Buying flat with s20

Jam1981

Hi,

We are quite far into the process of buying a ground floor leasehold flat and our solicitor has only just received the management pack.  She has not reviewed as yet and she has sent it to us to look at over Christmas.  On a quick inspection, I can see there are a couple of potential issues that I have queries with if anyone could help as my solicitor is now on holiday until the new year? 

Firstly, there are outstanding service charges of around £500 up to November.  Will this be dealt with by the vendor before completion as assume I will not be liable until purchase?

Secondly, there was a s20 issued in July this year detailing works to be done including new roof, external door and window replacement, new guttering, drains and fascias as well as cosmetic cracks etc to the building.  It gives no estimate of the amount for a leaseholder to pay so how would I know how much I would be expected to contribute when the sale goes through?

The flat is an ex housing association property and the freeholder is Sanctuary Housing.  On their website, it says they are responsible for the maintenance of all of the things mentioned in the s20 but does that mean just the arrangements of repairs and not the costs?  Would I be expected to pay all this in one go if responsible as I cannot afford anything like the number I can assume would be involved?

I have never owned a leasehold property so apologies if any of my questions are a bit silly but I don't want to be met with a huge bill in the next 12 months.

Thanks

anselld

You will be liable from compeletion so your Solicitor should ensure that the £500 outstanding would be paid by the vendor if it is for charges up to Nov 2022.  Also there would be some allowance made for charges up to date of completion.

Regarding the s20 of if there are no figures it must be at a very early stage so all you can say is it will be more than £250 per flat.  You would need to pay the full cost as and when the time comes (unless there is a contingency fund already in place) but then you will be benefiting from the improvements.

https://www.lease-advice.org/advice-guide/section-20-consultation-private-landlords-resident-management-companies-agents/

Jam1981

anselld said:

You will be liable from compeletion so your Solicitor should ensure that the £500 outstanding would be paid by the vendor if it is for charges up to Nov 2022.  Also there would be some allowance made for charges up to date of completion.

Regarding the s20 of if there are no figures it must be at a very early stage so all you can say is it will be more than £250 per flat.  You would need to pay the full cost as and when the time comes (unless there is a contingency fund already in place) but then you will be benefiting from the improvements.

Thanks for the quick reply. 

There is a sinking fund that I can see on some of the paperwork but can't see a balance anywhere to see how much this would cover.  Will there be a way before completion that I will know how much I would be expected to pay?

Jam1981

Also it says that it is at the tendering stage and the vendors solicitors have said that any works would be completed in the 23/24 financial year.  How long before any payment would be due do you think and would it be 1 lump sum?
Sorry for all the questions but this may be a deal breaker tbh!

anselld

It is impossible to say.  You should ask your Solicitor to enquire about the up-to-date status of the s20 works before you exchange.  However there is a degree of risk with any leasehold property, indeed any other property, that you may be faced with an unexpected large repair bill.  You need to keep some funds aside.  The difference here is you are forewarned and it may not be a good purchaes if the price does not already reflect the current poor state of repair.

Jam1981

Thanks for the advice.  Will see what happens after the Christmas break
Have a good Christmas

Jam1981

Sorry, can I ask one more question please?

This is the link to the freeholders website regarding owning one of their leasehold flats - https://www.sanctuary.co.uk/information-residents/your-lease/repair-responsibilities-homeowners

It reads as if they would pay for the repairs they say are needed in the s20?  Or am I misunderstanding (highly likely!)
Thanks again

RedFraggle

The "routine costs" listed there are paid for from your maintenance charge which is an annual charge often paid monthly. Larger works would either be covered by the sink fund OR billed directly to each leaseholder if there are insufficient funds. 
 

anselld

Jam1981 said:

Sorry, can I ask one more question please?

This is the link to the freeholders website regarding owning one of their leasehold flats - https://www.sanctuary.co.uk/information-residents/your-lease/repair-responsibilities-homeowners

It reads as if they would pay for the repairs they say are needed in the s20?  Or am I misunderstanding (highly likely!)
Thanks again

The page does not say anything about who pays.  The definative answer to that will be in your Lease but it is safe to assume that the Leaseholders pay for everything one way or another.  (They have to because the Freeholder has no other source of funds).

Mentioning the Lease raises another point.  You should read it and understand it in full before you exchange because that is what controls what you can or cannot do and what you must pay for, not a web page, brochure or any other advertising material.

Jonboy_1984

We have also had the third option in the past, some from the sinking fund and some as a bill, so that there was still a contingency pot in the sinking fund.

Is the flat part of a large estate or a small block?

(my flat was in a block of 10 but the service charges were managed as an “estate” for around 45 flats in 5 buildings on two adjoining streets?)


Based on what you have said I personally would be looking at alternatives over Xmas unless the sinking find was in the thousands per flat.

Have any other flats in the same block/estate come up for sale recently as others look to try and bail out before the details are finalised.

Other options would be for seller to discount according, which is ok if you would then have sufficient cash to cover it (not necessarily the case if you are buying with a high loan to value mortgage) or your solicitor holds a large retention back to cover the costs, as the flats value is reduced by the vale of the work at this stage.

Jam1981

Thanks for the replies.

We haven't had sight of the lease as yet so will definitely read it thoroughly before legally agreeing anything.

The flat is in a block of 4 purpose built flats but the s20 is only addressed to my proposed purchase and the flat above.  The freeholder does own a number of properties in the area though and I can see that some of the properties have already had the work proposed in this s20 already completed as they have new roofs etc. There are no other properties for sale on the estate but think a large number are still rented from Sanctuary rather than purchased.  

I will have to see what happens after Christmas but seems that I need to be bracing for a renegotiation or to pull out......

Thanks everyone