Managing Agents Massively Screwed Up Section 42

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    Managing Agents Massively Screwed Up Section 42

    We are the freeholders to a block of flats. We own the freehold in a limited company.

    Apparently one of the flats issued a Section 42 back in April with a date of July for any counter offers.

    Our managing agents have only just told us about this TODAY and we are way out of time to counter any offers. Fuming is an understatement in how we feel.

    The offer the long leaseholder has put forward is about 9k less than the lease extension calculators suggest for a statutory extension.

    We have let rip at the managing agents we employ and they have verbally stated that we will not be out of pocket for any shortfall. We have asked for this in writing and hope to receive that ASAP.

    Does any one else have any advice? We are going through a very stressful time anyway and for this to come on top has just pushed me over the edge.

    We were just about to sell the freehold anyway as we are selling our flat and just don't want the hassle anymore of being freeholders. But to lose this money would put us in bad financial position due to the value of the freehold dropping with a lease extension as well.

    #2
    It would be a good idea to enlist a solicitor to deal with the issue and make the MA pay for the additional legal costs.

    Comment


      #3
      Is the address of your managing agent the same as the address at the Land Registry for you as freeholder?

      If you believe the figure offered is too low, you could have therefore regarded the notice as invalid and that is why you have not responded. They would then have to apply to the court to argue that the premium offered was valid - this may bring about a discussion to help narrow the gap

      Comment


        #4
        Even if your managing agent does not follow through and give you something in writing stating that you will not be out of pocket, if you can prove:

        1.) That your managing agent informed you about the S.42 application too late for you to serve a counter- notice

        AND

        2.) That you have lost out financially because of your managing agent's error

        Then I believe you have a cast- iron case against your managing agent (should it ever come to that). Making good on the loss to you shouldn't even cost your managing agent anything. Assuming your managing agent has some kind of professional indemnity insurance cover, then this should compensate you for both the 9K loss on the enfranchisement premium and also your loss on the value of the freehold

        Out of curiosity, how many flats are in the block in total, including the one that you were about to sell?

        Comment


          #5
          sgclacy,

          Thank you. Yes the addresses are the same. The long leaseholders sent it to the managing agents by royal mail. This was during lockdown, when the office was shut (working from home) and no electronic copy was sent in April. The only electronic copy we got was on Tuesday, basically the first we had heard of it.

          Comment


            #6
            Lorimer,

            We do now have an email assuring us they will cover any financial loss, thank goodness!

            There are 4 flats in the block in total. 1 we own and are in the process of selling and moving on. 2 have very low leases just over 60 years. 1 high 80s and then ours at high 90s. Typically it was the lowest lease length this situation has happened on!

            Our agents have now instructed solicitors on our behalf, at no cost to us, to see how this can be resolved.

            It has been a very stressful week! We are not big property people, we just wanted a bit of control over the property when the freehold went up for sale a few years ago, and didn't want it sold to just anyone who didn't live here. No other leaseholder wanted it so it is just us!

            Comment


              #7
              I just thought I would give an update.

              We have spoken and instructed a solicitor this morning. We are basically screwed with regards to the timing out of the Section 42. So this means we have 2 legal cases going on.

              The first that we just have to plod through with the statutory lease extension for the flat.

              The second claiming all costs and shortfall from the managing agents for our losses. This will include legal fees, shortfall of premium and valuation costs etc.....

              Its not going to be a quick or easy fix, it's going to be months of wrangling I suspect with the managing agents insurers, but hopefully it will get done sometime. Maybe just in time for us to actually sell the freehold.

              Comment


                #8
                divadee,

                I would think the easier route is to ignore the "notice" - they will then need to apply to the tribunal to force the sale. You can still argue the offer was so low that you didn't consider it a valid notice but without knowing a true valuation we have no way of knowing if 9k is a substantial shortfall.
                Of course, as this appears to be one of your neighbours have you not thought of just having a chat and striking a deal ? Thus save everyone the tine hassle and costs of tribunal and legal fees.

                Comment


                  #9
                  I suggest that you argue that the notice is invalid as the figure proposed is wholly out of line with the correct figure .

                  HOWEVER I would suggest it can all be resolved if they increase their offer by £3k , your agent stumps up £3k and you in the Interest of getting the deal done accept £3k less

                  The legal costs could dwarf these sums

                  I am left wondering whether the serving of the notice at that time was served in the hope it might fail -

                  Comment


                    #10
                    Agree with the above and would advise that in future you make sure any major assets you own are registered in your own name & address with an email included on the registry.

                    Comment


                      #11
                      The OP could only make an argument about the proposed enfranchisement figure being invalid if:

                      1. The figure that was offered was a mere pittance - e.g £1.00 when any fool would have known that the value was closer to £20,000

                      AND

                      2. The OP had responded to the notice in time - as far as I am aware, leasehold law is pretty strict on timescales and two months is all that is given for counter notice to be served

                      The leaseholder does not have to negotiate the enfranchisement premium with the OP at all now and there is no point in the OP 'ignoring the notice'. All that this would result in is forcing the leaseholder's hand into applying for a county court vesting order at which the lease enfranchisement will be completed by a Judge without further reference to the OP!

                      The OP would however be made to pick up the leaseholder's costs of the court application and hearing for getting the vesting order. This could run into thousands - further diminishing any premium that the OP would otherwise be entitled to as freeholder.

                      Comment


                        #12
                        Originally posted by sgclacy View Post
                        I suggest that you argue that the notice is invalid as the figure proposed is wholly out of line with the correct figure .

                        I am left wondering whether the serving of the notice at that time was served in the hope it might fail -
                        You can only make this argument within the time given for the counter notice and then only if the premium offered was derisory ...

                        Comment


                          #13
                          actually I think your solicitor could and should respond that the claim was a nullity because the premium is less than any tribunal would find the premium to be. I am a veteran of appealling FTT cases and I think if what you say is correct you stand a good chance of having the claim dismissed. For more info, please supply some more info. What was the amount suggested in the s42. How short is the lease. Where roughly is the property, what is the ground rent, and is it fixed or doubling. If so, how frequently.

                          Comment


                            #14
                            S42 amount - 10,052
                            lease length- 64 years
                            property location - central south coast (where everyone is flocking too currently 😉)
                            property value with a long lease - approx £160,000
                            ground rent - £25 doubling every 25 years

                            Thank you for any help in advance.

                            Comment


                              #15
                              Originally posted by Section20z View Post
                              Agree with the above and would advise that in future you make sure any major assets you own are registered in your own name & address with an email included on the registry.
                              We have learnt a bitter hard lesson about this. We will be doing this through our solicitor. We just thought we could rely on the managing agents, as they are company secretary's for the freehold company but live and learn.

                              Hopefully it will all be over one day, us moved out and onwards and the freehold sold on.

                              Comment

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