Flats freeholder gone into administration / Selling back to a housing association

Audi1609

I purchased a shared ownership flat 1 year ago, before purchasing there were noticeable leaks. We told the estate agents that if they were not repaired the sale would fall through. We were told they were repaired, bought the flat and from the day we moved in the leaks have still been there. The freeholder/developer has made no effort to repair them (new build flat) and has now gone into administration. Because of the leaks, we decided to put the flat up for sale but since this has happened the freeholder has now gone into administration. 

Is it possible to 'sell' the flat back to the Housing Association on the basis they mis-sold us the flat due to knowing the leaks had not been repaired/fixed. If not, are we still able to sell on the market on the basis we currently have no freeholder.

On another note, no one knows if the building insurance was renewed in February, so could we also argue with the Housing Association that this is neglect on their part?

I am seeking legal advice, but in the meantime wondered if anyone had any knowledge. 

eddddy

There's a lot to unpack in your post...

Audi1609 said:

We told the estate agents that if they were not repaired the sale would fall through. We were told they were repaired, bought the flat and from the day we moved in the leaks have still been there.

So the estate agent told you that the leaks were fixed...

• Things the estate agent says aren't part of the contract

• Maybe the estate agent believed they were fixed (because that's what they were told)

• But if the estate agent knew the leaks weren't fixed and lied, in theory, that could be a breach of consumer protection law and/or misrepresentation. 

Can you prove that the estate agent knew the leaks hadn't been fixed and lied?  If you can, that might mean the estate agent has to pay you damages - i.e. resulting financial losses.  Have you suffered any? (And it would be a tough fight.)

Audi1609 said:

Is it possible to 'sell' the flat back to the Housing Association on the basis they mis-sold us the flat due to knowing the leaks had not been repaired/fixed. 

I can't see a route to rescind the purchase contract (or cancel the purchase contract), based on what you've said.

Audi1609 said:

If not, are we still able to sell on the market on the basis we currently have no freeholder.

There's no law saying you can't.

But buyers might be put off on the basis that the freeholder is in administration.

Normally, the administrator would sell the freehold building to the highest bidder - so you'd get a new freeholder in due course.


BUT... with Housing Association leases...

• The leases are usually Tri-partite (between freeholder, management company, and leaseholder.)
• The recent new laws say that freeholders cannot charge ground rent. Is your ground rent £0?

So the building's freehold might be completely worthless, and nobody would want to buy it. (Or maybe a dodgy company would pick it up for a few quid, and look for money making opportunities.)

This is probably an 'unintended consequence' of the Leasehold Reform (Ground Rent) Act 2022

Audi1609 said:

On another note, no one knows if the building insurance was renewed in February, so could we also argue with the Housing Association that this is neglect on their part?

Who's responsible for buildings insurance? (Check your lease.)

Assuming it's a tripartite lease - it might be the freeholder, or it might be the management company (i.e. the housing association).

If it's the freeholder's responsibility, it's not the management company's (i.e. the housing association's) fault if it hasn't been arranged.

Audi1609

eddddy said:

There's a lot to unpack in your post...

Audi1609 said:

We told the estate agents that if they were not repaired the sale would fall through. We were told they were repaired, bought the flat and from the day we moved in the leaks have still been there.

So the estate agent told you that the leaks were fixed...

• Things the estate agent says aren't part of the contract

• Maybe the estate agent believed they were fixed (because that's what they were told)

• But if the estate agent knew the leaks weren't fixed and lied, in theory, that could be a breach of consumer protection law and/or misrepresentation. 

Can you prove that the estate agent knew the leaks hadn't been fixed and lied?  If you can, that might mean the estate agent has to pay you damages - i.e. resulting financial losses.  Have you suffered any? (And it would be a tough fight.)

Audi1609 said:

Is it possible to 'sell' the flat back to the Housing Association on the basis they mis-sold us the flat due to knowing the leaks had not been repaired/fixed. 

I can't see a route to rescind the purchase contract (or cancel the purchase contract), based on what you've said.

Audi1609 said:

If not, are we still able to sell on the market on the basis we currently have no freeholder.

There's no law saying you can't.

But buyers might be put off on the basis that the freeholder is in administration.

Normally, the administrator would sell the freehold building to the highest bidder - so you'd get a new freeholder in due course.


BUT... with Housing Association leases...

• The leases are usually Tri-partite (between freeholder, management company, and leaseholder.)
• The recent new laws say that freeholders cannot charge ground rent. Is your ground rent £0?

So the building's freehold might be completely worthless, and nobody would want to buy it. (Or maybe a dodgy company would pick it up for a few quid, and look for money making opportunities.)

This is probably an 'unintended consequence' of the Leasehold Reform (Ground Rent) Act 2022

Audi1609 said:

On another note, no one knows if the building insurance was renewed in February, so could we also argue with the Housing Association that this is neglect on their part?

Who's responsible for buildings insurance? (Check your lease.)

Assuming it's a tripartite lease - it might be the freeholder, or it might be the management company (i.e. the housing association).

If it's the freeholder's responsibility, it's not the management company's (i.e. the housing association's) fault if it hasn't been arranged.

Thank you.

So it was the housing association (Party A.) which I believe to have mis-sold us the property (they also own 25%). The management company (Party B.) play no part in this and just manage the buildings. The Freeholder, who are also the developers (Party C.) are responsible for the insurance as per the lease. 

We have no evidence to suggest they fixed the leak, nor that they didn't. So not 100% sure how this works. 

We were told if no bidder accepts, it will go to the crown court meaning we are unable to sell for 6-12months. Is this correct (if you know). 

eddddy

Audi1609 said:

So it was the housing association (Party A.) which I believe to have mis-sold us the property (they also own 25%). 

You originally said you asked the estate agent about the leaks - and so presumably it was the estate agent who gave you a (possibly) misleading reply.

Are you now saying that you asked the housing association - and the housing association gave you a (possibly) misleading reply?

In that case, it's the housing association who might have breached consumer protection law and misrepresentation law.

But that really is grasping at straws, especially as you say...

Audi1609 said:

We have no evidence to suggest they fixed the leak, nor that they didn't. So not 100% sure how this works. 

To stand any kind of chance of winning a court claim, you'd need to convince a court that the housing association intentionally misled you.

Audi1609 said:

We were told if no bidder accepts, it will go to the crown court meaning we are unable to sell for 6-12months. Is this correct (if you know). 

I think you might be confirming what I mentioned in my previous post.

The freehold will be put up for sale. But there may be no bidders - i.e. nobody wants to buy it.  (Because, to be blunt, the freehold might be worthless.)

So the freehold will become the property of the Crown.

That might be an ongoing problem. For example, the Crown will not arrange buildings insurance - so another way will need to be found to do this.

I suspect it will make selling the flat more difficult. I'm not sure why it would become easier in 6 to 12 months.

Audi1609 said:

The management company (Party B.) play no part in this and just manage the buildings. The Freeholder, who are also the developers (Party C.) are responsible for the insurance as per the lease. 

It would be useful to know how many parties are named in your lease. I suspect there are 3...

• Freeholder (more usually described as landlord or lessor)
• Management company
• Leaseholder (more usually described as tenant or lessee)

But there may just be 2...

• Freeholder (more usually described as landlord or lessor)
• Leaseholder (more usually described as tenant or lessee)

RHemmings

Just curious here, and these are questions not suggestions.

Is it only the OP's flat that is suffering from leaks? Or do other flats in the building also suffer from leaks? 

Particularly in the latter case, but also in the former case, can the OP and perhaps other leaseholders in the building buy the freehold (between them)? That, to me, sounds a better solution than allowing it to fall back to the crown or have dodgy companies buy it and try to make a profit out of it. 

eddddy

RHemmings said:

...can the OP and perhaps other leaseholders in the building buy the freehold (between them)? That, to me, sounds a better solution than allowing it to fall back to the crown or have dodgy companies buy it and try to make a profit out of it. 

Yep - all the following are possible

• The OP buys the freehold
• The OP and some friends/fellow leaseholders buy the freehold
• The OP persuades all the leaseholders to club together to buy the freehold
• The OP persuades their Uncle George to buy the freehold 

Being a Housing Association Shared Ownership development - I'd guess there could be, say, 20 flats in a building.

But if the freehold is commercially worthless (as I suggested), whoever buys it may be unable to ever sell it again. So long after the OP sells up and moves away, they might be stuck owning a freehold block of flats that they can't get rid of.


Plus freehold ownership comes with responsibilities - some responsibilities will be specified in the lease, others will be specified in legislation. (So the OP would need to get familiar with the legislation.)


One responsibility is arranging buildings insurance. (I've never arranged insurance for, say, a block of 20 flats, so I don't know how easy/difficult that is.)

But here's 2 examples of things that could go wrong....


Example 1

• The freeholders arrange buildings insurance for £15k per year = £750 per flat

• The leaseholders challenge that as unreasonable. A tribunal agrees, and says the freeholder should have reasonably got a different policy costing £10k = £500 per flat

• The tribunal orders the freeholders to refund £250 per flat. The net result is the freeholders are £5k out of pocket

Example 2

• The freeholders make a mistake arranging buildings insurance, because of their inexperience

• The building burns down, the insurers refuse to pay because of the freeholder's mistake.

• There will then be 20 leaseholders suing the freeholder for negligence - for a total of millions of pounds

The freeholders can try to protect themselves by taking legal advice before doing anything (assuming that the lease allows them to pass on the cost of legal advice to the leaseholders - but the leaseholders might still challenge the cost of the legal advice.)


But as you can see, it could all be quite complex.