Flat without management company?

AlexMac

I'd echo Forefox's point about economies of scale - based on two personal experiences in the past ten years.

The 1st- a shared freehold in an early 19th Century conversion to six large flats - was self managed by the six owners who really worked well together as Directors of the Freehold Company. In consequence, insurance, service charges and shared costs at £1- £1.5k pa for our 2-bedder were half those of some comparable neighbouring blocks which we looked at when looking to move to upsize. The block was also really well-maintained as these annual charges included contributions to a sinking fund which was big enough to wholly cover major maintenance including external redecoration and scaffolding every 5-6 years at a cost of £15k.

The second block- also a conversion - was larger, twice the size, with 13 shared freeholders, and consequently not everyone was so committed to participating, and only a couple of Director/owners were left to manage, with some reliance on accountants. Annual costs at about £1k were comparable, despite there being no sinking fund, and the bigger building was less well maintained.

And to continue the anecdote, I've just paid £900 annual service charge on a much smaller flat in an estate owned by a local authority freeholder - and that in a year when no major maintenance extras were included.

So while it's probaly unfair to generalise from any one or two cases, in my experience, there seems to be a direct correlation between size and complexity of the building, size and control of (or accountability of) the Freehold Company, direct management or involvement of a commercial (or public) body and overall effectiveness and costs.

Fire_Fox

paulie2810 wrote: »

We're looking at buying a small flat to get us on to the property ladder and taking advantage of the low interest rates to save like crazy for a couple of years so we can then buy a house. So I guess if there's just been a load of work done recently then there's a good chance that (hopefully!) there shouldn't be too much needed in the 2.5 years that we're there.

Two and a half years? Property is only an investment if you are thinking in terms of ten years, anything less is a gamble as seen by the performance of the market over the last few years. It'as not a ladder unless you purchase in a rising market, and we are not in a rising market in most areas. People who bought in say 2007 are in many cases tens of thousands of pounds worse off than if they had rented! :eek:

Please do your maths carefully, you may well find if you take into consideration ALL the costs of buying and selling (legals, survey, mortgage arrangement) and ALL the running costs (insurances, service charges, ground rent, basic maintenance, mortgage payments) and compare this to rent and removals you risk making a loss or breaking even over such a short time frame. You could end up in negative equity, having to spend all your savings just to break even, no chance of trading up to a house.

propertyman

AlexMac wrote: »

So while it's probaly unfair to generalise from any one or two cases, in my experience, there seems to be a direct correlation between size and complexity of the building, size and control of (or accountability of) the Freehold Company, direct management or involvement of a commercial (or public) body and overall effectiveness and costs.

The correlation is actually the precise situation and the level of performance.

Those cheap service charges often mask buildings that are hugely under insured, cash in hand,payments to the uninsured cleaner or handyman, no method statement or risk assessments for them either, which means if the cleaning lady breaks their arm, the Directors are going to jail. That's if HMRC don't get their first.

The expensive service charges often mask rolled over contracts and commission on insurance all for the sake of convenience, and expensive overly managed cleaning contractors and expert contractors overcharging.

The point is that when you find a home, as said take a good look at what has and what will happen.

jgh

Can I bump onto this thread?
I may have found a way to foil George Osborne's plan to bankrupt me and starve me into the workhouse. I own a mortgaged Victorian terraced house that's split into two flats, and live in the downstairs one and let out the upstairs one. If I sell just my upstairs flat I can pay off most of my mortgage and continue to live in the downstairs flat. Although I will have "disposed of assests in order to pay off my mortgage" I'm pretty sure the DWP will decide that I've "disposed of assets in order to qualify for benefits", so I'll still not get and unemployment benefits, but at least my outgoings (the mortgage) will more-or-less disappear. It also means my pension will disappear, but ho hum, I'll just have to sponge off the state.

However, how easy is it to create two seperate "properties" from the one property, and what advatages or disadvantages are there for working out how to deal with maintaining common parts? I've spent the last 15 years refurbishing the whole building, so there's very little maintainance needed nowadays, I redecorate the shared areas every five years, and I vacuum the carpets. I'll still own the downstairs flat so can I be the managing landlord, or whatever the term is?

I'm planning on discussing this with my solicitor, so I'd appreciate any things I need to remember to ask about.

Thanks.

Richard_Webster

As will have been seen, there is no hard and fast rule here. This means, unfortunately for a lot of folk, that it is only when we solicitors are able to look at the whole set up and advise, that you can assess the risk factors.

There is usually no quick easy fix to get certain information from the seller or estate agents at an early stage. They usually don't have it or what you ask for isn't the most significant nugget of information.

Sometimes we get clues. If the name of the managing ganet (sorry genuine typo for "agent" - but I left it for a laugh ) or the freeholder is known this can be Googled and if you see a lot of adverse comments you might not want to proceed.

propertyman

I am a big fan of workhouses, we need them. a lot of people would give their eye teeth to have an asset to help them with the circumstances you find yourself in.

Assuming you own the freehold you have several options

-create two leases and sell one and retain the freehold
-retain the freehold and create one lease and sell it
-create two leases and sell the freehold to an investor

Te benefits are there as a safety net and rightly should not protect assets such as flat or savings until a certain level, they are not not nor intended to be a means of maintaining the status quo.

Perhaps you see it as a chance to rent both and move to somewhere you can get work assuming that you are able or not retired.

I wish you luck whatever you do.

jgh

propertyman wrote: »

Benefits are there as a safety net and rightly should not protect assets such as flat or savings until a certain level, they are not not nor intended to be a means of maintaining the status quo.

My assets were my pension, and would have provided me with an income in 20-odd years' time. The benefits system is predicated on you disposing of your future (when you are unlikely to be physically able to work) in order to stay alive today (when you are physically capable of working, if anybody will get off their arese and actully pay you to work).

propertyman wrote: »

Perhaps you see it as a chance to rent both and move to somewhere you can get work assuming that you are able or not retired.

I've tried moving to get work. I moved to Aberdeenshire for nine months as it had the lowest unemployment rate in the whole UK. After applying for and being turned down for 500+ jobs I ran out of money and had to return to Sheffield. I've applied for 1100+ jobs in the last 30 months, I'm prepared to do whatever anybody's prepared to pay me to do, but I can't even get MacDonald's to pay me to flip burgers or Morrison's to stack shelves.

propertyman wrote: »

I wish you luck whatever you do.

Thanks. I'll draft an initial letter to my solicitor before booking an appointment to discuss things.