat for £190k. 6 months later it drops in value by 20% to £152k. But 2 years after that it's back at £190k. Am I really loosing out in the long run? Would you still not buy it?

So just to be clear - you're buying a leasehold flat from the freeholder. So you mean it's a brand new lease.

If that's the case, it's very strange to create a brand new lease with terms that make it unmortgageable.

If things aren't progressing, it's more likely to be the sellers that are holding things up, not the sellers' solicitor.

Either way, it will be much faster and more efficient to chase this up via the Estate Agent, than via your solicitor.

• Tell the EA that the property is unmortgageable with the current lease terms
• Since the sellers are the freeholders, tell the EA to ask the sellers if they are prepared to change those terms
• If the sellers are prepared to change those terms, tell the EA to ask the sellers for a time scale
• If the sellers are not prepared to change those terms, tell the EA that you'll have to walk away 

Hopefully, the EA will then get on the phone to the sellers and get things moving.

FWIW, assuming the EA gets paid on completion, the EA will put pressure on the sellers to change the Lease terms, so that the sale proceeds and the EA gets paid.

pinkteapot

Your post still doesn't make sense - you had an offer accepted on 7th April (two weeks ago)? Yet your solicitor queried the lease on 14th January?

I assume 7th April is a typo. When was your offer actually accepted, so how long has this actually been going on?

[Deleted User]

If it's leasehold then it's worth exactly £0 until they remove it. Do not under any circumstances buy a leasehold property.