New build flat Milton Keynes

lukas-0704

Hi,

I am a FTB, with a deposit of about £35k, salary £24.5k, looking to buy a large (100sq meters), duplex (2 levels) flat in Milton Keynes. It is a new build flat, was for £160k for a while, and last week it has been reduced to £155k. There is also 5% contribution from the seller ( small developer ). So roughly total price is around £147k. It has above average service charge £110 a month!
So looking for advice from you,

1). What should my offer be? Estate agent who acts on behalf of the builders said not a lot of people are interested in the property as it has an odd layout, but it suits me. So thinking of putting a cheeky offer of £130k plus incentives? Also what kind of incentives could I ask for? Usual carpets, wardrobes, stamp duty, help with legal costs? Ask for one year service charge free maybe? (I know I m panicking about those!!) I know incentives aren't the deal breakers, just 'nice to have' once the price has been agreed.
Flat to be ready end of April. Not sure when the year ends for the developer so they would need to meet their targets.
About 3/4 of the estate has sold now...
2). How can I protect myself from horror service charge rises? I watched all those dispatches-like programmes, read horror forum stories about 'management companies'. What can I do to 'stay safe'. I asked the estate agent and builder who the management company is, to google them and read reviews, but apparently it hasn't been decided yet...

I know that new builds lose the value in short term, but I m hoping to live there for at least 8-10 years. Also I have been looking on rightmove for the last 6 months, and flats in the area are all in similar prices, with a lot of flats having similar 'service charges'.

Thanks for your help!

Wilma33

How do you know the service charge is £110 a month if they haven't decided who the management company is yet?

lukas-0704

Strange I know! I was told it is going to be £1400 per year. Then the builders rep went on about that some of it goes to the 'sink fund', and that possibly the residents 'choose' the management company. I think it must have been decided but they didn't have the name on file. They said if I was to buy it then the solicitor would find out the information. The EA said they will try and get the name for me tomorrow.

Fire_Fox

Are you sure three quarters of the block has sold (completed), or is that estate agent speak for under offer or lots of interest? If it has sold what have the other flats sold for according to Zoopla? Are the developers going to keep hold of or sell the freehold title?

Why is the service charge on a new build so high, are you getting a gym or concierge or similar higher end service? Is that all service charge or also including the buildings insurance and ground rent? You can't prevent service charge rises but they do need to be "reasonable" and "reasonably incurred". You can keep a careful eye on and query them, asking in writing each year for a breakdown and to view the invoices, you could start a tenants and residents association so you have contact with the other owners. It is helpful to know that even service charges that have been paid can be challenged, indeed you only have very limited legal rights to withhold charges even if you are unhappy.

Everything you need to know about leasehold, much better than TV shows that are all too often inaccurate http://www.lease-advice.org/publications/
You might ask for a very low ground rent, they should be able to agree this, it would be attractive to future buyers, reduce the cost of extending the lease (if 100 years now would ideally need to be done within 20 years). Or ask for a longer lease.

Many lenders subtract the incentives from the purchase price and then undervalue. Don't set a completion date without having appointed a professional snagger.

ETA cross post: sinking fund is VERY good news. :T Don't let them fob you off with saying the solicitor will do that, it costs money to pay a solicitor you are right to query yourself - do so by e-mail or letter so you have a proper record of what was said, ideally directly with the developer in case the agent makes a 'mistake'.

lukas-0704

Wilma33 wrote: »

How do you know the service charge is £110 a month if they haven't decided who the management company is yet?

Ideally I wish I could buy a house to avoid stupid management fees, but cannot afford one unfortunately. There are some flats in central Milton Keynes that have £200 per month service charge. I heard of thing like rights to manage, if half of residents aren't happy etc, just don't wanna have to do all this as soon as I move in. Plus some flats will be avilable on shared ownership (not my direct neighbours) but in the same building, so how would I find half the owners? I m really confused and panicking about the service charges (the only thing that puts me of the flat), and I m very fussy, I ve viewed quite a few properties within a 20 mile radius!

lukas-0704

Fire_Fox wrote: »

Are you sure three quarters of the block has sold (completed), or is that estate agent speak for under offer or lots of interest? If it has sold what have the other flats sold for according to Zoopla? Are the developers going to keep hold of or sell the freehold title?

Why is the service charge on a new build so high, are you getting a gym or concierge or similar higher end service? Is that all service charge or also including the buildings insurance and ground rent? You can't prevent service charge rises but they do need to be "reasonable" and "reasonably incurred". You can keep a careful eye on and query them, asking in writing each year for a breakdown and to view the invoices, you could start a tenants and residents association so you have contact with the other owners. It is helpful to know that even service charges that have been paid can be challenged, indeed you only have very limited legal rights to withhold charges even if you are unhappy.

Everything you need to know about leasehold, much better than TV shows that are all too often inaccurate
You might ask for a very low ground rent, they should be able to agree this, it would be attractive to future buyers, reduce the cost of extending the lease (if 100 years now would ideally need to be done within 20 years). Or ask for a longer lease.

Many lenders subtract the incentives from the purchase price and then undervalue. Don't set a completion date without having appointed a professional snagger.

Getting no extra services, purely the 'up keep'. Well yeah it includes the insurance, but nothing else. There is no garden, stair case is part of the flat already, the total area of the flat is 117sq meters with the stair case which is BEHIND the doors, belongs to the flat. Ground rent isn't too bad, it's £250 a year. There is a 125year lease. I believe a lot of flats have sold, but they were all standard 2 bed flats for £140k. Mine has a strange layout (downstairs: living/kitchen area, 1 good sized double bedroom and a bathroom, upstairs: huge bedroom with ensuit, so like a flat with an extra loft conversion).
And EA was a young lad my age, saying people don't like the layout, and to put an offer to the developer... So I think I can go cheekily low... I know all EA are extremely commission driven. I do believe the flat is probably fairly priced, but 'you don't ask you won't get' so if I can get it cheaper I am not going to say no...
I know incentives are subtracted, I have a good deposit so not too worried about minimum LTV % etc.

Is there anything I can do t avoid service charge? I guess I can't buy free hold?
So who actually owes the building?

lukas-0704

I know I m asking loads of questions, but I have done a fair bit of research, don't wanna be ripped off. Even if there is 'sink fund' can't they still throw a massive bill for 'painting the wall with Swarovski paint'?
Would rather get all the answer BEFORE I put an offer in haha! Thanks for your help all!

Keith

lukas-0704 wrote: »

, I ve viewed quite a few properties within a 20 mile radius!

Really? And you ended up with a flat in MK? Rather than one of the small towns/villages?

lukas-0704

Yeah, looked in Northampton, leighton buzzard, bletchley, fenny Stratford, wolverton, even rugby. There are some houses, but they all 2 beds, and really small bedrooms ;-( seen a nice big flat in Northampton but again it was 150k and really old building, no parking at all. So I prefer MK. there are cheap properties in MK, but they are in fishermead or leaks estate... So not very nice areas...

Fire_Fox

lukas-0704 wrote: »

Getting no extra services, purely the 'up keep'. Well yeah it includes the insurance, but nothing else. There is no garden, stair case is part of the flat already, the total area of the flat is 117sq meters with the stair case which is BEHIND the doors, belongs to the flat. Ground rent isn't too bad, it's £250 a year. There is a 125year lease. I believe a lot of flats have sold, but they were all standard 2 bed flats for £140k. Mine has a strange layout (downstairs: living/kitchen area, 1 good sized double bedroom and a bathroom, upstairs: huge bedroom with ensuit, so like a flat with an extra loft conversion).
And EA was a young lad my age, saying people don't like the layout, and to put an offer to the developer... So I think I can go cheekily low... I know all EA are extremely commission driven. I do believe the flat is probably fairly priced, but 'you don't ask you won't get' so if I can get it cheaper I am not going to say no...
I know incentives are subtracted, I have a good deposit so not too worried about minimum LTV % etc.

Is there anything I can do t avoid service charge? I guess I can't buy free hold?
So who actually owes the building?

Look on Zoopla at land registry sold prices for the development and area if you have not already done so, ignore for sale prices in a recession. Also remember that £140K could be artificially inflated by all the 'incentives'. Presumably the building is presently owned (freeholder AKA superior landlord) by the developer tho they may wish to dispose of their interest - sometimes the company that buys will manage the place so administer the service charges so that could well be why they don't know who will be managing.

Freehold flats are virtually unmortgageable in England, all new builds/ new conversions are leasehold precisely to force leaseholders/ longhold tenants to insure and repair the property together. If the leaseholders got together and purchased the freehold from the developer - you have to be offered first refusal by law - they would wear 'two hats' each and be party to two titles at land registry, still be a leaseholder but also own a share in the company that owns the freehold. The property would then be marketed as a "leasehold apartment with a share in the freehold", and you would effectively be your own (superior) landlord!

You cannot avoid service charges as they are a contractual obligation, you have to insure and maintain your investment that is part of being a homeowner. You can limit service charges by self managing but it is a thankless task (my father is chair of the board at his block). Or you can limit them by being all over the management company/ freeholder/ managing agent, putting queries and lodging complaints when there is poor service.

IME that is really worth doing, I saved thousands by discovering the cleaners were contracted to and invoicing for cleaning the corridors twice a week (more like once a month), windows monthly (more like once a year) and the caretaker was double charging for changing lightbulbs. Bunch of con artists.

Do you have a lift or heated communal corridors? If not I'd want to know what the hell they intend to do with £1400 a year on a brand new building. 125 years is good, get that ground rent down if you can they have total control over that, also check there are no sneaky clauses doubling it every five or ten years.

There is a lease extension calculator on the LEASE site which shows you the different costs of extending the lease - the cost can be halved if you only had a £50 ground rent and that saves you £200 a year as well. At the end of the day you get nothing for ground rent, it's just money down the drain. http://www.lease-advice.org/

lukas-0704 wrote: »

I know I m asking loads of questions, but I have done a fair bit of research, don't wanna be ripped off. Even if there is 'sink fund' can't they still throw a massive bill for 'painting the wall with Swarovski paint'?
Would rather get all the answer BEFORE I put an offer in haha! Thanks for your help all!

Your questions are good, much rather people did their research as you are than buy blindly.

Any major works costing over £250 per flat must be consulted on - procedure is in the articles on the LEASE website I linked to, it's a superb site I highly recommend you invest time reading it. That means you get to have a say, what is done and what is not, who the contractor is. Costs must always be reasonable, reasonably incurred and works to a reasonable standard. They'd struggle to justify Swarovski paint if you went to a Leasehold Valuation Tribunal.

If there is a good sinking fund I'd expect decorating to come out of that. The only time you could still get a hefty bill is if something massive happens to the roof or lift (full replacement) and there is not enough in the kitty. Not likely on a new build.

lukas-0704

Yeah I heard about each flat owner being a director in a ltd company, is that what you mean? Yeah I would love to do that, just can't see it happening at the beginning... Plus, surely they will want ridiculous money. I understand that building needs insurance etc, but don't think £1400 a year from like 30 flats in the building?!?! If you don't mind me asking from your / your dads experience how difficult it is to sort out? Ie getting all residents on your side etc? I m not one for communal monthly meeting etc, but I m the one for saving money haha. Also, no lift, no cleaner as stair case belongs to flat so I will obviously clean and heat it myself... So exactly !!!!!! they doing with £1400?!?!
Is there anyway of asking to have it reduced on the basis that there is no lift, stair case etc?
Also zoopla says the flats sold for 140k, but this flat is completely different. As said I think it's worth the price, but wanna offer less, it's a developer I don't feel guilty/sorry. Go with 130k and expect a decline?