Retention of funds to cover works due within the next years....can it happen?

Rodders2409

Hello all,

A friend is buying a leasehold property which she love but has been hit by big problem related to issues of Construction that are due to be remedied in the next 1-3 years but nobody's sure of the final costs or exactly how long it will take. There are >200 flats in the same community, owners having equal share in the Management Company and its a long leasehold property. Unfortunately there's no way to recover costs from the developer or Landlord. It's not a cladding issue.

The seller is offering a sizeable retention >£10K to cover the possible costs and I'm thinking that, to be safe, it might need to be £15K over 3-5yrs.
Can this be done?
What are the mechanisms to recover the retention as and when works are completed?

user1977

Retentions can be messy, especially if there's little certainty about the costs or timescale. And solicitors don't like hanging onto piggy banks of client money for years after a transaction has completed. Much cleaner just to agree a reduction in price and take on the risk.

Rodders2409

Thanks user1977,

I agree that it would be much cleaner but I'm not sure the other party will be interested in the reduction in price, unfortunately.

Solicitors may prefer a cleaner option but it's not an impossible process then?....

I guess a complexity is how the process works with regards to processing any claims of the retention fund.

eddddy

Rodders2409 said:

I agree that it would be much cleaner but I'm not sure the other party will be interested in the reduction in price, unfortunately.

Is the seller in a particularly strong negotiating position?

It seems they have a flat with significant construction faults - will any other buyers be queuing up to buy it? 


Has the seller indicated that they would accept a £15k retention for 5+ years? Or would they be happier with a 'clean break' like perhaps £12.5k off the price?

SusieT

Rather than a retention and assuming the bank agreed, would it be possible for your solicitor to ad to the contract that on completion the seller would deduct £xx thousand from the sale of the house to you for the rectifications, and that you would have no furthrt claim on the seller?

user1977

SusieT said:

Rather than a retention and assuming the bank agreed, would it be possible for your solicitor to ad to the contract that on completion the seller would deduct £xx thousand from the sale of the house to you for the rectifications, and that you would have no furthrt claim on the seller?

What's the difference between that and simply agreeing to reduce the price? I doubt a lender would view it any differently.

boots_babe

When we bought our current house, the septic tank was no longer legal and needed replacing. The vendor was happy to pay but neither side wanted to wait for winter to be over for the ground to dry out, to do the works prior to completion. 

So we built a retention sum into the sale contract of £15k. We'd had quotes come in around £12k, so the £15k was to cover this plus any unexpected extra costs incurred. 

A few months after completion we did the work, submitted invoices to the solicitor, and they released ~£12k to us to cover what we'd paid for the works, and the rest was released back to the vendor. 

TripleH

Is the flat currently unsellable without the cladding work being done or is it priced to reflect the cladding needs replacing?

I ask because if priced to reflect cladding work is required, why should the seller offer a retention for works that generate further expense for them to the buyers benefit?

This is a question rather than a statement of opinion.

Currently trying to get to bottom of a retention we hold in place for flat sold in 2020, every time I ask, I get a response from someone whose on their last week of working at the firm.

molerat

TripleH said:

Is the flat currently unsellable without the cladding work being done or is it priced to reflect the cladding needs replacing?

I ask because if priced to reflect cladding work is required, why should the seller offer a retention for works that generate further expense for them to the buyers benefit?

Rodders2409 said:

It's not a cladding issue.

....................................

TripleH

Apologies  brain not firing, added construction + flat = cladding

If it's not cladding, my point stands as to why its thought the seller needs to pay a hefty retention if they gain no economical benefit from the work?

We agreed a small retention when we sold our flat for works to the building as a gesture of goodwill (less than what buyer asked) but did then state in us doing so we expected imminent exchange and completion (think said we'd give a retention as long as we'd completed in 2 weeks time). If you expect a retention I do think you need to offer something back.