It depends on what was agreed. Your solicitor is the best person to ask your questions to but, if the agreement was basically that you pay £7k for the lease when the space has been surfaced, my first thoughts are that this is what you should do. If you've not paid anything, then you can't really grumble about not having anything for your money. As to the value, you should ascertain whether or not you can reasonably pull out. If you can, you should approach the seller with a more realistic offer that may or may not be accepted.

Assuming that the offer will be (or has been) rejected, it is for you to basically either walk away or pay £7k. If you walk away, my guess is that it is unlikely that legal action will be taken against you although you should confirm this with your solicitors.

You certainly wont get a reduction in the price unless you make it clear that you will otherwise be walking away. If they think that if they don't reduce the price, you will pay the £7k, then obviously they are not going to reduce the price.

In 2005 I bought the lease on a flat and entered into a separate contract to buy the lease on a parking space to go with it. At the time of doing so there was no indication given that the parking space's completion was going to incur some serious delays. The parking space had not been surfaced and marked out and was basically a rough piece of land used by many people. This meant that often it was difficult to find a space to park in the car park. Had I known this, I wouldnt have entered into the contract. My solicitor sent numerous letters to the seller's solicitor asking for completion dates. Most were not responded to, including one asking that it be completed by a set date.
Now, 4 years on, the seller's solicitor has written to me stating the space is to be surfaced/marked out by the end of November and that I will be expected to pay the 7k i agreed in 2005.
I have argued that the space wasnt created in 2005 when it was worth this amount and that prices have fallen considerably since then - not to mention the inconvenience to me over the last 4 yrs. I have requested a reasonable reduction in the price to reflect this, but they have refused. Would it be wise to consider court action ? What form would this take and how expensive could it be?

Steve