Bad survey on leasehold flat but mostly external.

Goy

Hi there,

I am in the process of purchasing a leasehold flat and have had a Homebuyers report back. The flat is c1860's conversion on the 2nd(of 3) floor.

There are a total of 19 level 3 issues but the main points directly effecting the flat are:

• Rainwater pipes and gutters need repairing/unblocking.
  
• External cracking beneath reception window / may indicate an issue with the load-bearing lintel of the flat below.
  
• Externally the mortar joints to the brickwork above all windows to front of building have deteriorated and need repointing with lime-based mortar - there are high levels of damp on all external walls and ceilings within the flat due to penetrating damp.
  
• Areas of open-jointed masonry below the kitchen window. These should be repaired to prevent further damage and internal water penetration.
  
• Areas of cracked render to be removed or repaired.
  
• Dampness was found on the ceiling of the kitchen, likely to indicate a leak from the flat roof structure directly above. Needs further inspection.

A lot of it is penetrating damp from exposed mortar joints that are visible on the external. The surveyor suggests that the subfloor is likely rotting too but this is speculation. Overall the flat appears in good condition with no visible damp when viewing. The windows are in dire need of repair but I knew this when I viewed.

The property was valued at £18,000 below my offer but did not take into account a private parking space valued at around £10,000.

I emailed the EA with the survey explaining the issues and asked for either the main issues to be addressed before completion or to renegotiate taking them into account. He came back saying they had flat out rejected my request for £18,000 off the price (which I never implied!) and that they have requested a response by tomorrow otherwise they will reenter the market.

First off the EA has been completely incompetent from the start, not replying to emails, not answering the phone once nor ever calling me back. It was his negligence and lack of communication which caused a 3 week delay between me receiving my mortgage offer and receiving the contract pack. I am in two minds whether to contact the seller directly as I don't trust the EA to relay my emails accurately.

My question is how concerned should I be about the external repairs given that repairs will be the responsibly of the freeholder and costs split between 3 flats and 1 shop below? I have emailed the freeholder detailing my concerns but have not yet heard back. In response to the EA's last email I explained £18,000 off was not my intention but for my share of the costs of repair to be covered. I asked for £5000 off which I believe is fair considering the amount of work, the hassle of it not being fixed before I move in and the current valuation.

If they flat out refuse again then I am unsure what I will do.

I am losing sleep over this purchase so any input would be greatly appreciated.

Thank you.

Alter_ego

I suggest find another flat

princeofpounds

The repairs and their cost will be split multiple ways (of course there may be other repairs elsewhere on the building required too). They aren't great but are mostly fixable, although the damp is most concerning.

The big problem is not so much the specific issues, but the indication that the freeholder is not properly maintaining the building. So if you want them fixed, do you fancy chasing a potentially non-cooperative freeholder? 

Do you know who the freeholder is? Have you spoken to them? Do they have any relationship to any of the units in the building?

The thing that jumps out at me is the commercial unit. Quite often that can be a stumbling block to qualifying for collective enfranchisement (buying the freehold), which means one less route to sort things out if the freeholder is a doozy.

Goy

princeofpounds said:

The repairs and their cost will be split multiple ways (of course there may be other repairs elsewhere on the building required too). They aren't great but are mostly fixable, although the damp is most concerning.

The big problem is not so much the specific issues, but the indication that the freeholder is not properly maintaining the building. So if you want them fixed, do you fancy chasing a potentially non-cooperative freeholder? 

Do you know who the freeholder is? Have you spoken to them? Do they have any relationship to any of the units in the building?

The thing that jumps out at me is the commercial unit. Quite often that can be a stumbling block to qualifying for collective enfranchisement (buying the freehold), which means one less route to sort things out if the freeholder is a doozy.

Thanks for the reply. The freeholder is the owner of the shop/studio on the ground floor and basement. The other 2 flats are being rented, as was the flat I am purchasing which is maybe why these issues have not been brought up before.

I emailed the freeholder last night with the survey, explaining the above repairs needed doing and asked if they were aware and if they will address them. I'm assuming they have a legal obligation to.

The lease (87 years remaining) will need extending soon and the freeholder has said (via seller/EA) that they are wiling to extend. 

From looking at past planning of the building it appears to have been derelict until it was bought in 2009 and converted to flats with an extra floor being added onto the roof.

My problem is that my budget is very tight and there are just not many 1 bed flats around at this price point (London). At the same price most are blocks of flats in less desirable areas whereas this has character and is in a more desirable location. It is already at least double the journey to work than where I currently rent.

NameUnavailable

It sounds like all of the units have been rented out so they are interested in maximum return and maintenance is often neglected.

The freeholder has said they are willing to extend the lease? Once you have been there for 2 years you have a legal right to extend your lease - it is usually better to do this formally than negotiating directly with a freeholder. With a statutory extension you get 90 years added and ground rent is reduced to zero.

What is the ground rent currently?

I would be careful about proceeding - you can't do work on the building yourself and it sounds like you might have some trouble in getting the freeholder to arrange the works, plus you have no idea of likely costs involved.

Goy

NameUnavailable said:

It sounds like all of the units have been rented out so they are interested in maximum return and maintenance is often neglected.

The freeholder has said they are willing to extend the lease? Once you have been there for 2 years you have a legal right to extend your lease - it is usually better to do this formally than negotiating directly with a freeholder. With a statutory extension you get 90 years added and ground rent is reduced to zero.

What is the ground rent currently?

I would be careful about proceeding - you can't do work on the building yourself and it sounds like you might have some trouble in getting the freeholder to arrange the works, plus you have no idea of likely costs involved.

Thanks for the reply. The flats are each lease owned by different people but because they are tenanted I suppose they are unaware of or are not concerned with repairs.

Originally the seller was going to start and pay for the lease extension process (informal) which the freeholder said would cost between £7-8000. The seller then changed their mind and didn't want the hassle so I reduced my offer by £9000. 

As of 2019 the ground rent is £250pa, rising £50 every 10 years so in this case an informal extension could make sense financially, I am unsure of the price difference and whether saving potentially £1500(?) legal fees is worth it. I'm guessing the freeholder told me they are willing to extend because they don't want me to do it formally, in which case can they decide to charge more?

NameUnavailable

Goy said:

NameUnavailable said:

It sounds like all of the units have been rented out so they are interested in maximum return and maintenance is often neglected.

The freeholder has said they are willing to extend the lease? Once you have been there for 2 years you have a legal right to extend your lease - it is usually better to do this formally than negotiating directly with a freeholder. With a statutory extension you get 90 years added and ground rent is reduced to zero.

What is the ground rent currently?

I would be careful about proceeding - you can't do work on the building yourself and it sounds like you might have some trouble in getting the freeholder to arrange the works, plus you have no idea of likely costs involved.

Thanks for the reply. The flats are each lease owned by different people but because they are tenanted I suppose they are unaware of or are not concerned with repairs.

Originally the seller was going to start and pay for the lease extension process (informal) which the freeholder said would cost between £7-8000. The seller then changed their mind and didn't want the hassle so I reduced my offer by £9000. 

As of 2019 the ground rent is £250pa, rising £50 every 10 years so in this case an informal extension could make sense financially, I am unsure of the price difference and whether saving potentially £1500(?) legal fees is worth it. I'm guessing the freeholder told me they are willing to extend because they don't want me to do it formally, in which case can they decide to charge more?

Alarm bells are ringing!!

An informal lease extension should be simple/quick if the parties are in agreement. I wonder what 'hassle' your vendors were worried about? With informal extensions freeholders can slip in things like higher ground rents or other conditions that make the lease more problematic.

At £250 the ground rent is already at the maximum threshold before it becomes an assured tenancy (less rights and potential for lease forfeiture if ground rent goes unpaid) assuming the flat is outside London. When the ground rent next increases it's then an assured tenancy and will become very difficult to sell.

Goy

NameUnavailable said:

Goy said:

NameUnavailable said:

It sounds like all of the units have been rented out so they are interested in maximum return and maintenance is often neglected.

The freeholder has said they are willing to extend the lease? Once you have been there for 2 years you have a legal right to extend your lease - it is usually better to do this formally than negotiating directly with a freeholder. With a statutory extension you get 90 years added and ground rent is reduced to zero.

What is the ground rent currently?

I would be careful about proceeding - you can't do work on the building yourself and it sounds like you might have some trouble in getting the freeholder to arrange the works, plus you have no idea of likely costs involved.

Thanks for the reply. The flats are each lease owned by different people but because they are tenanted I suppose they are unaware of or are not concerned with repairs.

Originally the seller was going to start and pay for the lease extension process (informal) which the freeholder said would cost between £7-8000. The seller then changed their mind and didn't want the hassle so I reduced my offer by £9000. 

As of 2019 the ground rent is £250pa, rising £50 every 10 years so in this case an informal extension could make sense financially, I am unsure of the price difference and whether saving potentially £1500(?) legal fees is worth it. I'm guessing the freeholder told me they are willing to extend because they don't want me to do it formally, in which case can they decide to charge more?

Alarm bells are ringing!!

An informal lease extension should be simple/quick if the parties are in agreement. I wonder what 'hassle' your vendors were worried about? With informal extensions freeholders can slip in things like higher ground rents or other conditions that make the lease more problematic.

At £250 the ground rent is already at the maximum threshold before it becomes an assured tenancy (less rights and potential for lease forfeiture if ground rent goes unpaid) assuming the flat is outside London. When the ground rent next increases it's then an assured tenancy and will become very difficult to sell.

I didn't know this but fortunately the flat is in London (where I've just read it needs to be over £1000 before it becomes an AST). 

The seller is young and probably the idea of a lease extension intimidates them so they said they would rather not do it. They are asking their father each time I have a question or request.

The EA gave them the idea we would be able to complete before the New Year (viewing in November) and they were after a quick sale. It's very likely the EA introduced the lease extension idea to them after people were questioning it on viewing. 

princeofpounds

Originally the seller was going to start and pay for the lease extension process (informal) which the freeholder said would cost between £7-8000. The seller then changed their mind and didn't want the hassle so I reduced my offer by £9000. 

As of 2019 the ground rent is £250pa, rising £50 every 10 years so in this case an informal extension could make sense financially, I am unsure of the price difference and whether saving potentially £1500(?) legal fees is worth it. I'm guessing the freeholder told me they are willing to extend because they don't want me to do it formally, in which case can they decide to charge more?

No, they can't charge more for a formal extension (well, not unless they decided to make an unusually cheap price for the informal extension).

When you do a formal extension, the value of the extension is calculated by a Tribunal, using a formula and some assessed inputs that can vary a little bit subjectively (like the value of the property).

The downside of a formal process is not price, but the time, hassle and expense (costs more in legal fees). 

Usually, if you ask for an extension, you will receive an informal offer. Often that initial offer is too expensive - the freeholder hopes you will not check and will agree the price.

If you then check what a rough formal extension would cost, you can then go back and say 'your offer was not competitive, please improve the terms or I will be forced to go through the formal process'. Then you usually get a better offer, as the freeholder can't be bothered to go through that process either. Often they will still ask for a small premium, but it's normally worth accepting for the legal fees it will save.

You can use a calculator like the one below for a ballpark estiamte but it's not really suitable for an escalating ground rent, which would be a bit more expensive.

https://www.lease-advice.org/calculator/