Major works on leasehold flat uncovered right before exchange!

firsttimebuyer364

Hi all! 

As a first time buyer, I am in desperate need of advice. I have just received my report on title from my solicitor and discovered that the flat I am about to exchange on has major works upcoming (external decorations and fixing loose cladding). Both part 1 and part 2 notices have been served to the tune of almost 85k to be split between leaseholders (presumably 18 flats therefore almost 5k each). The management company have not specified when this will take place. 

I asked the seller (in writing) through EA prior to making an offer whether there were any major works upcoming to which she responded no. However, the part 2 notice was issued in February 2021 and I offered on the flat in April 2021 so somethings not adding up there! 

I have no idea how to proceed - had I known about this prior to making an offer, I would have factored this in but should I now be lowering my offer to reflect this major cost? 

Any advice is appreciated!

eddddy

If you're saying you asked the seller specifically about upcoming major works and you think they lied - that's pretty shocking. It makes you wonder what other things they might have lied about.


Anyway, it sounds like it's justifiable to reduce your offer in this case. But that doesn't mean the seller will accept a reduced offer. 


Also, if you're buying with a mortgage, bear in mind that the £5k (or whatever) will need to be paid in cash - so that will reduce the amount of cash you have for a deposit. If you're very close to your mortgage LTV limit, that might be an issue. And bear in mind that the cost might be greater than expected.

And you'd need to get an amended mortgage offer, which might take some time.




Also, just for info - you say you asked the seller some questions in writing. You can't rely on the answers to those questions, because they aren't part of the contract.

If the questions and their answers are important to you, you need to tell your solicitor who will make pre-contract enquiries, and get the info included in the contract.

LAD917

Have you checked to see if there's a sinking fund?  And/or if the building has already started collecting the funds from the leaseholders via the service charge?

LWP

This kind of sums are not collected via service charge, legally freeholder has to issue section 20 and then give leaseholders certain period of time to pay for the works (ie. 12 months).

If the notice was issued in Feb then it does sound like the seller lied to you. I am surprised your solicitor didn't flag this earlier too. I would try and get the offer reduced (maybe meet the seller in the middle) especially that you have his dishonest response in writing.

Does it say in the notice how 5k will be paid? This is usually spread over time so shouldn't be a massive problem.

Disjoint

LWP said:

This kind of sums are not collected via service charge, legally freeholder has to issue section 20 and then give leaseholders certain period of time to pay for the works (ie. 12 months).

If the notice was issued in Feb then it does sound like the seller lied to you. I am surprised your solicitor didn't flag this earlier too. I would try and get the offer reduced (maybe meet the seller in the middle) especially that you have his dishonest response in writing.

Does it say in the notice how 5k will be paid? This is usually spread over time so shouldn't be a massive problem.

Depends how it's managed. We used to have about £15k in our sinking fund until I decided to pay a dividend to everyone as it was way too much (5 flats). So worth asking what's in the fund, but as it's 18 units, likely professionally managed and likely there won't be any cash. Ask for a discount.

firsttimebuyer364

Disjoint said:

LWP said:

This kind of sums are not collected via service charge, legally freeholder has to issue section 20 and then give leaseholders certain period of time to pay for the works (ie. 12 months).

If the notice was issued in Feb then it does sound like the seller lied to you. I am surprised your solicitor didn't flag this earlier too. I would try and get the offer reduced (maybe meet the seller in the middle) especially that you have his dishonest response in writing.

Does it say in the notice how 5k will be paid? This is usually spread over time so shouldn't be a massive problem.

Depends how it's managed. We used to have about £15k in our sinking fund until I decided to pay a dividend to everyone as it was way too much (5 flats). So worth asking what's in the fund, but as it's 18 units, likely professionally managed and likely there won't be any cash. Ask for a discount.

There is a reserve fund which by the end of March 2020 had around £47k in but there’s no mention as to whether the management company are going to utilise this for these major works. Presumably the whole point of a reserve fund is for this purpose though?

NameUnavailable

I would be definitely asking for a price reduction, but as mentioned above, you need to get the mortgage offer revised and you need to be able to pay the £5K when it's due - so may need to reduce your deposit to keep cash in the bank.

Alternatively the vendor agrees to pay £5K into the management company to cover your share of the works (although yes, the actual cost could be higher).

If the numbers no longer add up then you will have to pull out altogether.

Irishpearce26

Could it be that the seller has been paying into the sinking fund for this and as now you are buying the lease this is your contribution for the future works at a pro rata rate?

I would pose this to the EA to ask the seller for a response and why they failed to mention this. Once you have clarification you will better understand your next move.