Help with purchasing a leasehold flat, practically freehold. No responses on LPE1 form

vtochevska

Hi everyone,
I am in the process of purchasing a leasehold 1st floor flat and we have been trying to get the responses to the LPE1 form but unsuccessfully for the most part. The owner is deceased and her daughter is selling as an executor. The flat has  a very long lease, no service charge and the freeholders and managing agent are not involved in anything, everything seems to be to the responsibility of the two flats in the block. There are actually 4 in the whole building however the other two are on the other side, sharing a roof and joint walls. Each flat has it's own entrance so the shared parts with the downstairs flat should be roof, foundations, outside walls, gutters, some pipes etc. The leaseholders are also responsible for the buildings insurance.

The vendor, their solicitor and managing agent have come back with the following responses:
To the request of the insurance schedule for both flats in the block:

- You have the insurance details and I have resent again. I pay Nationwide Home insurance which my mother had paid for years. I would not be prepared to drive 40 miles to knock and ask the neighbour about her property insurance. (They have provided the annual figure of the insurance but not what it covers)

Are there any shared assets within the boundary, who has access to them, manholes, private sewers etc
- No problem with the drains.

Please confirm how the property has been maintained and if there are any section 20 works due to be carried out now or in the future.

- Paid by owner

Please confirm the date when the Managed Areas were last decorated, internally and externally.

- No managed areas

Please confirm with (the managing agent's solicitor) if all maisonettes are leased on leases with similar terms to ours.

- You have their contact details and obtained the pack therefore please contact them directly.

With regard to your letter attached to the replies to the LPE1, please confirm if the seller has been repairing and maintaining the property in conjunction with the neighbour.

- Our client is selling with limited title and has never lived at the property therefore cannot answer this question. Please rely on your own surveys and inspections

Please confirm that the title plan is an adequate reflection of the property?

- Our client is selling with limited title and has never lived at the property therefore cannot answer this question. Please rely on your own surveys and inspections

Please confirm whether your client is aware of any planned, unbilled or pending major works

- Our client is selling with limited title and has never lived at the property therefore cannot answer this question. Please rely on your own surveys and inspections

Please confirm whether your client is aware of any breaches of covenant (tenant, landlord or third party).

- Our client is selling with limited title and has never lived at the property therefore cannot answer this question. Please rely on your own surveys and inspections

Please also provide a copy of the building insurance policy for upper maisonette. If this is not possible please provide us with a copy the contingent building insurance indemnity policy at your clients cost.
- We do not provide indemnity policies for sale transactions. Please obtain your own policy at your clients expense.

Some of these have been replied by the seller and some by their solicitor but essentially no one seems to know anything. 
The buildings seems to have been maintained very well on the outside, although on the inside it's clear nothing has been done in many years. Yet no internal changes or extensions seem to have been done so I assume no breaches to the lease. 

I have read a lot on this forum and as far as I understand it isn't uncommon for leasehold flats to have this freehold setup, however the lack of information is still quite worrying and the lack of involvement and responsibility from the freeholders and the managing agent, as well. I would appreciate an opinion from people who have knowledge about this type of transaction and no responses, and whether it seems risky to proceed with this flat or would an indemnity insurance paid by them would be sufficient.

Thank you! 

eddddy

I guess the first question is, if you need a mortgage, is your mortgage lender happy with the situation? Obviously, if they're not happy, you can't proceed.

Beyond that, I guess it's slightly higher risk buying a property from an executor, because the information they can tell you is limited. I'd tend to expect to pay a bit less, because of this risk.

Based on some of your comments:

• You need to check the lease - but I'd guess they're maisonettes with no communal areas - the downstairs maisonette owner is responsible for the ground floor and foundations, and the upstairs maisonette owner is responsible for the first floor and roof. And you each insure your own bit.

• In those circumstances, the freeholder probably has no responsibility for maintenance or insurance or anything else, so it's not too surprising that they're not replying to enquiries. (And in that case, asking about section 20 consultations is a bit silly!)

• If you (or your solicitor) want to see the other leases, I guess you could get them from Land Registry.

• If you decide to ask the other leaseholders about their insurance - be very, very careful. Especially don't mention anything about a "contingent building insurance indemnity policy". You would probably invalidate the policy by telling a neighbour about it.
  
  

vtochevska

eddddy said:

I guess the first question is, if you need a mortgage, is your mortgage lender happy with the situation? Obviously, if they're not happy, you can't proceed.

Beyond that, I guess it's slightly higher risk buying a property from an executor, because the information they can tell you is limited. I'd tend to expect to pay a bit less, because of this risk.

Based on some of your comments:

• You need to check the lease - but I'd guess they're maisonettes with no communal areas - the downstairs maisonette owner is responsible for the ground floor and foundations, and the upstairs maisonette owner is responsible for the first floor and roof. And you each insure your own bit.

• In those circumstances, the freeholder probably has no responsibility for maintenance or insurance or anything else, so it's not too surprising that they're not replying to enquiries. (And in that case, asking about section 20 consultations is a bit silly!)

• If you (or your solicitor) want to see the other leases, I guess you could get them from Land Registry.

• If you decide to ask the other leaseholders about their insurance - be very, very careful. Especially don't mention anything about a "contingent building insurance indemnity policy". You would probably invalidate the policy by telling a neighbour about it.
  
  

Thanks for your reply @eddddy! 
I don't think we've gotten to the point of telling the bank yet, so this is yet to come up. 
The lease mentions that all shared parts are responsibility of owners of both flats. I could ask my solicitor to obtain the other property's lease, this is a good point. 
Could you please clarify a bit more about the contingent building insurance indemnity policy and how this would affect my policy if I mention it to the neighbour?  I am not sure how indemnity insurance works, as far as I understand if the seller can't provide some information they can pay for this cover so that I am insured and my solicitor has suggested that. And after reading a bit on contingent insurance it sounds like this is exactly what I need.

Thank you

greatcrested

Do you have the lease? What does it say regarding insurance, maintenance etc?

Separate insurance policies by each flat owner is not ideal, but is not uncommon. The risk is that the other flat owners do not insure. If the building burns down, your insurer cannot rebuild your flat unless the ground floor flat is also re-built....

Have you spoken tothe ground floor flat owner? Always a good move irrespective of this question. Else you can take out indemnity insurance I believe.

At the same time, ask about maintenance.

What does the lease say? If the roof needs replacing, is your sole cost or shared with downstairs? Read the lease.And if there are problems with foundations or downstairs damp, do you contribute?

What about re-painting the shared external walls? Read the lease.

Who is the freeholder?

Overall the replies are not surprising with a probate sale. I would investigate what you can yourself but, assuming any mortgage lender is happy, I would not be put off.

vtochevska

greatcrested said:

Do you have the lease? What does it say regarding insurance, maintenance etc?

Separate insurance policies by each flat owner is not ideal, but is not uncommon. The risk is that the other flat owners do not insure. If the building burns down, your insurer cannot rebuild your flat unless the ground floor flat is also re-built....

Have you spoken tothe ground floor flat owner? Always a good move irrespective of this question. Else you can take out indemnity insurance I believe.

At the same time, ask about maintenance.

What does the lease say? If the roof needs replacing, is your sole cost or shared with downstairs? Read the lease.And if there are problems with foundations or downstairs damp, do you contribute?

What about re-painting the shared external walls? Read the lease.

Who is the freeholder?

Overall the replies are not surprising with a probate sale. I would investigate what you can yourself but, assuming any mortgage lender is happy, I would not be put off.

greatcrested!
Yes the lease states that all shared parts are the responsibility of both tenants (I will be speaking to my solicitor today to confirm this), and also says the tenants should have their own buildings insurance. I spoke to the ground floor owner and she said she has insurance, but I don't know what hers covers. We have enquired about maintenance but they haven't provided any information, I will speak with the neighbour again and ask but I guess I should also be careful what I say, I'm a first time buyer and all of this is so new to me. 

"What does the lease say? If the roof needs replacing, is your sole cost or shared with downstairs? Read the lease.And if there are problems with foundations or downstairs damp, do you contribute?

What about re-painting the shared external walls? Read the lease."

These are exactly the questions I have asked, but no responses. The lease states it's both owners' responsibility and the freeholders are not involved at all. We have received initial responses from their managing agent only and further from the vendor and solicitor, but this is as fas as we got.

greatcrested

vtochevska said:

greatcrested said:

Do you have the lease? What does it say regarding insurance, maintenance etc?

Separate insurance policies by each flat owner is not ideal, but is not uncommon. The risk is that the other flat owners do not insure. If the building burns down, your insurer cannot rebuild your flat unless the ground floor flat is also re-built....

Have you spoken tothe ground floor flat owner? Always a good move irrespective of this question. Else you can take out indemnity insurance I believe.

At the same time, ask about maintenance.

What does the lease say? If the roof needs replacing, is your sole cost or shared with downstairs? Read the lease.And if there are problems with foundations or downstairs damp, do you contribute?

What about re-painting the shared external walls? Read the lease.

Who is the freeholder?

Overall the replies are not surprising with a probate sale. I would investigate what you can yourself but, assuming any mortgage lender is happy, I would not be put off.

....
Yes the lease states that all shared parts are the responsibility of both tenants

........I spoke to the ground floor owner and she said she has insurance,....... I will speak with the neighbour again and ask

......The lease states it's both owners' responsibility......

Please quote exactly what the lease says about each issue.

Once you own, and if the neighbour is friendly/cooperative, you could agree between you to a single joint insurance policy in future.

vtochevska

Sorry my first sentence was deleted in my previous post, thank you so much this is very helpful @greatcrested!
I read on this and was also planning to suggest a joint policy, as I believe this to be the most reasonable thing we can do in this situation. 
Here are the parts of the lease which are most relevant.

"All fences separating the demised premises from the adjoining property and the walls dividing the maisonette building hereby demised from the adjoining property and the roof and footings of the building of which the premises hereby demised form part and the joists or other the support for the floor of the said upper maisonette shall be deemed to be party fence walls roof footings and joists to be maintained and repaired (a) as to the fences and walls at the joint expense of the Lessee and the tenants occupiers or owners for the time being of the adjoining property thereby separated and (b) as to the roof and footings and joists at the joint expense of the Lessee and the tenants occupiers or owners for the time being of the building of which the demised premises form part.

To pay and discharge (in addition to rent) all rates taxes duties assessments charges and outgoings whatsoever whether parliamentary parochial or of any other description which now are or during the term hereby ranted shall be imposed or charged on the demised premises or the Lessor or the Lessee or occupier in respect thereof except the Landlord’s property tax and Tithe rent charge if any

From time to time and at all times during the said term well and substantially to repair uphold support cleanse maintain drain amend and keep the premises hereby demised and all new buildings which may at any time during the said term be erected and all additions made to the demised premises and the fixtures therein and all party and other walls fences roof footings joists sewers drains pathways passageways easements and appurtenances thereof with all necessary reparations cleansing and amendments whatsoever

At all times during the said term to pay and contribute a rateable or due proportion of the expenses of making repairing maintaining supporting rebuilding and cleansing all ways passageways pathways sewers drains pipes watercourses water pipes cisterns gutters party walls party structures chimney stacks fences easements and appurtenances belonging to or used or capable of being used by the Lessee in common with the Lessor or the tenants or occupiers of the premises near to or adjoining the demised premises or of which the demised premises form part such proportion in the case of dispute ro be settled by the Surveyor for the time being of the Lessor whose decision shall be binding. And to keep the Lessor indemnified against all costs shares and expenses in respect thereof. "

eddddy

vtochevska said:

Could you please clarify a bit more about the contingent building insurance indemnity policy and how this would affect my policy if I mention it to the neighbour?  I am not sure how indemnity insurance works, as far as I understand if the seller can't provide some information they can pay for this cover so that I am insured and my solicitor has suggested that. And after reading a bit on contingent insurance it sounds like this is exactly what I need.

Very briefly, I assume your situation is as follows...

• You're buying the downstairs maisonette. You will take out a buildings insurance policy to cover the downstairs of the building (as required by your lease)

• The upstairs maisonette owner should take out a buildings insurance policy to cover the upstairs and roof of the building (as required by their lease)

• So if the building burns down, your insurers will pay to rebuild the downstairs, and the other owners insurers will pay to rebuild the upstairs

But...

• if the upstairs maisonette owner has failed to get insurance (or was daft and took out the wrong insurance, or told fibs in their insurance application), they'll be no money to rebuild the upstairs.

• So your "contingent building insurance indemnity policy" will pay to rebuild the upstairs.
  
  
• But you mustn't tell the upstairs owner about that indemnity policy - because that might make them think "In that case, I won't bother getting my own insurance - I'll let your indemnity policy cover my flat". So the risk to your insurers would be greater.
  

• And as it stands your position is "I assume the people upstairs have buildings insurance, because their lease requires them to" - so it's a lowish risk for the insurer. But if you actually ask the people upstairs and they say "No", it's become a bigger risk for the insurers. So it might make getting indemnity insurance more difficult.

But maybe check all that with your solicitor.


Edit to add...
As above, it would be simpler to have a single policy for the whole building - but the person upstairs is not obliged to agree to that. And you'll need some form of insurance in place from exchange of contracts.

vtochevska

eddddy said:

vtochevska said:

Could you please clarify a bit more about the contingent building insurance indemnity policy and how this would affect my policy if I mention it to the neighbour?  I am not sure how indemnity insurance works, as far as I understand if the seller can't provide some information they can pay for this cover so that I am insured and my solicitor has suggested that. And after reading a bit on contingent insurance it sounds like this is exactly what I need.

Very briefly, I assume your situation is as follows...

• You're buying the downstairs maisonette. You will take out a buildings insurance policy to cover the downstairs of the building (as required by your lease)

• The upstairs maisonette owner should take out a buildings insurance policy to cover the upstairs and roof of the building (as required by their lease)

• So if the building burns down, your insurers will pay to rebuild the downstairs, and the other owners insurers will pay to rebuild the upstairs

But...

• if the upstairs maisonette owner has failed to get insurance (or was daft and took out the wrong insurance, or told fibs in their insurance application), they'll be no money to rebuild the upstairs.

• So your "contingent building insurance indemnity policy" will pay to rebuild the upstairs.
  
  
• But you mustn't tell the upstairs owner about that indemnity policy - because that might make them think "In that case, I won't bother getting my own insurance - I'll let your indemnity policy cover my flat". So the risk to your insurers would be greater.
  

• And as it stands your position is "I assume the people upstairs have buildings insurance, because their lease requires them to" - so it's a lowish risk for the insurer. But if you actually ask the people upstairs and they say "No", it's become a bigger risk for the insurers. So it might make getting indemnity insurance more difficult.

But maybe check all that with your solicitor.

Thank you @eddddy, this explains so much! I am buying the upstairs flat but it all makes sense. The neighbour downstairs confirmed she has insurance, but I didn't expect to be responsible for the roof. Does it sound from the lease that I am responsibly for the upper part and the downstairs for the lower part? I thought it meant we split everything. 
And do you think asking for the seller to provide indemnity insurance is a good idea?
Thank you

eddddy

It does sound like you're jointly responsible for roof, footings and party walls/floors.  That seems to make the insurance situation very strange. There's one roof which would be half insured by your policy, and half insured by by somebody else's policy.

It might be worth seeing what the lease actually says about insurance. (But it's all getting a bit too complex for me!)

Edit to add...
If the seller refuses to pay for indemnity insurance, you can pay if you want (if you think the price of the property makes it worthwhile).

davidmcn

eddddy said:

That seems to make the insurance situation very strange. There's one roof which would be half insured by your policy, and half insured by by somebody else's policy.

Not all that strange, it's pretty commonplace in Scotland for each flat owner to arrange their own insurance (including for their respective interests in the common parts). Obviously claims are simpler if there is just a single policy for the block.