New build flats (only 4 years old), owners charged with £425,000 repairs, no insurance

Crashy_Time

user1977 said:

[Deleted User] said:

Also a great illustration of why leasehold is a terrible idea and most countries just have freehold for apartments. The law badly needs to change.

While I don't disagree that leasehold is an absurd system for residential properties, freehold doesn't prevent buildings needing expensive communal repairs.

No, but it makes it harder for an anonymous company to pluck a figure out of the air and demand payment?

[Deleted User]

eddddy said:

[Deleted User] said:

Also a great illustration of why leasehold is a terrible idea and most countries just have freehold for apartments. The law badly needs to change.

As above, it's more an illustration of problems with:

• Developers who build shoddy, badly designed buildings
• Limitations in cover with newbuild warranties

The OP is faced with a bill of £8k.

It would no different if somebody bought a newbuild freehold house, and after 5 years found that the roof was leaking and needed £8k worth of repairs - and the newbuild warranty didn't cover it.


(In this case, there's also the question of why the OP's solicitor told the OP they were getting a 'better' Premier Guarantee Warranty which might have provided cover, but the OP ended up with a 'worse' CRL warranty which didn't provide cover.) 

It would be a lot simpler if it was freehold. No middle men.

ComicGeek

I haven't read every post so don't know whether this has already been mentioned.

When we work on schemes (and particularly apartment blocks, office buildings etc rather than single houses) we always have to provide design collateral warranties. Given that the survey findings have identified poor detailing in addition to possible poor workmanship, it would be worth asking whether the original architects provide a collateral warranty, which would be backed up by their professional indemnity insurance - this is completely separate to the building insurance and building warranty, and covers the client against mistakes made by the design team. 

When we provide collateral warranties there is also a number of assignments included, so the original developer should have passed these onto the new freeholder when sold. Standard wording is that the assignment then transfers the responsibilities of the designers to the new owners as if they had appointed the designers directly. Our warranties are normally 12 years from practical completion of the project, so would still fall within the time scales presented.

Would be worth asking the management company about this, but always difficult to get them to do any hard work when it's not their own money they are spending!!

eddddy

[Deleted User] said:

eddddy said:

[Deleted User] said:

Also a great illustration of why leasehold is a terrible idea and most countries just have freehold for apartments. The law badly needs to change.

As above, it's more an illustration of problems with:

• Developers who build shoddy, badly designed buildings
• Limitations in cover with newbuild warranties

The OP is faced with a bill of £8k.

It would no different if somebody bought a newbuild freehold house, and after 5 years found that the roof was leaking and needed £8k worth of repairs - and the newbuild warranty didn't cover it.


(In this case, there's also the question of why the OP's solicitor told the OP they were getting a 'better' Premier Guarantee Warranty which might have provided cover, but the OP ended up with a 'worse' CRL warranty which didn't provide cover.) 

It would be a lot simpler if it was freehold. No middle men.

By "middle men" do you mean the management company?

It sounds like the management company have:

• Made claims against the building warranty providers
• Instructed surveyors to give their opinion
• Had discussions with the original developers
• Taken legal advice from solicitors
• Arranged quotes from 3 building companies

Unfortunately, the outcome wasn't what the leaseholders wanted - but all that stuff would have been hard work for an 'amateur' home owner to undertake.


But...

• the leaseholders will have to pay the Management Company's fees for doing that.
• And the management company work for the freeholder, so the leaseholders can't be sure that the Management Company is acting in the leaseholders' best interests

Perhaps it would have been better for the leaseholders to take over the building management through 'Right to Manage' - then they could have instructed a management company themselves.

user1977

eddddy said:

[Deleted User] said:

eddddy said:

[Deleted User] said:

Also a great illustration of why leasehold is a terrible idea and most countries just have freehold for apartments. The law badly needs to change.

As above, it's more an illustration of problems with:

• Developers who build shoddy, badly designed buildings
• Limitations in cover with newbuild warranties

The OP is faced with a bill of £8k.

It would no different if somebody bought a newbuild freehold house, and after 5 years found that the roof was leaking and needed £8k worth of repairs - and the newbuild warranty didn't cover it.


(In this case, there's also the question of why the OP's solicitor told the OP they were getting a 'better' Premier Guarantee Warranty which might have provided cover, but the OP ended up with a 'worse' CRL warranty which didn't provide cover.) 

It would be a lot simpler if it was freehold. No middle men.

By "middle men" do you mean the management company?

More likely the freeholder. Then at least the flats' owners would be instructing the management company directly.

Crashy_Time

What happens if you don`t pay?

eddddy

Crashy_Time said:

What happens if you don`t pay?

Typically:

Late fees get added
Solicitors fees get added
Debt collectors fees get added

The freeholder applies to court for forfeiture of the lease (i.e. repossession of the flat)

The flat owner's mortgage lender steps in and pays the service charge (plus the £1000+ in fees) to stop the lease being forfeited

The mortgage lender adds everything they've paid to the flat owner's mortgage


(If the mortgage lender doesn't step in and pay, the lease is terminated, and the flat owner no longer owns the flat.)


... Then, once the freeholder has the money, the roof is finally repaired.

mertywerty

ComicGeek said:

I haven't read every post so don't know whether this has already been mentioned.

When we work on schemes (and particularly apartment blocks, office buildings etc rather than single houses) we always have to provide design collateral warranties. Given that the survey findings have identified poor detailing in addition to possible poor workmanship, it would be worth asking whether the original architects provide a collateral warranty, which would be backed up by their professional indemnity insurance - this is completely separate to the building insurance and building warranty, and covers the client against mistakes made by the design team. 

When we provide collateral warranties there is also a number of assignments included, so the original developer should have passed these onto the new freeholder when sold. Standard wording is that the assignment then transfers the responsibilities of the designers to the new owners as if they had appointed the designers directly. Our warranties are normally 12 years from practical completion of the project, so would still fall within the time scales presented.

Would be worth asking the management company about this, but always difficult to get them to do any hard work when it's not their own money they are spending!!

Thanks for this, no it hasn't been mentioned by anyone yet. I take it you are an architect? The original architects behind this I understand are a reasonably sized firm, so it's line of inquiry we will go down. 

The new freeholder I have been told has been, staying away from this whole issue, and anyone who have tried to approach them have been told that it's nothing to do with the freeholder. Incidentally I found out the the service management company is actually owned by the freeholder, their addresses are both the same, however it might be worth asking them to see if they can at least look into this. 

mertywerty

eddddy said:

It sounds like the management company have:

• Made claims against the building warranty providers
• Instructed surveyors to give their opinion
• Had discussions with the original developers
• Taken legal advice from solicitors
• Arranged quotes from 3 building companies

Unfortunately, the outcome wasn't what the leaseholders wanted - but all that stuff would have been hard work for an 'amateur' home owner to undertake.


But...

• the leaseholders will have to pay the Management Company's fees for doing that.
• And the management company work for the freeholder, so the leaseholders can't be sure that the Management Company is acting in the leaseholders' best interests

Perhaps it would have been better for the leaseholders to take over the building management through 'Right to Manage' - then they could have instructed a management company themselves.

Hi, yes, the management company have done the above points, except for the taking legal advice. Legal advice is what the leaseholders are trying to do at the moment, but there is a bit of confusion and doubt about what legal advice to go for, and whether there is even being any realistic chance of claim (who to claim against, and whether that claim will be successful, and even if successful, whether the defendant would be able to pay (and not just fold to get out of paying)). 

Also as just mentioned previously the management company not only works for the freeholder, but is wholly owned by the freeholder, so that's why we (the leaseholders) are questioning the cost of the works e.g. after the warranty claim was rejected, they instructed another roof surveyor for a plan for remedial action who recommended a course of action and choice of product, but none of us have the knowledge or expertise on whether this solution is the most expensive and comprehensive one out there, or whether there are more cost efficient options.

Especially when the original surveyor for the warranty claim reported the cost of repairs would high likely be less than £104k, but then after the management company got quotes for their recommended work via their own surveyor it came out to be £425k - £500k.

Since neither the freeholder nor the management company have to pay for it, they just as well go for the most costly / best quality option? 

eddddy

mertywerty said:

Especially when the original surveyor for the warranty claim reported the cost of repairs would high likely be less than £104k, but then after the management company got quotes for their recommended work via their own surveyor it came out to be £425k - £500k.

Personally, I wouldn't take too much notice of the warranty surveyor's cost estimate. I suspect he was just taking the easy route.

i.e. He was saying "The roof isn't covered - but even if it was covered, the excess would be more than the repair cost" so that he could close the file quickly, and move on.

If he said "The roof isn't covered - and it will cost £400k to £500k to fix" he probably suspected that there would be a lot of flack to deal with.

mertywerty said:

Since neither the freeholder nor the management company have to pay for it, they just as well go for the most costly / best quality option? 

The management company will definitely want a very low risk option - which usually means an expensive option. Because they're spending leaseholder's money and they want to cover their backs.


It's a bit like if you want to get your BMW serviced and repaired. The low risk option is to take it to a big flash official BMW dealership, with receptionists, customer lounge, certificates on the wall, etc. You can be pretty sure they'll do a good job, but they'll be expensive.

Or you could go to an independent garage in a back street. They might do an equally good job of servicing and repairing the car - but charge half the price of the dealership. But it's generally a more risky thing to do. They might do a bad job.

If you were arranging the roof repairs for your own house, maybe you'd take a calculated risk and go with a '3 star' or '4 star' company instead of a '5 star' one, to save some money. But a management company probably wouldn't.