1930s block - red flags prior to exchange - what to do here?

raha

Hi all, 
So I had an offer accepted on a one bedroom flat in a 1930s purpose built block in London, that was accepted some weeks ago, it seemed to be an extremely good deal and I was very happy, but since then in the conveyancing process it has been uncovered that the freeholder and managing agent are the same company, the cleaning costs making up the service charges are extremely high, and so is the building insurance.  There's no sinking / reserve fund, and  there's no resident association set up.  There were major works in 2014 that cost the resident/seller of this flat £11,000.  Now in answers to enquiries the managing agent ticked the box saying there are anticipated major works in the next two years,  This worried me so I asked my solicitor  to ask them more about this, and anticipated costs, at first they were vague and then sent across a budget,  and said they estimated that this will cost this flat no less than £5k.  I have shown further concern and asked my solicitor to look into it more and  to ask for a report of what was done in 2014. The seller is claiming the works in 2014 were a lot more 'major' than what is proposed for the next major works, and that as they are usually every 10 years,  these works wouldn't happen until another 3 years and it's all still very speculative because section 20s haven't been issues / letters haven't been sent out about them.  So she's clearly saying this to distance herself from this and avoid a scenario where I decide to renegotiate. 

Now I really don't want to be "that buyer" that asks for a few thousand less only days before exchange. Also, a few thousand pounds less will not make much of a difference to my monthly mortgage payments.  But I also don't want to go into this feeling like I've got a big flat bill to come from the managing agents in the next couple of years and that it's hanging over me. 

I just don't know what's fair here. What's the best way to move forwards? 

GDB2222

What’s the name of the freeholders?

raha

GDB2222 said:

What’s the name of the freeholders?

The freeholder is Brickfield Properties Limited. 
They own Freshwater who is the managing agent. They do not have winning reviews online. 
I guess though it must be a nice place to live if the seller lived there 10 yrs and only moving due to starting a family, and the neighbour in the flat next door 40+ years. I've been offered the neighbours number to speak with them if I want to know more about the block. I ask my solicitor to tell theirs that I would be grateful to be able to speak to the neighbour. 
That's where we are now. 

GDB2222

I thought it might be Freshwater. I was going to suggest doing an online search, but I see that you have already done so. I think you need to review your offer in the light of that information and decide whether to go ahead.

raha

GDB2222 said:

I thought it might be Freshwater. I was going to suggest doing an online search, but I see that you have already done so. I think you need to review your offer in the light of that information and decide whether to go ahead.

Hi, thank you, you seem to know more about managing agents than me! May I ask why did you think it might be Freshwater? 

HampshireH

I'd be wary about anyone telling you major works usually only happen every ten years and so won't happen for another three. THAT is speculative unless stated in the lease that they can only do major works every ten years.

If such a clause exists it's likely to only be applicable to cosmetic or routine works and not anything arranged in response to repair issues....... Such as a roof.

Also you say would cost you no LESS than £5k....... What is the upper cost as that's the important one.

princeofpounds

There's nothing odd about a freeholder who employs a 'separate' managing agent that they happen to own. That's an internal corporate structure issue, not a conflict of interest.

The seller is right that without Section 20 they will have very little idea about what is coming and anything else is speculation. Mind you, that applies to their reassuring comments too.

Expecting a vendor to finance potential maintenance and improvement works 3 years in the future isn't that sensible, but there's nothing wrong with feeling like you don't want to be the specific one paying for it.

As for the apparently expensive insurance, cleaning, lack of sinking fund and residents association... that is quite a few little amber warning lights. 

What's fair here? You make a decision on what the property is worth to YOU given what your due diligence has now uncovered (more of a vaping gun than a smoking gun, to be honest, but not to be dismissed). Then, you either pull out, modify your offer or proceed. There are no rules of the game here, just personal decisions based on assessments of future risk.

AnotherJoe

Any such building especially 1930's could have major works at any time. I think you just have to factor that in vs other factors, such as, I'd guess , typically bigger  rooms in such an old block compare to newer?  You happen to know there are some due but if you are planning to be in a place a long time I'd have thought it was almost inevitable at some point.

Also if there was a sinking fund wouldn't they be looking to boost that after the works so would it make any difference? Say the major works will be same as the last, £11k. How much if a deal breaker is that for you? And would those not be possible in any other block? 
I would look dispassionately at the ongoing fees and see if you are happy to pay those for the advantages you have of living in that block rather than just the cleaning costs itself.  

AnotherJoe

princeofpounds said:

As for the apparently expensive insurance, cleaning, lack of sinking fund and residents association... that is quite a few little amber warning lights. 

Devils advocate POV:
no residents association shows things haven't been bad enough to make them form one,
no sinking fund means they aren't squirrelling away your money needlessly you can build your own individual sinking fund by saving each year rather than have them force you to (a sinking fund doesn't lower costs just spreads them out)
expensive insurance and cleaning - maybe on their own but do the pros of the flat outweigh these ?

princeofpounds

AnotherJoe said:

princeofpounds said:

As for the apparently expensive insurance, cleaning, lack of sinking fund and residents association... that is quite a few little amber warning lights. 

Devils advocate POV:
no residents association shows things haven't been bad enough to make them form one,
no sinking fund means they aren't squirrelling away your money needlessly you can build your own individual sinking fund by saving each year rather than have them force you to (a sinking fund doesn't lower costs just spreads them out)
expensive insurance and cleaning - maybe on their own but do the pros of the flat outweigh these ?

All fair points.

LAD917

Do any freeholders / management companies have good reviews online?  

With any type of communal living, you're never going to have things run exactly the way you'd like.  In addition to what others have said, I think you also need to assess your likelihood of finding something that's run substantially better. Based on the stories people write on this board and others, expensive insurance and cleaning costs are in the normal range of potential freeholder problems.  How does the service charge compare overall to other flats you've seen in comparable buildings?