What to do when buying a flat

fluffpot

Many thanks for posting - very informative - have booked marked your blog for future reference

Edward_Squid

Propertyman, could you please explain further the idea of "share of freehold" for me. If it is a nonsense, why are Estate Agents/Vendors allowed to use this term?

We are first-time buyers currently looking at a maisonette offering a 1% of the freehold. Is this worth anything whatsoever? There are no Service Charges and no Sinking Fund, only Ground Rent so, as I understand it, the 1% held by each of the leaseholders enables them to agree and commission any maintenance on the building without consulting the freeholder, sharing the cost between them. Does this sound right?

silvercar

On a purpose built 2 year old flat, would you have a full structural survey or a home buyers report?

Also, is the valuation going to do anymore that look at comparables (which is fairly obvious given that there are new flats still being sold).

Richard_Webster

Propertyman, could you please explain further the idea of "share of freehold" for me. If it is a nonsense, why are Estate Agents/Vendors allowed to use this term?

'll join in if I may. Iwas going to doa 3rd party bump as the first post is rteally good!

OK, "Shared Freehold". This expression means that the freehold is owned jointly by the individual flat lessees or by a company which is in turn ownedf by them.

This gnerally means in practice that ground rent specifrifed inthe leases is not collected and some of the lease terms are not enforced. The dificulty is that many folk end up assumingthat what often happens is what must happen - that somehow there is a separate set of rules for "shared freehold". There isn't.

If there is no trust deed stating to the contrary then if the freehold is literalky owbne dby uop ti 4 flat lessees they have to make unanimous decisions to exercise any discretionary powers that they have in the lease wording e.g. not to enforce a particualr covnenant. If a trust deed syas the majority can decide that that apply - but most such small "shared freeholds" - typically a house divided into up to 4 flats - do not have a trust deed.

If the frehold is oqwned bya company the sharehodlers or members of which are the flat lessees thenthey can decide things in company mdeetings - theprobllem often there is thata small group

cluelessoncanvey

I am a first time buyer looking at getting my first property and flat is all I can afford. My question is regards to his advice, it takes time, what's the negotiation phase, is that when you make your initial offer or later on. Reason I am asking because here in Southend property seems to be going on the day its advertised (or the day after if you are lucky). In such a situation you haven't got much time to do checks as someone else will grab it from under you. (I have only been studying the market for 2 weeks, its just what I've seen and heard so far).

Also what's the best survey to have done on a flat, the cheaper one or the full works, is it worth paying for that if they can't actually examine the full structure?

R_H_Goldsbrough

I am a first time buyer - many thank for the advice

george4064

I had to think for a while what 'EA' stands for!

Finally got it, must be estate agent?

cautious_mum

Very informative post.
What is the difference with the Scottish system (I assume this is the English system?)
or is there a link to a similar guide for Scottish flat buying?


Thank you

seven-day-weekend

propertyman wrote: »

A few thoughts for the flat buyer.

You will make your own decision about decor, lifestyle, and location, but there is a lot more than that to the price you offer.

What you will read below may have little effect on that, but can very often have a substantial, and even scary, effect on the initial agreed price. A vendor may not agree to a reduction, happy to try again, and, as you will lose money and time and your dreams and plans dashed, you might compromise.

EAs often play on this, encouraging the tough questions to be asked later and “sorted by solicitors” who in turn often only highlight the big issues late in the day. Similarly your survey and valuation and request for information from managing agents or freeholders can take a couple of weeks and important issues come to light late in the process.

As you can see the assumption is that the price is accurate and legally physically and organisationally, all will be well. The problem is that where it isn’t, you are often on the back foot in renegotiation as your move and all the related changes will be planned.

What I outline below runs contrary to established routines but will help you, and not the EA or vendor, so be patient persistent and polite with them.

It is important to try and extract the information needed from the vendor at the negotiation stage, as it is often to hand or available online with better managing agents or freeholders, and not later.

Step I What you can’t See -understand that you are going to need to check, with professional help, the hidden issues of services and utilities, the plumbing boilers and electrics.

Step 2 Revisit - the property and locale several times especially in the evening and weekend; inconsiderate neighbours, not enough parking and people lurking nearby might not be apparent on a Wednesday afternoon.

Step 3 Is “what you see, what you get?”- roof terraces gardens might not be included so ask the vendors or EA to confirm that there is right to use it or own it, a few pots shrubs and a deck chair doesn’t mean that the roof is yours or that space to park doesn’t mean you can.

Step 4 Its never too early to Read the Lease- this is favourite put off by EA’s anxious to sell and have you on the backfoot when issues arise. The lease is available online at the Land Registry and some Vendors might even have a copy.

-Length of the Lease- A flat with 122 years and an identical one next door with 75 years have vastly different sale values, which is often not taken into account by the EA’s “ valuation” for sale. It is essential that the lease, no matter who owns the freehold, is long enough to be a long term investment for you. You are buying the lease of a flat for X years which in theory is handed back at the end and is therefore a valuable long term investment. Postponing that by extending the length means that the landlord ( whether a freeholder or residents group that own the freehold) must be compensated. That makes big difference to your offer and if the lease is offered with an interest in the freehold, there is no guarantee that the extension is “free”.

-Ground Rent - this is a mandatory payment and can vary from a peppercorn a year, to several £000, which, in many modern leases is regularly, and often hugely, increased. Not only is this, for you, a lot for nothing, it can significantly increase the cost of a lease extension.

-Restrictions- Just because you own it doesn’t mean that there are no restrictions on pets, the right to let it out, alterations, or installing the devils floorboards-laminate flooring.

-Who Does What- you are buying a drawer in chest of drawers and in most cases someone else is responsible for the rest and you pay a share for that. Even in small converted houses that does not mean that the work can be done DIY or by hiring a Chum and costs are therefore often higher and out of direct control.

In some cases you are buying a layer of a cake and are responsible for the walls and often a roof or foundation and drains. That may be advantageous,. But can the nice but penniless old lady above afford to maintain the roof, even if she wants to?

-Is there Someone At the Wheel-It is important to understand who and how this takes care of the building and if it is effective as it has a big effect on the service charges and while “ we just sort it out between us” sounds attractive, it can mask problems with agreement and cost sharing, plus dangerous amateurism on wasted money on inexpert work inadequate insurance cover and in appropriate priorities.

Poor planning can lead to surprise bills, huge ones at that, and the friendly cooperative can explode with arguments that linger for years. External freeholders are just as likely to surprise you too. In the former you might well have more input, but the risk is that nothing gets done, while in the latter needed work is normally pushed through, so signs of good coherent management is a must. I

-Service Charge- Service charge information looks at the current and previous years estimated charges, the budget, and the actual charges that are compared to the estimate at year end, in one form or another of accounts, and any difference refunded or billed to you. Remember these are in most cases an estimate which you pay in advance to allow the owner or their agent to arrange for and pay for works, not after the work has been done. You should try to get the current if not at least three years of the budgets and accounts.


-The Survey- it is important to add to your own look round the building and grounds, to specifically ask the surveyor to identify what needs doing, in the future, and how much it might cost. That will affect the service charge, and who does what- something might be a specific flat owner’s responsibility and not a communal one- and how well the building is or will be maintained.

Be wary of informal friendly arrangements as they can explode when the roof has to be done and the chap of the GF refuses to pay. This applies equally to modern new build and old converted piles covered in moss.

-No such thing as share of freehold- you will own the lease of your flat and that is what you will own and borrow on and sell in future. There are two main setups for the building ownership/management
1 a landlord/freeholder or a residents group with joint ownership of the building or via company in which they have a share or are a member of.
2 A tripartite lease where an intermediary takes on all or most of the management of the building and can be a company owned by the residents or a company that owns and manages premises, and historically a person such as a trustee or chartered surveyor
All of these may employ a managing agent acting for them.

There are also right to manage companies, owned by residents, and tribunal appointed managers, where the control has been removed from the freeholder. In social housing, management might be provided by the council a housing association or a tenants management organisation- TMO.

Residents Associations are commonly referred to in error as they are rarely in control and in fact are only advisory and consultative bodies. Their role and control should be verified.

Making The Offer

Let me restate that the initial offer/price might not reflect problems and affect saleability and the price.

The EA and Vendor will insist that this is dealt with later as
a you will be out £1000s time and dreams and likely to compromise
b the Vendor need not agree to any reduction and try their luck with a less astute buyer

Step 1 Make your offer
- subject to Survey
- verification of the SC GR and lease length and
- what you see IS what you get


Step 2 Instruct Your surveyor to inspect immediately even if it means paying again for the mortgage valuation

Step 3 Tell your solicitor not to use their standard procedure and urgently
-obtain a copy of the lease and report on it to you
-immediately seek the managing agent/freeholder enquires( there will be a fee) assuming you only have some of it so far fomr public sources and or the vendor.

That way your offer, and any issues, are quickly addressed early on, as the other job that a solicitor does in reporting on title, the contract and related enquiries, local searches, and carpets and curtains create fewer problems less often.

This approach may only take a few days to a week and is well worth pursuing to make sure that problems are identified and dealt with at the earliest time, not 4/5 weeks before you planned to jump in the moving van!

Thanks, very useful. I have found that EAs in England (Wales seems different), virtually never mention the length of lease in the particulars, you always have to ask for them. To me this is as important (perhaps even more so), than the number of bedrooms.

(just noticed the thread is three years old - but still applicable I am sure).

whatnext18

Hello


I just made an offer on a converted house with leasehold.


I have yet to send the email as an official offer, should I say
subject to survey, valuation and confirmation of lease details?
Also, what do you mean by what you see is what you get?


EA says the owner will compile a list of things of how much it wants for appliances etc, if I want them
Thanks