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No sinking fund

Hello there

I'm an FTB on a small budget.
I'm close to exchange on a leasehold flat.
It's one of five in a Victorian conversion.
I'm just reading the contract pack now to check for any problems, and attempting some due diligence.

The purchase process started in November.
Since November the freehold actually changed hands - an older couple sold it to a management company and this freehold sale completed in March. The freehold was auctioned in January by the looks of things, and interestingly my vendor offered to buy it (the freehold of the entire building) but the old freeholders turned him down (not sure on what basis - perhaps because he is a tenant? He was offering at the lower end of their price range.)
The contract pack reports that with the old freeholders, while service charge of £300 per year was collected, there are no records of what it was spent on; and extra costs were paid for on an ad-hoc basis. There is no sinking fund.
The new freeholder is likely to manage things more formally, and they have indicated that a Section 20 consultation will occur (that's for major works, right?) but they don't say what the works will be for as they are apparently still assessing the building.
My conveyancer has obtained a retainer from the vendor of £300 to cover any shortfall in the service charge.

So basically it seems to me that with no sinking fund I am definitely at risk of receiving 20% (my share) of a large bill for major works within weeks of moving in. But then again if I pull out I will definitely lose lots of money (and this wouldn't be the first purchase of mine which has fallen through).

If I complete there will probably be a large bill soon - if it was much more than a grand I'd have to get a loan to pay it. If I pull out there will be a smaller bill, not the first I've incurred in the last 12 months. I'm tempted to just go ahead and complete, because ultimately perhaps I should just swap the problems of a renter for the problems of a leaseholder and get on the ladder.

Any thoughts?
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  • davidmcn
    davidmcn Posts: 23,596
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    Ogriv wrote: »
    they don't say what the works will be for as they are apparently still assessing the building.
    What did your survey say about the state of the building?
  • G_M
    G_M Posts: 51,977
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    Ogriv wrote: »
    .....
    If I complete there will probably be a large bill soon - if it was much more than a grand I'd have to get a loan to pay it. If I pull out there will be a smaller bill, not the first I've incurred in the last 12 months.
    What works will be required?

    What condition is the building in?

    What did your surveyor say?

    Are the hallway/communal areas in need of redecoration? Do the bell systems work? Can you see broken/missing tiles on the roof? Does the outside need re-painting? What condition are the windows? Etc.

    It's not rocket science.
  • Ogriv
    Ogriv Posts: 97
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    Hello - thanks for your replies.
    As it's a flat I only got a Homebuyer Report.
    My surveyor generally did not have concerns.
    But of course the roof is not visible from the ground.
    I didn't notice anything terrible about the communal areas or any of the outside areas.
    But neither did things look brand spanking new.
    It is not obviously in a very poor state.
    But there is only so much you can see when the Homebuyer Report is restricted in what it looks at, as I'm sure you realise.
  • davidmcn
    davidmcn Posts: 23,596
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    Ogriv wrote: »
    But there is only so much you can see when the Homebuyer Report is restricted in what it looks at, as I'm sure you realise.
    It depends how motivated the surveyor is to look at stuff. Is the loft communal/accessible, for example? The roof is the most likely potentially expensive thing, so it would be best to find out whether it's perfectly sound or leaking like a sieve.
  • Ogriv
    Ogriv Posts: 97
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    From the survey it seems that the surveyor attempted to get into the top floor flat to see the roof, but no-one was in.
    All he said about the roof was the following:
    Main Roof Structure and Covering
    The main roof slopes were pitched and covered with double lap plain tiles. Very little of the roof slopes were
    visible and those that were had a moss and frost cover. Ridges and verges were in conventional detail.
    The usual weathering has occurred, including some minor erosion to mortar pointing to ridge and verge tiles.
    While no urgent action is necessary, ongoing maintenance including pointing at ridges and verges will be required.

    * Out of interest, how much does roof repair cost?
  • [Deleted User]
    [Deleted User] Posts: 7,323
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    You could ask the other people in the building. Particularly the ones on the top floor. If there are any leaks, they'll be the first to know.
  • Ogriv
    Ogriv Posts: 97
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    Interestingly the top floor flat has just been put on the market. I could always pay a visit
  • I had a similar situation and have had my fingers burnt so personally I would never buy another Leasehold property.


    I completed on a property without a sinking fund and within 6 weeks I was presented with a Sec 20 costing upwards of £14k for various works ( we are one flat of three in a Victorian Terrace ).


    The building was tired / drab and the surveyor said the condition was commensurate with the age and type of building so no real clues but common sense says maintenance will be required.


    The first £14k wasn't the bugbear but the Freeholder took his money and sold the Freehold on to another who appointed managing agents who wouldn't have stopped until they bankrupted us. They decided the work needed doing again and so the Sec 20 arrived again.


    It has been a financial and emotional nightmare and we had to go down the Right to Manage route to get some control back which is a hassle in itself as none of us has company experience.


    You already say money is tight so my advice is to walk away. The uncertainty of being presented with a bill the equivalent of a family car on demand is about as stressful as it gets because if you cannot pay it you are likely to lose your home.
  • Ogriv
    Ogriv Posts: 97
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    BBH123 wrote: »
    I had a similar situation and have had my fingers burnt so personally I would never buy another Leasehold property.


    I completed on a property without a sinking fund and within 6 weeks I was presented with a Sec 20 costing upwards of £14k for various works ( we are one flat of three in a Victorian Terrace ).


    The building was tired / drab and the surveyor said the condition was commensurate with the age and type of building so no real clues but common sense says maintenance will be required.


    The first £14k wasn't the bugbear but the Freeholder took his money and sold the Freehold on to another who appointed managing agents who wouldn't have stopped until they bankrupted us. They decided the work needed doing again and so the Sec 20 arrived again.


    It has been a financial and emotional nightmare and we had to go down the Right to Manage route to get some control back which is a hassle in itself as none of us has company experience.


    You already say money is tight so my advice is to walk away. The uncertainty of being presented with a bill the equivalent of a family car on demand is about as stressful as it gets because if you cannot pay it you are likely to lose your home.

    Thanks - yes, sounds like a nightmare. Poor you.
    It feels like a tough call. Difficult when one can only afford leasehold.
  • Ogriv
    Ogriv Posts: 97
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    My vendor does seem a bit desperate, I must say.
    He got the estate agent to ask me yesterday if I was going to my conveyancer's office (miles away) to sign the documents; or if they were being posted to me.
    Answer: I'm reading the ****ing contract report, hold your horses!
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