First time buyer and landlord - Flat bought on auction with hidden service and ground rent arrears

ashthemash

theartfullodger said:

ashthemash said:

First time buyer and landlord - Flat bought on auction with hidden service and ground rent arrears

Hi I purchased a flat with in situ tenants as my first ever property and this was through an auction. I know probably a lot of you are going to say I should have sought legal advice beforehand, I should have  .....................

A very valuable thread illustrating (some of the) risks buying at auction.   Hope anyone else tempted reads from it & learns.

(btw I bought a house at auction without ever even seeing inside it: Children, do not do this at home....)

You state you are first time landlord: Not entirely: Until notice(s) complaint with s48 & s3 are served there is no rent owed by tenant (s48..) and possible fines and criminal offence (s3) owner is not entirely fully the landlord: Have you had these notice(s) served please?? 

Done any education or training in being a landlord?  Strongly recommend that, urgently. 

Luckily this element is in hand. Because there was an existing tenancy in place, the letting agents managed this process for me and served the relevant notices to the tenant. I am expecting the first month's rent to come into my account in the next few days.

GDB2222

Have you checked with the tenants and letting agents whether there are any letters that have arrived at the flat for the old owners?

ashthemash

I have written to the seller's solicitors asking them to provide the service charge account and ensure all charges for the period before the completion date are paid. I have referred them to the general condition G22  of the contract.

https://www.auctionhouse.co.uk/Documents/AuctionConditions.pdf

especially the following conditions of the contract

G22.3 Within two months after COMPLETION the SELLER must provide to the BUYER a detailed service charge account for the service charge year current on COMPLETION showing: 

(a) service charge expenditure attributable to each TENANCY; 

(b) payments on account of service charge received from each tenant; 

(c) any amounts due from a tenant that have not been received; 

(d) any service charge expenditure that is not attributable to any TENANCY and is for that reason irrecoverable.

  G22.5 In respect of service charge expenditure that is not attributable to any TENANCY the SELLER must pay the expenditure incurred in respect of the period before ACTUAL COMPLETION DATE and the BUYER must pay the expenditure incurred in respect of the period after ACTUAL COMPLETION DATE. Any necessary monetary adjustment is to be made within five BUSINESS DAYS of the SELLER providing the service charge account to the BUYER.  

eddddy

ashthemash said:

I have written to the seller's solicitors asking them to provide the service charge account and ensure all charges for the period before the completion date are paid. I have referred them to the general condition G22  of the contract.

https://www.auctionhouse.co.uk/Documents/AuctionConditions.pdf

I think you've misunderstood G22.

G22 relates to things like buying the freehold of a block of flats.

As a simple example, G22 might apply if you bought the freehold of a block of 5 leasehold flats. The seller has to tell you which leaseholders/tenants have paid their service charge etc.


(Your flat has a tenant, so perhaps you could argue that you want details of service charges paid by your tenant. But your tenant doesn't pay service charges. So the details would be "zero".)

saajan_12

ashthemash said:

I have written to the seller's solicitors asking them to provide the service charge account and ensure all charges for the period before the completion date are paid. I have referred them to the general condition G22  of the contract.

https://www.auctionhouse.co.uk/Documents/AuctionConditions.pdf

especially the following conditions of the contract

G22.3 Within two months after COMPLETION the SELLER must provide to the BUYER a detailed service charge account for the service charge year current on COMPLETION showing: 

(a) service charge expenditure attributable to each TENANCY; 

(b) payments on account of service charge received from each tenant; 

(c) any amounts due from a tenant that have not been received; 

(d) any service charge expenditure that is not attributable to any TENANCY and is for that reason irrecoverable.

  G22.5 In respect of service charge expenditure that is not attributable to any TENANCY the SELLER must pay the expenditure incurred in respect of the period before ACTUAL COMPLETION DATE and the BUYER must pay the expenditure incurred in respect of the period after ACTUAL COMPLETION DATE. Any necessary monetary adjustment is to be made within five BUSINESS DAYS of the SELLER providing the service charge account to the BUYER.  

What does that have to do with service charge LIABILITIES? 

G22 SERVICE CHARGE
G22.1 This CONDITION G22 applies where the LOT is sold subject to TENANCIES that include service charge provisions. 

Subject to tenancies means when someone else rents (part of) the property from you ie your use and access of the property is limited by / subject to the rights you have granted under a tenancy. That could be residential tenants under an AST, or a commercial lease, or a flat leaseholder where you are the building freeholder. 

Its not, however relevant to service charges you PAY. 

ashthemash

eddddy said:

ashthemash said:

I have written to the seller's solicitors asking them to provide the service charge account and ensure all charges for the period before the completion date are paid. I have referred them to the general condition G22  of the contract.

https://www.auctionhouse.co.uk/Documents/AuctionConditions.pdf

I think you've misunderstood G22.

G22 relates to things like buying the freehold of a block of flats.

As a simple example, G22 might apply if you bought the freehold of a block of 5 leasehold flats. The seller has to tell you which leaseholders/tenants have paid their service charge etc.


(Your flat has a tenant, so perhaps you could argue that you want details of service charges paid by your tenant. But your tenant doesn't pay service charges. So the details would be "zero".)

I was arguing that the following is relevant 

(d) any service charge expenditure that is not attributable to any TENANCY and is for that reason irrecoverable.

ashthemash

saajan_12 said:

ashthemash said:

I have written to the seller's solicitors asking them to provide the service charge account and ensure all charges for the period before the completion date are paid. I have referred them to the general condition G22  of the contract.

https://www.auctionhouse.co.uk/Documents/AuctionConditions.pdf

especially the following conditions of the contract

G22.3 Within two months after COMPLETION the SELLER must provide to the BUYER a detailed service charge account for the service charge year current on COMPLETION showing: 

(a) service charge expenditure attributable to each TENANCY; 

(b) payments on account of service charge received from each tenant; 

(c) any amounts due from a tenant that have not been received; 

(d) any service charge expenditure that is not attributable to any TENANCY and is for that reason irrecoverable.

  G22.5 In respect of service charge expenditure that is not attributable to any TENANCY the SELLER must pay the expenditure incurred in respect of the period before ACTUAL COMPLETION DATE and the BUYER must pay the expenditure incurred in respect of the period after ACTUAL COMPLETION DATE. Any necessary monetary adjustment is to be made within five BUSINESS DAYS of the SELLER providing the service charge account to the BUYER.  

What does that have to do with service charge LIABILITIES? 

G22 SERVICE CHARGE
G22.1 This CONDITION G22 applies where the LOT is sold subject to TENANCIES that include service charge provisions. 

Subject to tenancies means when someone else rents (part of) the property from you ie your use and access of the property is limited by / subject to the rights you have granted under a tenancy. That could be residential tenants under an AST, or a commercial lease, or a flat leaseholder where you are the building freeholder. 

Its not, however relevant to service charges you PAY. 

Will see what the sellers solicitors come back with. I will get a legal view as well. The sellers solicitors argue that G11 is relevant which talks about rent arrears but that makes no sense in my view.

user1977

ashthemash said:

eddddy said:

ashthemash said:

I have written to the seller's solicitors asking them to provide the service charge account and ensure all charges for the period before the completion date are paid. I have referred them to the general condition G22  of the contract.

https://www.auctionhouse.co.uk/Documents/AuctionConditions.pdf

I think you've misunderstood G22.

G22 relates to things like buying the freehold of a block of flats.

As a simple example, G22 might apply if you bought the freehold of a block of 5 leasehold flats. The seller has to tell you which leaseholders/tenants have paid their service charge etc.


(Your flat has a tenant, so perhaps you could argue that you want details of service charges paid by your tenant. But your tenant doesn't pay service charges. So the details would be "zero".)

I was arguing that the following is relevant 

(d) any service charge expenditure that is not attributable to any TENANCY and is for that reason irrecoverable.

But the whole clause begins with "This CONDITION G22 applies where the LOT is sold subject to TENANCIES that include service charge provisions" - which (probably) doesn't apply in your case.

I would say the most relevant clause here is G1.4:

"The LOT is also sold subject to such of the following as may affect it, whether they arise before or after the CONTRACT DATE and whether or not they are disclosed by the SELLER or are apparent from inspection of the LOT or from the DOCUMENTS:
...
(f) outgoings and other liabilities;
...
(h) matters that ought to be disclosed by the searches and enquiries a prudent BUYER would make, whether or not the BUYER has made them;"

(and it would also help to see the special conditions)

eddddy

ashthemash said:

Will see what the sellers solicitors come back with. I will get a legal view as well. The sellers solicitors argue that G11 is relevant which talks about rent arrears but that makes no sense in my view.

I think it's unlikely that the seller's solicitors will come back with anything, unless somebody instructs them and pays them for their time.

As @user1977 says, you really need to look at the Special Conditions of Sale.

From what you have said, this sounds like a 'quick and dirty', distressed, back-to-back sale (possibly by a "we buy any house" type company). 

They are likely to have added Special Conditions with massive disclaimers that override huge chunks of the Standard Conditions.

ashthemash

I have now also obtained a copy of the lease.
There is an interesting statement there about a ground rent cap which states that

rent shall never exceed the amount which would bring this lease within the provisions of the Rent Act 1968 or any Act amending or re-enacting the same. 

Does anyone know if this cap still applies and how?