Finally nearing completion but something else irritates me

saajan_12

Dannydee333 said:

So put another way, the previous leaseholder (and not you) will owe the £2000 outstanding service charge, but your flat could be repossessed if it isn't paid.

So you're telling me MY flat could be repossessed because of someone else's debt?  How would that even be possible, when I'm the new owner with obligations to my own lender separate from anything the previous owner had in place?

Some of this stuff is utterly hilarious 🤭😄

In saying that, I'm sure that won't happen as my solicitor is making sure it's paid and I have to trust that the vendor will do the right thing.

Perfectly logical..
The freeholder barely gets involved in the transaction, doesn't check the credit of who's buying or selling the lease (if they did the process would take longer). This is fine because any debt they could be owed for ground rent or service charge is secured again the flat. 

Upon sale to you, if the bill stayed with the prior owner, it would become unsecured and the freeholder is likely to never get paid, which is unacceptable to either them or the other leaseholders who share the hit. 

Instead if it stays with the flat, then you have a better opportunity to force the seller to pay or deduct it from the purchase price, with the threat of not exchanging if they don't comply. You don't get stuck with an extra bill because the solicitor should check this and get it addressed. 

eddddy

Just to correct a myth in this thread.  The law says...

• If a previous leaseholder has not paid a service charge bill - the previous leaseholder remains liable for it.

• The new leaseholder is not liable for that service charge bill

The real problem is that the freeholder can still forfeit the lease (repossess the property), because of the previous leaseholder's unpaid service charge.

Here's the legislation that states this:
https://www.legislation.gov.uk/ukpga/1995/30/section/23


So the message is still "Outstanding Service Charges must be paid before completion" - but the reasons some people are giving are wrong. (This could become significant if there is a dispute, legal action, etc.)





If you want to see it confirmed in plain English, here's a solicitor's website:

Leasehold assignment: who is liable for the service charge debt?

Buyers can be reassured that, under The Landlord and Tenant (Covenants) Act 1995, the arrears remain the liability of the previous leaseholder and do not pass on to the new owner. However, if there is evidence of a breach of lease by the seller, forfeiture proceedings can be brought against the new owner of the flat

Link: https://www.bradysolicitors.com/brady-blog/leasehold-assignment-who-is-liable-for-the-service-charge-debt/

Dannydee333

saajan_12 said:

Perfectly logical..
The freeholder barely gets involved in the transaction, doesn't check the credit of who's buying or selling the lease (if they did the process would take longer). This is fine because any debt they could be owed for ground rent or service charge is secured again the flat. 

Upon sale to you, if the bill stayed with the prior owner, it would become unsecured and the freeholder is likely to never get paid, which is unacceptable to either them or the other leaseholders who share the hit. 

Instead if it stays with the flat, then you have a better opportunity to force the seller to pay or deduct it from the purchase price, with the threat of not exchanging if they don't comply. You don't get stuck with an extra bill because the solicitor should check this and get it addressed. 

I don't appreciate or accept the logic. It's actually illogical, in reality. Outstanding debt on the flat not being my responsibility is more logical. Chase the people who owe you money, not someone who owes you nothing.

Although I never thought of that - if an outstanding debt wasn't paid, it's reasonable to deduct it from your offer. If that needed to happen, would it hold things up, like would you need to contact the lender and tell them the new price is 2k less, or could we just withhold 2k from the deposit and deal with the details later?

user1977

Dannydee333 said:

saajan_12 said:

Perfectly logical..
The freeholder barely gets involved in the transaction, doesn't check the credit of who's buying or selling the lease (if they did the process would take longer). This is fine because any debt they could be owed for ground rent or service charge is secured again the flat. 

Upon sale to you, if the bill stayed with the prior owner, it would become unsecured and the freeholder is likely to never get paid, which is unacceptable to either them or the other leaseholders who share the hit. 

Instead if it stays with the flat, then you have a better opportunity to force the seller to pay or deduct it from the purchase price, with the threat of not exchanging if they don't comply. You don't get stuck with an extra bill because the solicitor should check this and get it addressed. 

Although I never thought of that - if an outstanding debt wasn't paid, it's reasonable to deduct it from your offer. If that needed to happen, would it hold things up, like would you need to contact the lender and tell them the new price is 2k less, or could we just withhold 2k from the deposit and deal with the details later?

Although it doesn't happen in reality anyway, you're not changing the price, just carrying out an apportionment about other costs related to the property. So no, it wouldn't involve the lender.

Dannydee333

Leasehold assignment: who is liable for the service charge debt?

Buyers can be reassured that, under The Landlord and Tenant (Covenants) Act 1995, the arrears remain the liability of the previous leaseholder and do not pass on to the new owner. However, if there is evidence of a breach of lease by the seller, forfeiture proceedings can be brought against the new owner of the flat

Link: https://www.bradysolicitors.com/brady-blog/leasehold-assignment-who-is-liable-for-the-service-charge-debt/

It feels like there is a contradiction in the above:

"You are not responsible for the bill"

"But we still might bill you or punish you for it anyway"

if there is evidence of a breach of lease by the seller, forfeiture proceedings can be brought against the new owner of the flat

...."we will make you responsible for the failings of another person" 🤭😄

Dannydee333

user1977 said:

Although it doesn't happen in reality anyway, you're not changing the price, just carrying out an apportionment about other costs related to the property. So no, it wouldn't involve the lender.

Oh I see. Well, it's nice to have an ace up my sleeve, should I need it.

eddddy

Maybe part of the problem is that you haven't grasped what you are buying.

Taking a step back....

• Some time ago - "The Landlord" (aka the freeholder) granted a (say) 150 year lease to "The Tenant" (aka the Leaseholder)

• Now - You are not buying anything from "The Landlord"
• Now - You are not paying "The Landlord" any money
• Now - "The Landlord" is not granting you a new lease

• Now - You are buying "The Tenant's" lease from "The Tenant"

• Therefore, you are becoming "The Tenant" (If you like, you are magically morphing into being "The Tenant")
  
  
• Therefore, you take over all the rights and responsibilities of "The Tenant" that are documented in the lease

None of this has anything to do with "The Landlord"

So any issues you have about Service Charges etc, have to be resolved with "The Tenant", not "The Landlord".

Dannydee333

eddddy said:

Maybe part of the problem is that you haven't grasped what you are buying.

Taking a step back....

• Some time ago - "The Landlord" (aka the freeholder) granted a (say) 150 year lease to "The Tenant" (aka the Leaseholder)

• Now - You are not buying anything from "The Landlord"
• Now - You are not paying "The Landlord" any money
• Now - "The Landlord" is not granting you a new lease

• Now - You are buying "The Tenant's" lease from "The Tenant"

• Therefore, you are becoming "The Tenant" (If you like, you are magically morphing into being "The Tenant")
  
  
• Therefore, you take over all the rights and responsibilities of "The Tenant" that are documented in the lease

None of this has anything to do with "The Landlord"

So any issues you have about Service Charges etc, have to be resolved with "The Tenant", not "The Landlord".

Thank you. I still think it's flawed tho.

I'm buying the lease to become the tenant. Any bills from before the date on which I became the owner are not mine, logically. Why can't the management company just chase the right person after I buy it? It shouldn't be my problem and I reject the idea that it is.

Anyway, if they don't pay, the figure will be deducted from the price.

I have to trust that they will tho.

macman

Dannydee333 said:

eddddy said:

Maybe part of the problem is that you haven't grasped what you are buying.

Taking a step back....

• Some time ago - "The Landlord" (aka the freeholder) granted a (say) 150 year lease to "The Tenant" (aka the Leaseholder)

• Now - You are not buying anything from "The Landlord"
• Now - You are not paying "The Landlord" any money
• Now - "The Landlord" is not granting you a new lease

• Now - You are buying "The Tenant's" lease from "The Tenant"

• Therefore, you are becoming "The Tenant" (If you like, you are magically morphing into being "The Tenant")
  
  
• Therefore, you take over all the rights and responsibilities of "The Tenant" that are documented in the lease

None of this has anything to do with "The Landlord"

So any issues you have about Service Charges etc, have to be resolved with "The Tenant", not "The Landlord".

Thank you. I still think it's flawed tho.

I'm buying the lease to become the tenant. Any bills from before the date on which I became the owner are not mine, logically. Why can't the management company just chase the right person after I buy it? It shouldn't be my problem and I reject the idea that it is.

Anyway, if they don't pay, the figure will be deducted from the price.

I have to trust that they will tho.

Because 'chasing' them may be completely futile once they have sold the lease, as the debt is then unsecured. The question I would be asking is why they have been able to run up 20 months of service charge arrears without the LL or management co. taking some action? 
You can reject whatever idea you like, but you are bound by the law as it is, not how you might wish it to be.

Dannydee333

macman said:

Because 'chasing' them may be completely futile once they have sold the lease, as the debt is then unsecured. The question I would be asking is why they have been able to run up 20 months of service charge arrears without the LL or management co. taking some action? 

You can reject whatever idea you like, but you are bound by the law as it is, not how you might wish it to be.

Exactly, why didn't they? Not my problem.

It is a stupid "law" ... but anyway, the ball is now in their court as the contract has been sent and one of the conditions is that the debt is paid out of the money from the transfer.