OK, I have already admitted how I have lost my head on this London flat.
While I may be wearing my heart on my sleeve, I haven’t taken complete leave of my senses.
The past few weeks have been a whirlwind of research, research and yet more research.
Buying property at auction can be a minefield and you have to know what you are getting yourself into to ensure when you bid you’re happy you’ve bought!
So true to my own advice (yes, I practice what I preach!) I have had the legals checked, had the surveyor’s report and done all the estate agent comparables. I’ve also been talking to some of the residents and owners who currently live at the block to find out more.
And it’s this more which you always need to know about.
Because this more is sometimes what you don’t know about until its too late.
So while I have been talking to my (hoped-for-would-be) neighbours I have learned about the heating replacement programme which is planned for the block. The flat has a communal heating and hot water system which is due to be replaced shortly by the freeholder. Now while I knew these major works were on the horizon (the letter had been included in the legal pack), what I didn’t know was the anticipated cost of the replacement per flat.
Given it costs around £3k for an entire new central heating system in a house, I decided that was a fair estimation to work with. But, when I spoke to the owners I got a shock – they informed me the cost was more likely to be around £6-10k per flat.
That is a heck of a lot for FOUR radiators! Admittedly, they’re connected to a mains boiler – but still you get my drift. That is way more than what I ever would have expected to pay as a “contribution” for this sort of works.
And so it has preyed on my mind about these costs – which have never been verified and which no further information has been provided by the seller.
Concerned with the potential size of the bill, I therefore decided to take matters into my own hands and contact the Contracts Manager who was overseeing the works to see if I could get a better idea of the costs involved.
As luck would have it, he understood my desire to plan my future budget and he replied to my question with an estimated cost for the replacement heating works.
My jaw FELL OFF MY FACE!!!!!!!!!!!!!!!!!!!!!!!!!!
I looked at the email again – perhaps he had put the comma in the wrong place?
Really, did he really mean to write £12,000 as a contribution to the heating system for a 1 bed flat – I could rebuild the flat for less than that!
So I called him.
I just had to ask him “Are you really, seriously sure about your figure of a £12,000 contribution per flat towards a gas central heating system?”
“Yes, really” was his reply. “It’s estimated at £12,000 per unit”
“Seriously” I challenged him: “Are you sure? I just need 4 radiators – that seems a bit pricey….?”
“Yes” he replied again: “Those are the estimated costs of the communal system. This system will last 25 years and in that time if you had your own domestic boiler you would probably have to replace it 2-3 times and so this makes economical sense in the long term. Remember, though this is an estimate and once we have properly consulted residents we will know if that price will go up or down”.
“UP???” I heard myself squeak…
Oh my Lord, I think to myself, is this a gold plated boiler?
So I say to him: “Listen, I understand about this communal system and all, so what I am thinking, is that maybe I could just opt out – I will just get my own system, as I don’t think it’s going to cost me quite as much and I feel I could budget better”.
“No, you are not allowed to opt out” He replied. “If it is decided we are replacing the communal system then every owner must contribute and must pay”
“I see” I replied – although I didn’t really see – because I still could not fathom how the replacement of central heating in a one bed flat could possibly be estimated at £12,000 – even if it is anticipated to last 25 years!
Shocked by my discovery I called my solicitor who I could hear choking on his morning cornflakes. “How much for the central heating system?!” he spluttered down the phone.
“I know” I acquiesced “I do believe it would be cheaper to fit a commercial wind turbine on the roof – however I doubt my lease permits that”.
So what to do?
Well, the easiest thing would be to build the £12k estimate into my bid price. As of this moment, I should now bid £12k less. However, if I do this I think I will scupper my chances of auction success. The fact is: very few people will have gone to the effort of finding out the actual estimated figure – the majority will make an individual estimation which I doubt very much will see them planning for a £12k contribution.
So I have a quandary: I am now in possession of information which adversely affects the price I was going to pay for the property…but it’s information which most other people will not know. Which means they’re likely to bid more for the property because they don’t know about the size of this potential bill. Which means I am more likely to get outbid…
What am I going to do?
Honestly, I just don’t know.
I cannot decide how best to quantify the potential estimate of a £12k bill – will it really be £12k in the end?
And if I bid £12k less than somebody else and they win it will I regret it…or if I bid the same as I was going to and I end up with a £12k bill (or higher) will I regret it…and what if the actual bill ends up being much lower than the estimate…?
I guess it’s all about probabilities…maybe I should just flip a coin?
wow, I dont envy you, however I think you done the wise thing and found out about these anticipated costs up front. In my mind you are one step ahead of all the people who will be bidding..maybe you can contact the owner and offer them a price prior to the flat going to auction?..however you know that love conquers all 😉 and if you have to have it, it doesnt matter what price it is :). good luck. will be interested to read follow ups
Yes, I have already tried to offer before auction, but it has to go to the room. Will keep you updated.
Simon – I so know you are right. Have I failed to mention that they also haven’t included the expected and desired three years service charge accounts… My solicitor is not very happy with my decision to continue to bid. However, I have now worked out a “buffer”. If this was a straight investment I would run, but it’s not which appears to see me doing things differently…
The bigger picture is what happens when you buy the place? By knowing they are going to royally screw you on a central heating system, you know that they will royally screw you on everything that needs replacing – what about the roof? If that comes up, you can bet they are not going to the most expensive provider. A central heating in a typical terrace house is around £2,500 (ish). Around £1,000 is for the boiler. The boiler may need replacing every 10 years or so, but the pipes and radiators shouldn’t. Therefore he is trying to explain away a five fold increase in cost as “but it’ll be cheaper in the long run”.
I’d run a mile and find somewhere else.
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