Right to retention funds following Major Works delay

newland_archer

Hi all,

We purchased a leasehold property with the Local Authority as the freeholder back in 2019. A notice of Major Works had been issued, so we negotiated a proportion of the sale proceeds to be withheld with the solicitor for a period of 3 years to cover up to the final cost of the works, with any remainder going back to the seller. At the time, this felt like a lengthy and generous settlement with the seller and covered our concerns about a large Major Works invoice that we could not afford to cover.

The three years expires in April but of course due to covid there have been significant delays to the programme of Major Works and they are still in the relatively early design work stage. The Section 20 notice however is still in place and there is no question that these works will go ahead.

What are my rights with regard to these retained funds? The costs the funds were retained for are still going to be incurred and the notice hasn't gone away - but the delay means it has taken longer than expected. Is the Section 20 itself sufficient to keep the funds with the solicitor?

Any guidance you can offer or experience you've had would be very gratefully received. Thank you.

Tiglet2

Was there a Rider to the Contract setting out how long the seller's solicitors would retain the retention monies before returning it to their client?  You will need to look at the paperwork you received for the purchase, particularly the contract you signed and the report your solicitor sent to you.

eddddy

There are no specific laws or legislation relating to this.

As Tiglet2 says, it depends entirely on the wording of the contract that you signed with the seller.  Hopefully, the contract is clear about what happens after 3 years.

For example, it could be that the retained funds are returned to the seller - but the seller continues to be liable to reimburse you for the cost of the works. Or it could be that the seller's liability for the costs ends after 3 years. 

newland_archer

Thank you both. I've looked again at the wording of the contract:

"If the Seller has not been notified of a Major Works payment or received the Payment Demand by the end of the Retention Period, the Seller's conveyancer may release the balance of the Retention held to the Seller forthwith without reference to the Buyer."

I am resting my hopes on that 'notified of a Major Works payment' wording and any flexibility that can be interpreted there. I wonder if the Section 20 and anything else I could get from the Local Authority on works proceeding would be enough. Certainly there will be no final invoice or actual demand for payment by April...

GoogleMeNow

newland_archer said:

Thank you both. I've looked again at the wording of the contract:

"If the Seller has not been notified of a Major Works payment or received the Payment Demand by the end of the Retention Period, the Seller's conveyancer may release the balance of the Retention held to the Seller forthwith without reference to the Buyer."

I am resting my hopes on that 'notified of a Major Works payment' wording and any flexibility that can be interpreted there. I wonder if the Section 20 and anything else I could get from the Local Authority on works proceeding would be enough. Certainly there will be no final invoice or actual demand for payment by April...

When is the end of the Retention Period?

A Section 20 will not be enough as that is a notice of intended works and still at consultation stage, not the actual invoice and payment demand.

eddddy

newland_archer said:

Thank you both. I've looked again at the wording of the contract:

"If the Seller has not been notified of a Major Works payment or received the Payment Demand by the end of the Retention Period, the Seller's conveyancer may release the balance of the Retention held to the Seller forthwith without reference to the Buyer."

I am resting my hopes on that 'notified of a Major Works payment' wording and any flexibility that can be interpreted there. I wonder if the Section 20 and anything else I could get from the Local Authority on works proceeding would be enough. Certainly there will be no final invoice or actual demand for payment by April...

That clause only relates to the release of the retention.

As I mentioned above, what does the agreement say about the seller's continued liability to reimburse you for the cost of the works?

Is the seller still liable to reimburse you for the cost of the works, even after the retention is released?

newland_archer

Thanks for the response and apologies for the delay. The clause I've quoted is the only part of the very short contract relating to the service charge retention. Nothing else makes any reference to the eventuality that the Major Works will not have been completed by the end of the three year Retention Period.