9:32 AM, 16th January 2023, About 2 years ago 22
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Hello, Firstly thanks for taking the time to read my article/questions.
I have recently acquired a property and freehold which comprises of 5, 1 bedroom flats. 3 of which are owned by myself two of which have separate individual owners.
For ease, and anonymity, I am going to call the individuals “A” and “Z”.
“A”, resides in their flat and has been paying ground rent, insurance, service charges etc on time, in full, upon invoicing. A real pleasure to deal with.
“Z” has invested in a leasehold property, which they rent out to a paying tenant. They (‘Z’) are frequently late paying service charges, rarely pay in full and often are being chased for their contribution to all associated costs.
“Z” has an un-mortgageable property as the lease left on the property is less than 65 years.
“Z” and I have had numerous conversations about renewing the lease, which I am happy to do, but he is not willing to pay all the costs associated and actually can’t believe that the costs involved are so high. (In excess of £10,000).
This year, following on from some bank valuations I had done throughout my property portfolio and looking at the leases granted to both “A” and “Z”, I could see that the external of the property is to be maintained and repainted every 7 years.
I spoke with both lessees verbally after meeting with them to issue them with the year’s invoices regarding the lease and we all agreed the property would benefit from paint and remedial works.
The works would require a scaffold around the entire property, new guttering/fascias where applicable, two coats of a high quality paint, some rendering in areas where it has fallen into disrepair and, of course, whilst the scaffold was erect, we would take the opportunity to survey the roof.
To try and progress the works, this was initially quoted at around £13,000 (a great price of yesteryear) and passed on to both lease holders, with their contribution being around £2,600 each.
‘A’ was delighted and sent a cheque to proceed.
‘Z’ involved a solicitor, baffled that he has to contribute, which then meant we had to formalize the process, serving section 20’s and delaying the works.
After formalising the process, wasting a load of time, having someone come to survey the property, we are now faced with quotes of £38,000 + VAT and £29,000 (no VAT).
The consultation period has now ended, of course I have decided to proceed with the £29,000 quote and in such a fast moving world we’re now want to progress this before were hit with even higher build costs.
I have received a cheque for £6,000 (approx) from ‘A’ for her 1/5.
I parted with my £18,000 for my 3/5.
Once again, now we have requested payment for £6,000 from “Z”, he disagrees, despite no communication throughout the consultation period.
Of course. I want to continue with the works, how does this end?
Can I recover the costs and interest?
Can I put a charge over his property?
Any help would be greatly appreciated.
Thanks in advance,
T.
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Simon F
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Sign Up11:21 AM, 17th January 2023, About 2 years ago
When something unexpected comes up, some people just want someone else to blame -- so it might be diplomatic, when you meet, to show a little sympathy but then suggest the fault perhaps lies with the solicitor Z used when buying the flat for not properly informing Z of all the lease obligations prior to exchange.
Puzzler
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Sign Up13:17 PM, 17th January 2023, About 2 years ago
Tom, no the informal discussion won't count against you but if you relied on it for agreement then Z could get out of paying more than £250.
You can't secretly record the meeting (at least it then can't be used in court) but you can record it saying it's to help writing it up.
If they have agreed to meet that is a good sign, but as suggested take a witness, preferably someone who understands the lease and legislation.
You can only put a charge on the property through the courts
Tom Body
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Sign Up14:07 PM, 17th January 2023, About 2 years ago
Reply to the comment left by Freda Blogs at 17/01/2023 - 11:10
great advice, thanks for this,
myself and my wife usually take the Meetings together, where we take notes "minutes" and have them sign at the bottom.
this has been the case with his payment plans etc.
however, as we're now taking about £6,000 and not £120 for insurance etc, I may involve a solicitor.
Tom Body
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Sign Up14:10 PM, 17th January 2023, About 2 years ago
Reply to the comment left by Freda Blogs at 16/01/2023 - 13:07
freda,
thanks again.
I hadn't considered writing to the the lender.
this is all hypothetical/speculation as it stands as we haven't given a start date for works, neither raised an invoice for the works.
he may arrive at the meeting with a cheque (doubtful)
great advice again.
thanks
Smiffy
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Sign Up8:31 AM, 18th January 2023, About 2 years ago
As he's not living there, you could just offer to buy him out. It would solve everyones problems.
Tom Body
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Sign Up9:44 AM, 18th January 2023, About 2 years ago
Reply to the comment left by Smiffy at 18/01/2023 - 08:31
This has crossed my mind....
could be a good option to explore.
Thanks.
yl2006
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Sign Up8:30 AM, 19th January 2023, About 2 years ago
TLDR: follow the Section 20 procedure.
Work by a landlord that requires any lessee to contribute more than £250 as a one off or £100 per year falls under Section 20 legislation. The procedure is exact and failing to follow it could limit the amount you can recover to the figures above meaning that, while its good practice to have a discussion, you really need to follow the procedure to avoid being left seriously out of pocket.
The lessee is not obliged to pay up until the work is completed and invoiced; it’s your responsibility to find the funds to complete the work. Some landlords incentivise lessees to contribute to the cost earlier by agreeing payment terms with them (instalments, flexible payment terms, etc). There is also a time limit to invoice if you don’t want to lose your money.
Once (properly) demanded, the lessee is obliged to pay up If he is unwilling to do that at that point, I’ve found that (the threat of) a letter to their mortgage provider pointing out the risk of forfeiture due to breach of the lease terms usually does the trick and funds will come promptly thereafter, from the lessee or lender.
Tom Body
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Sign Up8:55 AM, 19th January 2023, About 2 years ago
Reply to the comment left by yl2006 at 19/01/2023 - 08:30
great advice and well written response,
thanks for this.
i have passed all my work to date on this, to a solicitor to ensure i am fully compliant.
a quick check of my section 20 procedure and correspondence will determine how i handle the F2F with 'Z' next week.
im a huge fan of the letter to the mortgage company route, something i hadn't previously considered prior to posting on property118.
thanks
T
Jan
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Sign Up9:33 AM, 21st January 2023, About 2 years ago
Good luck with this. We've recently been in a similar position, one leaseholder who felt they shouldn't need to pay towards roof repairs. If we'd carried on informally, just fixed the issue immediately while we had a trusted builder and scaff in place already for an inspection, we'd have saved a fortune. Instead it took years, paying for a surveyor, legal processes, tenders etc and a project manager and solicitor. The leaseholder who didn't want to meet their legal obligations cost all the owners a fortune, including himself. It would have been cheaper for the rest of us just to have paid his share. it was a cash purchase, £500k+ property, no mortgage company to approach, owner not short of funds. We didn't want to risk future problems without S20 and took the proper route. I'll never buy another leasehold property.
KD South East
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Sign Up12:14 PM, 21st January 2023, About 2 years ago
Bernie Wales is good for all leasehold matters.
However your quotes do seem a bit high.
I live in the south coast and scaffolding here on the front of a 3 story building was only just over £1k so even if your place is huge then should only be around £6 -8k. If you're paying 3 contractors £200 a day (high wages) for 3 weeks that's £9k. Then supplies. £29k seems a bit high to me. I might be wrong.
Why not ask Z to get a few quotes (with the spec you've written ) and see what they come up with. At least then they'll have a better understanding of the costs involved. Although it does sound like they have an issue paying anything if they can't even deal with their regular low costs.
Perhaps you could also suggest increasing the annual costs a bit to put some aside towards future maintenance costs. (If that's allowed).