Offer accepted on a 2bed flat in Sheffield, but straightaway run into a problem - should I pull out?

Halabala9

Hi,

After months of searching and discovering that the leasehold system in the UK is broken, I thought that I have finally found a flat, that looks alright, not sure if I can use links here so:

2 bed flat, 4th floor in 5 storeys building, 975 years lease left (built around 2000), £224.50 current ground rent (I assume it's RPI reviewed 10 or 20 years considering that figure), £2200 service charge, EWS1 A1 rating - offer accepted £150k in Sheffield.

No dodgy doubling rent, no dodgy office conversion, no dodgy high service charge, the flat looked alright, the estate too. Had a chat with one of the residents and he said that the estate is very nice, they are happy there. Made an offer on Friday, accepted yesterday. I am planning to do a cash purchase.

Straightaway, I run into a problem, the solicitor I had lined up, said she doesn't take buildings with 5 storeys or more. I was shocked, yet another problem in this already broken market. Few other solicitors refused too but finally got one that will take it, but obviously they will charge me £2500 (which is like £800-£900 more than for a flat below 5 storeys due to some fresh Building Regulations Act or something, I don't even want to know...).

But then I noticed another problem. The ground rent currently sits at £224, so I presume it is a either 10 or 20 years review RPI (as the building is 23yo). That is 0.15% value of the property currently. From what I found on reddit, some lenders don't lend if it's above 0.1% value. Not a problem for me now, as I am a cash buyer, but I need a property that is mortgage-able, to avoid problems in the future.

Not sure what to do. Should I pull out now, when I only invested £60 on ID check? I don't want to spent £2500 on a solicitor just to find out it's a bad idea to buy it...

What made this situation even worse is the attitude of the EA. He is a nice guy, however when I told him after 1h after he said that the offer got accepted yesterday, that my solicitor refused to take and I need to find a different one, he started to push me really hard to get a new one ASAP. Phoned me up after 4h asking if I found one. Then asked what time I started work today, when I said 8am, he said he will call me to check if I found one already. That is weird, he is pushing a bit too hard IMO, that offer got accepted yesterday at 11:30am.

I am honestly fed up after months of searching, the whole situation around flats is ridiculous. Had a long converstation with my landlord last evening (she has got loads of exp in properties) and she said that her only regret after investing in properties is that she bought too many flats instead of freehold houses, and now she is trying to sell due to all ground rent / service charge problems.

Her advise is to get that money I want to spend on a cash purchase, and use it as a high deposit, get the mortgage and buy a freehold house. My only problem is that such house won't be in any good location when a flat can be.

Give me some hope guys...

propertyrental

Best to stick to one thread

https://forums.moneysavingexpert.com/discussion/6510522/solicitor-refused-to-act-as-the-building-is-5-storeys-high#latest

bobster2

Mike997 said:

But then I noticed another problem. The ground rent currently sits at £224, so I presume it is a either 10 or 20 years review RPI (as the building is 23yo). That is 0.15% value of the property currently. From what I found on reddit, some lenders don't lend if it's above 0.1% value. Not a problem for me now, as I am a cash buyer, but I need a property that is mortgage-able, to avoid problems in the future.

So you got the 0.1% idea from reddit?

Ground rent > £250 per annum or that increases more often than every 21 years is seen as a problem.

Try some solictor's websites rather than reddit

https://www.frettens.co.uk/site/blog/property-blog/ground-rent-over-250-pounds-here-are-your-options-leaseholder

https://www.birkettlong.co.uk/site/blog/property/ground-rent-a-stumbling-block-for-purchasers

RHemmings

Three words: Mortgage Advisor/Broker 

You clearly need help in this area. 

eddddy

Mike997 said:

Should I pull out now, when I only invested £60 on ID check? 

Going off topic, but was that £60 fee to a company called Life time Legal?


If so, based on their website, it sounds like it's not so much a fee for an ID check, as a fee to allow them to phone you and sell you their products.

(And perhaps you feel you have to listen to their sales pitch, because you might fail the ID check if you don't.)


Based on their website, it sounds like it's a bit of a hard-sell collaboration between the Estate Agent and the Legal firm.

The legal firm tell the Estate Agent to do things like:

• "Add a note with any special instructions that will help us build rapport with the client quickly". (i.e. Tells us some info about the client which might help us sell them stuff.)

• "Warm up the client and explain that being legally prepared can help the client move 3 weeks sooner and that using Life time Legal and a panel solicitor will make their move smoother with less risk of problems."

• "Explain that Life time Legal offer Mover Protection which may cover up to £1850 of fees if purchase fails."

In return, the estate agent will get some commission, if you buy any of the legal firm's products.

Here's the website link: https://www.lifetimelegal.ltd/index.php/referral-types-and-definitions/


I'm not suggesting that the legal firm or the estate agent are doing anything bad or wrong.

But it's good to understand the people's motivations when you're having discussions with them. 

Halabala9

eddddy said:

Mike997 said:

Should I pull out now, when I only invested £60 on ID check? 

Going off topic, but was that £60 fee to a company called Life time Legal?


If so, based on their website, it sounds like it's not so much a fee for an ID check, as a fee to allow them to phone you and sell you their products.

(And perhaps you feel you have to listen to their sales pitch, because you might fail the ID check if you don't.)


Based on their website, it sounds like it's a bit of a hard-sell collaboration between the Estate Agent and the Legal firm.

The legal firm tell the Estate Agent to do things like:

• "Add a note with any special instructions that will help us build rapport with the client quickly". (i.e. Tells us some info about the client which might help us sell them stuff.)

• "Warm up the client and explain that being legally prepared can help the client move 3 weeks sooner and that using Life time Legal and a panel solicitor will make their move smoother with less risk of problems."

• "Explain that Life time Legal offer Mover Protection which may cover up to £1850 of fees if purchase fails."

In return, the estate agent will get some commission, if you buy any of the legal firm's products.

Here's the website link: https://www.lifetimelegal.ltd/index.php/referral-types-and-definitions/


I'm not suggesting that the legal firm or the estate agent are doing anything bad or wrong.

But it's good to understand the people's motivations when you're having discussions with them. 

No, it was Credas, I think its genuinely a stuff to check your identity. 

Cit6

Tell the agent to do one, only interested in his cut. Forget leasehold, do what ever you can and buy freehold.

Olinda99

the very first thing you need to do is to find out how often the ground rent changes

it is very very different if it doubles every 10 years compared with if it is every 20 years

if it is RPI reviewed then that might be slightly better but RPI is worse than CPI and the figures can still get scary

Halabala9

I paid £3 to get the info from Land Registry about that property. Apparenty it was sold for £120.000 literally in March 2023. The price seems very low, as looking at sold properties in that building, flats are going for between £130k to £165k, probably depending if it's a 1bed, 2bed, some haven't got parking space some have. Don't know if it's some auction price or what. The owneer is Ascendis Property Limited from Liverpool.

Now regarding the Ground Rent. It's £150 in 2002 when the lease started. I checked RPI calculator from 2002 - 2022 and it seems like it reached the current ground rent in 2016, which is £224. Now I wonder if they have gone through Deeds of Variation in 2016 to stop it at that value and keep below £250 or what is going on. I need to get that information from the vendor to double check.

NameUnavailable

Ideally you want a shared freehold flat which should have a long (900+) year lease and peppercorn ground rent. Also 1-4 storeys high.

The flat you're looking at is proving difficult already and if the GR increases to over £250 at some point then it's another problem you'll have when you come to sell.

Some leasehold is indeed 'broken' until laws are changed or lenders attitudes change.

EssexHebridean

Save the estate agent’s number in your phone. Red button the call when you don’t want to or aren’t in a position to speak. You can also tell them that you are only willing to communicate with them by email. Ultimately they are just the agent, and aren’t acting for you in any case. While they can come in useful for chasing things through during the transaction, you certainly don’t need to be hounded by them.