Dishonest and neglectful freeholders

by Readers Question

8:28 AM, 11th February 2015
About 4 years ago

Dishonest and neglectful freeholders

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Dishonest and neglectful freeholders

The freeholders of the property my flat is in have neglected the building for years and deceived at every opportunity. I purchased a two bed leasehold flat last year with a lease of 61 years for 75K it was in need of total refurbishment, 16K worth.

I will use it as a holiday let which I have experience of doing and will give a better yield probably close to 15% based on my recent experience. The resale on my flat with all the work done and the lease extended would be in the region of 120K although I don’t think that I will want to sell for 5 years or so. Obviously a challenging set of circumstances but I am in it for the long haul.

The two other flats were owned by freeholders who each hold 50%. One of these flats, one bed, has just been sold last month at auction for 72K with an extended lease and increased ground rent. The new owner lives abroad and has bought the flat as a long term investment. The flat had been on the market for a year at 120k. The freeholder who as just sold this flat, let’s call him F1, has retained the 50% freehold.

The remaining flat owned by the other 50% freeholder F2 is in an appalling state of repair, like something out of the 1950’s has been let to the same family for 10 years. However it is a bigger flat with 3 bedrooms and has nice views. I would prefer to own the 3 bed flat.

The freeholders are asking for 20K to extend my lease 5K higher than the valuation and want to hike up the ground rent to £250 going up to £900 over the coming 15 years.

F1 has consistently lied and misled both myself and the new leaseholder. The freeholders are not aware that I am in communication with the other leaseholder so his lies are all the more transparent.

The building which was originally a modest Victorian semi villa has had no maintenance in decades. The cost of repairs which will be split between the three flats is estimated by my builder at 24K. F1 has said no maintenance or repair work has been done because the leaseholders wouldn’t pay for it, neglecting to mention that the two leaseholders were also the freeholders during this period. He claims 24K for the work is too much and overpriced, it isn’t. He has an estimate which proposes a limited amount of work totalling 14K which addresses most of the issues that affect F2’s flat.

He is telling each of us new leaseholders that it is the other new leaseholder who is capping the level of work and has agreed to the cheaper estimate. We know that is not case as we are talking to each other. F1 is saying that the other leaseholders have agreed to go ahead and that he wants to be paid next month.

We have each independently asked for a comprehensive estimate covering all the work and at least one more estimate and for a Section 20 to be issued but he refuses saying that the other leaseholders don’t want to do it that way. The new leaseholder and I are prepared to pay for all of the work to be done, as both our flats are badly affected by the damp the lack of repair is causing.

The need for the work is evident so we purchased prepared to take pay for the work when we bought our leases oddly each of use is liable for 35% of the costs according to the leases. F1 has said that he will get his preferred builder to quote for the additional work and we are asking for at least another estimate. All has gone very quiet. At no time have we had any sign that F2 has been involved with these negotiations.

There are no accounts for the managing agents which is a defunct company registered to F1 and F2. A service charge of £200 per flat per year is levied without any statement or explanation of what it is for. The insurance on the building I am sure would be void because of the state of repair. Tiles have been falling from the roof during last year.

We really don’t know how best to proceed any advice?

Triciadis



Comments

Neil Patterson

8:30 AM, 11th February 2015
About 4 years ago

Hi Tricia,

The good news I can see is that apart from the current hassle it still looks like you have purchased a good investment.

Can I ask in an ideal world what you would like the outcome to be?

Ian Narbeth

11:41 AM, 11th February 2015
About 4 years ago

Hi Tricia, it's not my specialist area but you could look into setting up a Right to Manage company see e.g. http://www.lease-advice.org/publications/documents/document.asp?item=21

You and the other leaseholder should also look at the terms of your leases to see what obligations there are on the landlord to repair etc. You may be able to compel the landlord to do the work and to claim damages for having failed to do so in the past thereby increasing the cost now of sorting out the disrepair. I suggest you take legal advice.

Neal Craven

12:59 PM, 11th February 2015
About 4 years ago

Need specialist legal advice. Depends on the terms of the lease and stature.

Tricia Bugden

14:55 PM, 11th February 2015
About 4 years ago

Reply to the comment left by "Neil Patterson" at "11/02/2015 - 08:30":

I will take legal advice about the status of repairs and getting that sorted.
With regard outcome I'd like of course to increase the value of my investment but I was wondering if I should be looking to be more creative. I have about 20K that will be spent anyway on lease extension and repairs. May be there is a better way of spending that even if it means spending a bit more...buy the freehold?
Not that I have any idea how the value of the freehold is calculated or if they will sell. Buy the freehold with the other lease holder? Try to get F2 to sell me his dilapidated flat with 50% freehold. The value of the freehold if primarily the renew of my lease do I say I don't want to extend my lease until I have owned the flat for two years but I will buy the freehold. Whilst a value legal advise my experience is that they always advise against any risk. I ended up using an inexpensive conveyancing service because my usual lawyer was freaking out over this flat.


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