New built apartment: Share of Freehold BUT no lease

JonMitchell

Hi

I was wondering if I may be able to get some advise from the knowledgeable crowd here?

Interested in an apartment, in England, with a new built block of only 5 flats. Was informed by the estate agent that the apartment has a share of freehold of 20% - I have not got an issue with this. These apartments are NOT help-to-buy or share-ownership type.

But when I ask what is the lease period like, eg 999yrs? And was told that there is no lease arranged. EA claimed this is a new trend of no lease. There is no ground rent, not even peppercorn charge, for this apartment but a service charge pa.

I have personally not heard of such arrangement as apartments are mostly leasehold in England and wonder what complication/implications there would be if I were to get a mortgage for such property? Surely my mortgage lender will ask how many years of lease there are before they would even take the next step of mortgage application.

Any advise or if anyone of any new legislation change in new built apartments are greatly appreciated!

TripleH

First issue is whether there is a cap or limit on service charge?
Who "manages the property" and what powers do all owners have?
The worrybis that service charge starts at a modest £600 pa fir first year then jumps up to £12,000 pa for example (champagne filled crocs don't come cheap daaarlyng)

G_M

Do the other 4 flats have leases?

JonMitchell

Thanks!

TripleH - EA states at the moment the developer had appointed a management company BUT it would be down to the owners of the 5 flats to decide if they want to use the management company or arrange their own, so in essence the developer not managing anything.

G_M - as far as I have been informed by the EA, the other 4 flats have the same status, ie share of freehold, no lease. I have asked the EA if the other 4 owners are cash buyers or with mortgages, as if with the latter, their mortgage lender must have asked something about the lease. EA told me 2 flats have completed so far and the other 2 are awaiting exchange of contract.

It does bemuses me at this stage.....and rather surreal...

I purchased the title deed for this new built and it stated a freehold - but I believed it was for the purchase for the piece of land for development. There is no mention of leasehold clause about these 5 flats anywhere in the title deed.

eddddy

I suspect that the EA has misunderstood.

As it's newbuild, the leases won't exist yet. Your lease will be created when you buy the property.

A draft lease probably exists. If you decide to buy, your solicitor will want to review it first.

JonMitchell

Thanks Edddy. That makes sense, I will ask the EA about this aspect.

sal_III

I don't think it's possible to have a separate title for your flat without a lease. Sounds like an inexperienced EA telling porkies. Do you have a contact of the Builder to ask them?

JonMitchell

Hi Sal_III, thanks!

I have been digging up the planning permissions from the local council website and was able to find the builder. But when I tried to call them today, they referred me back to the EA!

After spending sometime on the planning permission website, I found out the EA has their own planner department that was in charged of submitting all the documents from start to finish for the building site for the builder. Yet the EA have not been able to provide a clear answer.

Latest reply from EA, it would be down to the 5 owners after completion to sort out their lease, if they wish???!!! How does this work at all?

I had a word with my broker and its head scratching exercise to go ahead with a mortgage application to be rejected in due course, which will leave a hard credit footprint on my record and it does looks bad although the credit report does not says mortgage approved or rejected, but one can guess from it. However, credit score is of lower importance here as I would like to find out how to proceed or indeed should I proceed with no much clarity in place.

Thanks folks

davidmcn

JonMitchell wrote: »

Latest reply from EA, it would be down to the 5 owners after completion to sort out their lease, if they wish???!!! How does this work at all?

It doesn't. I suspect you're dealing with an idiot. Maybe ask them to speak to the developers' solicitor.

eddddy

JonMitchell wrote: »

Latest reply from EA, it would be down to the 5 owners after completion to sort out their lease, if they wish???!!! How does this work at all?

As above, the EA is confused!

I suspect the EA was told that the 5 owners can sort out maintenance arrangements after completion (e.g. Do you hire a management company, or do the management yourselves?). And the EA didn't understand.

JonMitchell

Thanks Davidmcn, edddy and folks!

ATM, I can only rely on what the EA informed me though I am very sceptical about what the EA had said so far.

. Maintenance - EA claimed the developer had appointed a management company BUT it would be down to the 5 owners (with equal share of freehold each) to decide if they want to use the management company. With due honesty, the new built block is not huge and apart from sweeping and maintaining the internal communal hallway and staircase, I can't forsee why the need of a management company if all 5 owners have a share of freehold. A cleaning company on a weekly cleaning rota would be far cheaper than getting a management company involve, which IMHO, they do not offer value for money a lot of the time. Not sure if management fee gets doubled over time?

. Lease - EA reverted today and claimed there is a standard draft of 125 years lease available!!!! As the 5 owners have equal share of freehold, the EA then claimed it would be up to, again, the 5 owners to decide what to do with the lease.

- if I put in an offer, should I push for a 999 years lease instead as 125 runs out quickly and 999yrs option looks a better option, with no ground rent.

- there is possibly a hard chance to get all 5 owners after completion to sit down and discuss about extending lease. I would prefer 999yrs all sorted then to waste money later on releasing etc

Any thoughts? Appreciate all help thus far