Sinking fund exit fee

alic555

Hi all 

After some advice I have contacted LEASE to see if they can advise yet wondered if anyone had the same experience. 

14 years ago I bought a shared ownership apartment in the lease (which wasn't pointed out) embedded were the term 0.5% of the market value for each year capped at ten years will be due on sale for an exit fee for the sinking fund. 

Now roll on 4 years the company who owned the property went bust and a new landlord housing association took over, the lease was not amended however the service charge dramatically increased over the years and the sinking fund was obtained through the service charge, in massive surplus now. 

So I sold my property and 2 days before completion the company contacted my solicitor and demanded an exit fee based on the full market value, I had no time to argue this and paid it. 

Now my question shall I just walk away from this and forget it and see it as lesson learned or do you think this is an acceptable term. Maybe there is nothing I can do. After 13 years I walked away with 4 grand less than I started with never would I do shared ownership again! ( The price decreased dramatically after the recession) 

TripleH

Sadly if the lease states that, then you would be hard pressed to avoid paying it.

The time to challenge would have been when the new leasehold company started building up a sink fund.

Browntoa

Your solicitor would have been confident it was legit otherwise they shouldn't have asked you to pay it . 

eddddy

You probably can't challenge the 0.5% exit fee.

(Unless you mean you want to make a claim for negligence against your solicitor when you purchased, for failing to highlight the exit fee.)


But you might be able to challenge your earlier payments into the sinking fund, if they were not 'reasonable'. You'd need to challenge them at a tribunal.

But you'd need to construct a case that explains why they weren't 'reasonable' - which might involve some forensic accounting.


For example, the freeholder might say:

• The windows are due for replacement in 2 years time - estimated cost £40k
• The communal carpets are due for replacement in 3 years - estimated cost £10k
• The lifespan of the roof is estimated at 40 years, which makes it due for a refurb in 10 years - estimated cost £100k
• etc, etc, etc

And maybe the freeholder can show a spreadsheet (or similar) which shows how the sinking fund will grow and shrink over the years to meet all those costs.

Then maybe you'd have to go through that spreadsheet and explain why you think some of the numbers are unreasonable or wrong.

(But it's also possible that the freeholder just stuck a finger in the air and guessed how much you should put in the sinking fund. In that case, you'd still need to show that it was not a 'reasonable' guess.)



FWIW, you could argue that when you sold the property, it was a 'selling feature' that there was a big sinking fund. It might have been harder to sell without that.

alic555

Thanks so much for all your comments and totally agree I should of challenged this when they took over. Edddy your advice us really helpful. My solicitor did have concerns they were charging on the full market value as it's really unclear from the lease, the landlord didn't know either which didn't help so their solicitor made the decision they could. It was all so rushed... 

I am not sure I have the expertise to fight it really so I may just leave it and move on however frustrated I feel... Just an example this year the moved the service charge from 270 to 360 it was totally unmanageable the whole thing. Anyhow thanks so much!