Defective lease, need some advice

renorawe

We are in the process of buying a leasehold first floor maisonette that is semi detached and has 3 other flats in the building. The sellers are getting very impatient with us and want to exchange contracts ASAP however it has been brought to our attention that the lease is defective in two ways. The lease does not state who is responsible for maintaining and repairing common areas/parts. The freeholder also has not insured the property so the lender requires us to not just insure our maisonette but the entire building which I worry will be extremely costly. In the contract they are writing that we will insure the whole building initially and then work with the downstairs neighbour to figure out joint building insurance together. This is confusing to me because there are 4 flats in the building but in some sections they only refer to us insuring 'both' (our maisonette and downstairs) but in other sections it speaks about insuring the whole building (which would mean 4 flats). 
The sellers themselves never got building insurance as they claim they 'never got round to it' but have offered to pay for indemnity insurance. My questions are is the indemnity insurance even going to be enough protection in this situation in terms of the issue with building insurance and with not knowing who is responsible for maintaing and repairing what? Are there too many red flags here and would pulling out be the best option? Is this going to make selling in the future really difficult? Is getting building insurance for the entire building going to be really expensive and the process of arranging insurance with the neighbour in the future also going to be a hassle? 

caprikid1

Personally I have never owned a leased property but these feel major and I would want both resolved. I certainly would not want to be fobbed off with indemnity insurance, I think the Seller is stringing you along and trying to press you into completing. I suspect this could costs a lot to fix and rely on cooperation of the other leaseholders. I suspect this has been tried already and failed, I suspect you are being lied to.

user1977

What exactly is the risk the indemnity insurance would be covering?

TripleH

Who owns the freehold?

Is it a private company or the flats?

Is there a management company, as I would expect them to organise the insurance and maintenance.

If you're unhappy with the lease don't exhange. We went to buy a new-build flat with a defective lease. We were promised it would be corrected but they kept stringing us along because everyone else had signed on the 'promise' it would be fixed.

Once you exchange, you loose all negotiation power and in the above case they would never change the lease because only we were kicking up a fuss about it (developer owned the freehold).

We walked.

starving_artist

It is the freeholder's legal responsibility to arrange insurance for the building.  It is usually the leaseholders responsibility to pay for it.

renorawe

TripleH said:

Who owns the freehold?

Is it a private company or the flats?

Is there a management company, as I would expect them to organise the insurance and maintenance.

If you're unhappy with the lease don't exhange. We went to buy a new-build flat with a defective lease. We were promised it would be corrected but they kept stringing us along because everyone else had signed on the 'promise' it would be fixed.

Once you exchange, you loose all negotiation power and in the above case they would never change the lease because only we were kicking up a fuss about it (developer owned the freehold).

We walked.

A private company owns the freehold and there are no fees that we have to pay in terms of service fees or maintenance. I am under the impression that the freeholder isn't interested in changing anything in the lease which means in order for our lender to be happy to give us the mortgage they require the entire property to be insured and since the freeholder won't do that, we need to do that. They then recommend that we arrange with the other owners of the flats to get building insurance together which seems risky as they may not want to do that. The current owners (the sellers) not having insurance makes me question whether they also tried to get joint insurance with the other flats and failed? 
I don't have any previous experience in buying houses but this does sound pretty strange to me.

renorawe

user1977 said:

What exactly is the risk the indemnity insurance would be covering?

I don't even know what indemnity insurance can cover as I am so new to all of this. I feel like the sellers are trying to convince us that this indemnity insurance will cover us for anything that could go wrong and financially affect us in terms of having a defective lease. For example if the roof needs repairs but the lease doesn't state whose responsibility it is, how is the indemnity insurance going to be any help us? 

caprikid1

Listen to your solicitor not the seller !

renorawe

caprikid1 said:

Listen to your solicitor not the seller !

Our solicitor has been pretty awful to be honest and I don't think he has much experience with this kind of defected lease. He is also constantly getting our conveyancing process confused with another case he is working on. He even at one point sent an email saying our 'agreed upon completion date' was too soon when we had never even communicated our preferences on completion date yet, let alone discussed it with the sellers. He is not offering much advice and we are purely trying to make sense of things by reading the drafted contract, the lease and the copies of emails we have now been given access too between the lender and the solicitor. The only decent advice we are getting is from our financial and mortgage advisor as the solicitor is never able to answer our questions.

GoogleMeNow

This is the seller's problem to deal with.  Don't make it yours.

Your solicitor should be raising enquiries about the defective lease and it is up to the seller's solicitor to liaise with the freeholder (or their management company) to agree a Deed of Variation to cover these issues.  That will take time as the seller's solicitor may have to draft the Deed of Variation, the freeholder/management company will want their own legal representative to approve the Deed (there may be amendments going back and forth), plus there will be extra fees which the seller will have to agree and pay. There is a Defective Lease Indemnity Policy, but all it will do is pay your legal costs if you have to sort this out when you come to sell in the future.  Far better to get it sorted it out before you purchase.

Good luck.

climbthatwallseegar

I recently sold my leasehold flat and I'd feel very uneasy about the state of this lease.

My buyer's solicitor went through my building insurance with a fine toothcomb and I ended up paying an indemnity as my freeholder had arranged a very basic level of cover that missed a lot of things out and the solicitor was not happy with it. However there was at least some semblance of insurance in place. I'm far from an expert but don't understand how an indemnity will cover you when insurance is non-existent to begin with.

Why has not the freeholder not arranged buildings insurance anyway? This is what usually happens and the leaseholders then pay for it. The sellers 'never got around' to sorting this out either? I agree with others that it's likely they tried and failed to get the other leaseholders to take out insurance together.

It's also a big red flag that there is no mention of who is responsible for paying for the maintenance of common areas etc. What happens if e.g. the roof is damaged? Presumably it will be left to the leaseholders who are actually affected by it to pay since there is no agreement in place. Is your flat on the top floor?

Please take proper legal advice and proceed with caution. If the lease is defective it needs to be amended and if it cannot be fixed you should walk. Your sellers are likely trying to rush this along and railroad you for a reason.