Feel misled by estate agent - thoughts?

silveremploy

Hi all, 

I'm a first-time buyer trying to buy a leasehold property in London for ~£400,000. The offer has been accepted and I am a few weeks into the process after instructing my solicitor. I am posting approximate figures to avoid identifiability. 

A frustrating issue has come up in the early stages of the search regarding ground rent. This was listed on the estate agents' website and Rightmove as ~£400/an. It turns out that the actual ground rent is more than three times this amount and with a review period ~10 years closer than listed. Not only this, but it appears the estate agents simultaneously updated the advertised ground rent from the old figure to the new one as it was labelled as sold STC on Rightmove, which was about a day after I instructed my solicitor. A cached version of the advert before I instructed the solicitor shows this.

Not only does this mean I will be expecting to pay ~£1000/an more than expected, but it now sits well above this £1000/an threshold in London which means I will definitely need indemnity insurance or a DoV to obtain a mortgage. The property has a long lease (approaching 1000 yrs) and the ground rent is subject to RPI changes every 10-20 years.

I feel misled by the estate agents into this situation. I already participated in a sealed bid which means I am offering above the asking price. That alone was frustrating as my offer had been accepted before we entered this bid, but to discover this on top is even worse. Part of me is tempted to walk away entirely; part is tempted to reduce my offer as I am not in any particular rush and my very lucky personal circumstances mean I have a substantial deposit and small mortgage. I am of course talking to my solicitor about this as well.

If anyone has any thoughts on my situation, I would be very keen to hear them out. 

RHemmings

To me this looks like a very significant omission, and I'm not sure that it's accidental. But, the last is just a random guess - no specific evidence of course. But, as you point out, it's a whole different situation. 

In my attempts to see if I can buy a property for my son, I looked into a flat in London that said that it had £2000 combined service charge and ground rent. I attempted to find out the actual ground rent, and I was fobbed off. I asked the EA if they could give me the exact address and flat number so that I can look up the documents from LR, and I was ignored. Very suspicious, to my cynical eyes. I feel they are hiding something. 

If you were misled and wouldn't have bought the property given the true situation with the ground rent, then in theory you can make a complaint to the Property Ombudsman Scheme, or the Property Redress Scheme. Typically when these schemes find in the favour of the buyer, the compensation is not that large. However, if you withdraw, you might be able to get some of your fees compensated for. To do that you first have to go through the EA's internal complaints scheme, and then complain to the scheme if you feel your complaint has not been sufficiently addressed. Note that this should all be free to you. If you go through the published case studies on the TPOS site, you should (if my memory serves) find some cases vaguely similar to yours. 

In your situation, I would definitely be looking at walking away, or reducing the offer. I wouldn't just accept this. 

user1977

Does the change in the ground rent affect the overall value of the property?

silveremploy

user1977 said:

Does the change in the ground rent affect the overall value of the property?

I think so, my main concern is that 5-10 years down the line the ground rent will be approaching its next renewal period and it may be substantially harder to sell. I do not envision being in this property for longer than this unless I decide to let it out, but I do currently intend on re-selling at some point. 

AskAsk

I feel EA should be forced to get all info accurate and relevant info on a property for the sale.  They rely too much on you getting to the coneyancing stage to sort that out, and it shouldn't have to wait until then as some information are very obvious.

Like major works bill that the seller has received or been notified.

I always ask the EA for the ground rent and service charge info directly to be confirmed and not rely on the info on their website, which can be wrong.  Did you ask the EA to confirm the ground rent before you made your offer?

silveremploy

AskAsk said:

I feel EA should be forced to get all info accurate and relevant info on a property for the sale.  They rely too much on you getting to the coneyancing stage to sort that out, and it shouldn't have to wait until then as some information are very obvious.

Like major works bill that the seller has received or been notified.

I always ask the EA for the ground rent and service charge info directly to be confirmed and not rely on the info on their website, which can be wrong.  Did you ask the EA to confirm the ground rent before you made your offer?

No unfortunately not as far as I recall. We confirmed that the service charge was in-line with what was advertised, I can't remember if the same was said of the ground rent. Clearly this is something to learn for next time if I do walk away from this. 

annetheman

This IS a major omission and I usually raise an eyebrow when people recommend strangers to "walk away" instead of trying to find a way through an issue, but this is as close to a done-deal reason to as I've ever heard of. I am an active campaigner for leasehold reform, and sadly have come across MANY many stories of leaseholders trapped by onerous ground rent terms just like this (please search for and support National Leasehold Campaign, it's just a group of leaseholder [started by 3 ladies on their own] fighting for leasehold reform who have done more to instigate change in this area than any politician has in the past few decades).

Leaseholders were recently given hope that ground rents would be abolished and increases like this one phased out, but lobbyist groups succeeded in overriding our campaign for a last-minute water down of the Leasehold Reform Bill, so ground rent reform only covers houses, not flats.

This is after many years of campaigning to even get leaseholder issues on the discussion table. Who knows when flat leaseholders will next have a chance at meaningful reform? Lisa Nandy talks the talk but so did Gove; the lobbyists seem to have unfettered power here - I'm not holding out hope it'll get better any time soon and it is the main reason I am selling a flat I otherwise love.

That flat will become a massive ball and chain around your neck the minute you sign the contract; as I mentioned it is typical to hear of terms exactly like this leaving people absolutely stuck for years and having to sell at a life-changing loss just to move on with their lives.

This is likely why the EAs resorted to misleading and hiding information to secure a sale.

I can't tell you what to do but I myself would drop it like a hot potato and leave a damning review on Google for the EAs.

Gentoo365

You say you are in a good position with a decent size deposit and only require a small mortgage.

So have a look what else is available in your price range and decide if you really want to deal with this. 

It sounds like you are buying a liability and you have an opportunity to drop out before you spend any more on legal fees. 

eddddy

Just in case, you're keen on the flat, and want to look at other angles...

FWIW, you could reduce the ground rent to zero by doing something called "a statutory lease extension".

Under the current legislation, with a ground rent of £1200 pa increasing with RPI, that might cost about £60k (plus fees of maybe £5k+).

So I guess you'd want to reduce your offer accordingly.


(That assumes the ground rent continues to increase with RPI for the full term of the lease. i.e. 1000 years. Sometimes leases says RPI increases stop after, say, 50 years or 100 years. That would reduce the cost of the lease extension.)



The cost might (or might not) go down if/when the Renter's Reform Bill is passed by parliament.

But if you're considering that route, you'd probably need advice from a specialist lease extension valuer and specialist solicitor (probably not your conveyancing solicitor).

silveremploy

eddddy said:

Just in case, you're keen on the flat, and want to look at other angles...

FWIW, you could reduce the ground rent to zero by doing something called "a statutory lease extension".

Under the current legislation, with a ground rent of £1200 pa increasing with RPI, that might cost about £60k (plus fees of maybe £5k+).

So I guess you'd want to reduce your offer accordingly.


(That assumes the ground rent continues to increase with RPI for the full term of the lease. i.e. 1000 years. Sometimes leases says RPI increases stop after, say, 50 years or 100 years. That would reduce the cost of the lease extension.)



The cost might (or might not) go down if/when the Renter's Reform Bill is passed by parliament.

But if you're considering that route, you'd probably need advice from a specialist lease extension valuer and specialist solicitor (probably not your conveyancing solicitor).

Thanks, and thanks as well to everyone else for the responses so far, I do value your thoughts a lot.

Yeah a lease extension would not be ideal for those reasons you outlined. My solicitor is attempting to see if a DoV can be arranged. If this doesn't work out, I'm minded to substantially reduce my offer as I already offered above the asking price in a sealed bid (and to be honest at this rate I'm not even sure if I trust there was another genuine offer). I would also be minded to ask for a reduction anyway as I assume a DoV would probably cap the ground rent at £1000/an which is still more than double what I was expecting.

If the vendor reject this, I think I will return to the market. I would not have placed my current offer which was around 4% above the asking price if I had known about this issue. Perhaps it is partly my fault for not confirming the ground rent with the agent in writing, but I would've thought a ground rent likely to warrant insurance or a DoV would be something they'd be minded to mention. My guess is they may have assumed I would be unwilling to walk away after instructing a solicitor. I can't prove it, but it really feels very dodgy that the Rightmove advert was updated with the new ground rent at the exact same time it was taken off the market which was ~1 day after I instructed my solicitor and it does feel deliberate to me. Maybe I was a bit naive, but understating the ground rent by more than £1000 wasn't something I expected to come across. Either way, this has been a valuable learning experience and I've emotionally detached myself from the property; there are many others like it in this part of London.

Thanks again for your thoughts to all those who took the time to read and reply.

eddddy

silveremploy said:

I would also be minded to ask for a reduction anyway as I assume a DoV would probably cap the ground rent at £1000/an which is still more than double what I was expecting.

If the vendor reject this,...

As it stands, is there any reason to suspect that the freeholder would accept a ground rent reduction to £1000 per year?

TBH, if the freeholder is open to the idea of accepting a big chunk of money in return for reducing the ground rent to £1000 per year...

... I suspect they might be open to the idea of accepting an even bigger chunk of money in return for reducing the ground rent to £400 per year.



It's a matter of either

• persuading the seller to pay the freeholder a bigger chunk of money to get the ground rent down to £400 - so you'll keep your offer the same

• persuading the seller to pay the freeholder a lesser chunk of money to get the ground rent down to £1000 - and you'll reduce your offer

But it all needs to be agreed between the seller and their freeholder (and you).


(And the seller might have other ideas about doing a different type of Deed of Variation which doesn't involve reducing the ground rent.)