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Sometimes it is better not to enter the ring

13th November 2018

There was a deal lined up which was exceptional, on paper at least.  A flat in Bounds Green, literally a few minutes from the station.  Worth about £350K with a lease extension, which would cost about £25K.

We were picking up the deal for £200K.  It was an obvious deal, nothing really complicated about it at first glance.  It was at the bottom end of the property pyramid.  Yes, £350K for a property in London is classified as nearly scraping the floor.  You would be hard pressed to find boroughs in London where the average property price is below £300K.  At this price range, the demand comes from more of a need for shelter, rather than those looking for an investment and speculating.

The kicker in this deal is we could have exchanged for £1 and had a delayed completion of six months.  Enough time to negotiate the lease and resell the apartment back on.

However, the circumstances surrounding the deal were very precarious.  The deal was a probate.  Probate had been granted overseas and converted so it could be exercised in the UK.  The claimant was an overseas person, and she was in a position to sell the property here.  However, it transpired there was a parallel will floating around, and the other party was of the intention to also put a claim on the property.  If this was done between exchange and completion it would have scuppered the deal, as we would not be in a position to resell the contract.

Hence the reason to exchange with £1, and that too in a separate company which we could simply close down and forget about the property, should any issues come to surface.  IF we did manage to sell the property on and a claim did arise, it could put us as sellers at risk, since we had knowledge of the situation.  We were told in order to secure our position we should put a tenant in the property immediately from the date of exchange, as the saying goes, possession is nine-tenths of the law.

The potential upside in comparison to what we had to put in, and the structure, seemed like this was a great deal to be in.  However, once you enter any legal issues, costs mount up and it takes a lot of time and energy, irrespective of whether you are correct or not.

Perhaps five years ago I would have jumped into this deal, without a second thought.  However, having more experience under my belt, I have learned that it’s very easy to enter a deal, but when things don’t go to plan it can be tough to exit.

Suresh Vagjiani

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