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First time buyer and landlord - Flat bought on auction with hidden service and ground rent arrears
Comments
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So you bought a flat without even seeing the Lease? I hope the flat was cheap!2
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loubel said:So you bought a flat without even seeing the Lease? I hope the flat was cheap!The OP was buying the lease, the flat belongs to the freeholder.So they bought a lease without knowing what it actually contains! Dangerous stuff.1
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Hopefully it's not an incredibly short lease?!
I also hope you've not spent thousands on a property which turns out to be financially ruinous - an FTB buying a property with sitting tenants, via an auction without legal advice and lacking a land registry listing... (a property which you don't seem to have done very basic due dilligence for) is a recipe for things going very very expensively wrong.1 -
I’m abit confused by this one.
I knew of someone who owed a lot of ground rent/service charges to the freeholder, (I didn’t know that the freeholders could get the flat off of you if a judge said so because of non payment til then) the solicitor paid everything off, along with the mortgage, estate agent fees and all other bills, before they received the surplus.
I have recently sold a leasehold flat, I was two weeks in credit with my service charge, that was credited to me, VIA the solicitors, they paid off the outstanding mortgage, charged me £100 for that, and charged me £30 to pay the surplus into my bank account.
I made sure the £10 a year ground rent was paid because the solicitor would have charged £30 to pay that,
I made sure I was on top of the monthly service charges which was communal electric, intercom, buildings insurance, aerial, cleaning etc, because if the solicitor had to pay that off, it would have been a charge of £30 to pay that.
About six months before I sold, each flat had new top of the range fire proof front doors installed to comply with the latest fire regulations, and a few additional communal lights installed which we were billed for and we were able to pay this off interest free at either £10 per week or £50 per month until it was paid. You’ve already guessed this one I bet - I still owed £420 the week before I exchanged contracts - so to avoid a £30 charge from the solicitors to pay it, I paid it off in full.
Isn’t it in the lease that all bills must be settled at the time of sale before the new purchaser takes over, or was my solicitor over zealous?
The only other £30 charge I got was to pay the estate agents, but I did sign something saying that everything had been paid off at exchange of contracts
Good luck, and I hope that because someone has signed that it’s all paid, I hope that’s the end of one of the issues.1 -
ashthemash said:Hi I purchased a flat with in situ tenants ...through an auction. I know probably a lot of you are going to say I should have sought legal advice beforehand, I should haveIndeedbut it was so difficult to get hold of conveyancers in London.?? Rubbish! (sorry to be blunt). And if that was genuinely the case you had to either wihdraw or take the risk. Your choice....my bid got accepted and I instructed my solicitors to progress towards completion. ..... Anyway, their solicitors would not answer any questions as they said that we had already contracted at the auction.True. You chose to take the risk.After much chasing up they provided some very brief responses to a few of the questions. When my solicitors were waiting for them to respond, they issues a notice to complete and charged us around £500 for the delay although it was we who were waiting for them to respond.No. You had already Exchanged when the hammer fell so they had no obligation to respond. YOU were causing the delay by asking questions that you should have asked before the auction.My solicitors felt rushed to complete and finally, we managed to complete it last week.Great. You bid, you won, now you own.My letting agent found out from the managing agent that there was a large amount outstanding in ground rent and service charges which the previous owners had accrued.When I spoke to the managing agent they confirmed that there were arrears but would not tell me how much it is. They also said that the sale was pending and said that the solicitors need to sort this out between themselves.Indeed. Until you/your solicitors formally inform the freeholder or their managing agent of the sale, they will not recognse you legally.I reverted back to solicitors for advice, they did not seem to be interested and asked me to liaise with the managing agent directly and gave me a letter which says the purchase had been completed and if anyone has any questions they should contact them.What does your contract with your solicitors include? eg managing the transfer of the lease and formalising with the freeholder? If you've paid for this, they should manage it. If not, then pay them more to do it!
I want to know how much trouble I am in and what steps if any I can take to ensure that this situation does not result in forfeiture of the lease.1) get yourself recognised formally as the new leaseholder by the freeholder, Either DIY or via your solicitor2) establish what is owed.3) establish whether the freeholder has already billed the previous leaseholder (in which case the liability is his), or not (in which case the liability is yours).4) learn the lesson that before bidding at auction you need to know exactly what you are bidding to buy.5) as for the tenants, how much due diligence did you do?* Are they up-to-date or in arrears?* do they have an AST or something else?* do they have a fixed term or periodic?* were they provided the required docs (gas, EICR, gov leaflet...)?* did they pay a deposit? Where is it? Were the deposit regs complied with? Who now controls it?* was there an appropriate inventory? Do you have it?* Have you received their vetting docs? guarantor agreement if any?* are there any outstanding disputes? Historic disputes?* were they checked for 'Right To Rent'?
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Reading this thread wakes you up to the risks of buying a leasehold property via aution.1
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diystarter7 said:Reading this thread wakes you up to the risks of buying a leasehold property via aution.To be fair, freeholds at auctions can also have risks.The wake-up is that before bidding, you must know exactly what you are buying, and exacty how you're going to pay for it.
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canaldumidi said:
1) get yourself recognised formally as the new leaseholder by the freeholder, Either DIY or via your solicitor
Unfortunately, it's not that simple.
Essentially the problem is... the freeholder won't recognise the OP as the new leaseholder, until the old leaseholder pays the service charge arrears.
So there should have been a term in the auction sale contract that said something like "The seller agrees to pay all service charge arrears on completion."
But I guess that term wasn't in the auction sale contract. (In normal circumstances, a solicitor would have noticed that term was missing and told the buyer not to exchange contracts unless the term was added.)
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ashthemash said:Hi I purchased a flat with in situ tenants as my first ever property and this was through an auction. - okay, high risk strategy.. are you experienced in assessing the condition and conveyancing yourself, or not too affected if this goes wrong (ie not expecting to live there, diversified investments so you can take a hit here..)?
I know probably a lot of you are going to say I should have sought legal advice beforehand, I should have but it was so difficult to get hold of conveyancers in London. Everyone seemed to be very busy. - so..? You find a conveyancer elsewhere in England or online (they don't have to be geographically close), or you hold off on the auction until you can.
Anyway, my bid got accepted and I instructed my solicitors to progress towards completion. The seller was acting as a contractual seller and not a registered seller. I was told this was a back-to-back transaction in which the seller was buying from a third seller at the same time as I was buying from them. I thought this was some way for them to save on SDLT. - that's fine, can be the case with new builds bought off plan and resold before completion, or house buyer companies, repossessions etc.
Anyway, their solicitors would not answer any questions as they said that we had already contracted at the auction. After much chasing up they provided some very brief responses to a few of the questions. - well they don't have to answer anything. Even if the answers were not what you wanted, you'd still be obligated to buy so what was the point?
When my solicitors were waiting for them to respond, they issues a notice to complete and charged us around £500 for the delay although it was we who were waiting for them to respond. My solicitors felt rushed to complete and finally, we managed to complete it last week. - they should have been rushed.. the questions were just wasting time as you'd already exchanged. Delayed completion is entirely yours / your solicitors' doing, and comes at a cost.
My letting agent found out from the managing agent that there was a large amount outstanding in ground rent and service charges which the previous owners had accrued. When I spoke to the managing agent they confirmed that there were arrears but would not tell me how much it is. They also said that the sale was pending and said that the solicitors need to sort this out between themselves. I reverted back to solicitors for advice, they did not seem to be interested and asked me to liaise with the managing agent directly and gave me a letter which says the purchase had been completed and if anyone has any questions they should contact them.
- Between you and the solicitors, depends on what was agreed with the solicitors re how much work was included to transfer the lease and deal with any blockers. If not included, then you'd have to deal yourself or pay them more.
- Between you and vendor, depends on what was in the contract re paying for service charges accrued upto the completion date. You can ask them to fwd you any past bills or pay the arrears if you reimburse them - as a favour as depending on the contract, they may not have to do anything.
- Between you and freeholder / managing agent, ask if they can make an exception and forward you past bills so you can pay and then get the transfer going (though note they may not have to do anything)
I want to know how much trouble I am in and what steps if any I can take to ensure that this situation does not result in forfeiture of the lease. - re trouble / risk of forfeiture, try to get a hold of past bills and get them paid. Note you have little chance of recovering money you spend for this, but at least you'll protect your lease.2 -
canaldumidi said:diystarter7 said:Reading this thread wakes you up to the risks of buying a leasehold property via aution.To be fair, freeholds at auctions can also have risks.The wake-up is that before bidding, you must know exactly what you are buying, and exacty how you're going to pay for it.
Watching Homes Under the hammer, the number of times buyers don't read the bit about paying the sellers fees which can equate to several k's lol - this applies to lease and freehold properties.
Another item people get caught out with is completion withing, less than the norm 28 days, lol.1
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