Flat purchase - Victorian house conversion with majority occupied by council tenants

H2a

Hello everyone!
Happy New Year! So, i've put in a offer on a flat in Belsize Park London, NW3 - the area has a lot of beautiful Victorian house conversions. I've just found out from my sollicitor that the estate hadn't disclosed some major points, despite my explicit questions on the topic before the offer:
- the flat's freeholder is in fact the council (Camden) - the estate agent had advised that it was a private freeholder
- the majority of the flats are in fact occupied by council tenants - 3 out of 4 flats are social housing. Note that I have spoken to the neighbours who are all nice as far as I can see. the House itself is well kept at first glance - it is most likely a very top tier council flat in a very wealthy street.
The flat has been on the market more than 7 months; and was reduced once. The flat is on appearance in excellent condition and is stunning - beautiful high ceiling and wooden floors etc. It's in fact very odd that it's been sitting on the market for so long considering other flats with similar specs were sold fairly quickly.
The aforementioned bits of info were news to us - we only found out from our sollicitor, days before our survey which is now happening tomorrow and which includes a valuation. We are now extremely torn - we don't know that this is the right investment for us, particularly as the majority of flats are still occupied by council tenants - our concerns are less about the people; instead I worry about how those circumstances impact on the value of the flat:
- Can anyone speak from experience of whether such circumstances impact the value of the flat?
- I worry that the stigma will deter sellers and renters down the line, when I decide to rent or sell.
- Has anyone had any problem getting a mortgage because of the ratio of council tenants? I read online that the stigma can deter lenders.
- Would you say the value of the flat is less likely to grow as a result?
- Has anyone experienced unfair bills from the council with the flat being the only one privately owned amonst council housing?
 Thank you for reading everyone!

NameUnavailable

You have less rights as the tenant of a Local Authority landlord - some links below. However if yours is the only private flat in the building thinks like enfranchisement and right to manage are moot points.

Also worth bearing in mind that private freeholders can charge you what they want for service charges too and whilst you can take them to tribunal it's not always sensible to do so given that they can usually add their legal costs to your future service charges.

Some leasehold reform is coming but it's more about reducing the cost for lease extensions rather than clipping the wings of rougue freeholders and management companies who just see leaseholders as cash cows they are out to milk dry.

https://www.leaseholdknowledge.com/why-local-authority-leasehold-owners-have-second-class-rights/

https://www.localgovernmentlawyer.co.uk/property/313-property-features/44698-freehold-enfranchisement-and-local-authorities

https://www.theguardian.com/money/2020/feb/08/leaseholders-facing-staggering-bills-for-ex-council-flats

AlexMac

H2a said:

The flat has been on the market more than 7 months; and was reduced once.... our concerns are less about the people; instead I worry about how those circumstances impact on the value of the flat:
- Would you say the value of the flat is less likely to grow as a result?
- Has anyone experienced unfair bills from the council with the flat being the only one privately owned amonst council housing?
 Thank you for reading everyone!

I know nothing about Camden, and can't answer most of your Qs, but on the lesser of your enquiries above (unfair bills) I'd observe that the freeholder of the two little ex-Council BTL flats I own (Greenwich in SE London) has been impeccably fair and competent over my many years of ownership.  Service charges, now around £800-£900  p.a. are reasonable, and like the £4-5k one-off top-up charge I've had to pay every 7-10 years or so for things like external decorations, are divided pro-rata across all the flats in the two small blocks.  So I only pay 1/12th (reflecting the 12 homes in each block), with transparent, detailed and fully-analysed accounts.  I've no reason to believe that Camden (a borough very much like mine?) would differ, especially as there seems to be a well-organised lCamden Leaseholder forum -
https://www.leaseholdersforum.org.uk/  (they have local reps and email contacts)

My flats are probably a very little bit cheaper than comparable non- LA freeholds, but not much, and I suppose a cynic would argue that as you were poorly advised by the EA, you could chance gazundering; although that might risk the vendor  walking away in pique?

I similarly can't take a view on whether there is any stigma associated with living next to Council tenants which will affect future re-sale. I suspect some people will have strong views. The fact that the property has taken some time to sell implies that maybe some will be deterred?  But as my current relative prosperity is based largely on the stable lifestyle my family gained by being assigned a Council flat in the 1950's after 5-6 years of extremely precarious accomodation; 30-40 unsatisfactory lodgings, caravans and hostels, I'm an inverted snob - an enthusiast for Social Housing.  So much so that I've turned one of my BTLs back into social housing by leasing it long-term to a Housing Association to accomodate people from the Council list.

So if it was me, and as such beautiful period flats are rare, I'd probably proceed with the purchase;   good luck with your decision

Norman_Castle

H2a said:

- Has anyone experienced unfair bills from the council with the flat being the only one privately owned amonst council housing?

The shared bills are split 25/75, the council will have to fund 75% so hopefully have an interest in containing them. A 100 year old house will need sporadic work but won't have communal repair costs such as lifts or cladding with the associated high cost of these.

gwynlas

Whilst current neighbours might seem fine you have no idea who the council might place there in the future whuch would affect resale value. Nothing against social tenants but it is the problematic minority who you hear about. Local authorites are often the most expensive in terms of refurbishment works which would always be expensive in terms of :London anyway, not all builders are prepared to take on the tendering process. An older building always requires maintenance. Whilst the flat might seem great value for the area I would not buy any ex local authority property unless it was the last socially tenanted property thus becoming entirely privately owned. If you had asked the question earlier I would have advised you to cancel the survey thus saving your cost as the surveyor will not have access to al areas and the report will be full of caveats. Having lived and worked in Camden and Islington I would say proceed with extreme caution

H2a

Thanks so much everyone for sharing your views. I've sinced talked to a mortgage broker who confirmed that lenders would consider giving mortgages in this context where tthere would be a majority of non privately owned flats - but it was clear that this the choice was reduced. I'm very concerned about marketability and re-saleability. The survey was conductd yesterday - too late to cancel but thought i  might as well see what a survey looks like for such property and learn from the process. A valuation is also being done. The idea is that we would make an informed decision once we have all the information.
What's clear is that I know it will be a great flat to live in, in a beautiful neighbourhood. All my doubts come from the ability to selll or rent quickly if I need to. what to do.. what to do...

numbercruncher8

I wouldn't be surprised in this area if the council own several houses. Down Belsize Park Gardens (I think) I think there is a repurposed mansion for social housing, and in the past I've been into one of the houses on this street which I suspect must have been split up into flats for social.

I can only suspect as the communal areas and exterior were fairly poorly maintained. In this area that doesn't mean bad, just relative to other houses, some of which are very well cared for. Also it didn't contain the type of people whom you would think may afford this type of thing on the private market. Of course that is quite presumptuous, but that was my hunch.

I suppose the bigger danger may be there may be a greater danger of social tenants doing something which requires you requiring the assistance of authorities, which in turn means that you have to declare this when selling next, which also in turn means people being put off. Not to say it will happen - there probably is some incentive for people not to misbehave as there are far worse places to go. But there are some people out there who don't treat things with respect.

I don't believe these conversions to be that rare, but IMO given this set up it should trade at a discount to a house that is privately owned, allowing for condition of course.

theartfullodger

Good heavens, estate agent either lied or answered with a reassuring reply when they didn't know.

Gosh, what a surprise....

btw In my experience social housing neighbours are usually nicer that owner-occupiers banging on incessantly about bleedin' house prices.

Sandtree

gwynlas said:

Whilst current neighbours might seem fine you have no idea who the council might place there in the future whuch would affect resale value. 

Just as a private owner could be a terrible neighbour or even rent it out to any random person.

Our building is 2/3 private and 1/3 social housing (at least when it was built 15 years ago, no idea if any have managed to buy their social housing) with a private freeholder of the whole building. The only pain neighbour happens to be on the social housing floor however her being a pain is just complaining about people breaking the rules in terms of having loud music or BBQs on their balconies etc and so not really bad.

By far the worst neighbours we've ever had were privately owned properties (one let out, other leaseholder occupied)... the former used their balcony as toilet and ashtray during their Friday/Saturday parties. The owner occupied next door smoked like a chimley next to our bedroom window (in the shared garden)  and often threw rubbish out their patio doors into the garden and leave it there for days.

H2a said:

All my doubts come from the ability to selll or rent quickly if I need to. what to do.. what to do...

You've already seen the impact yourself in the current sellers attempts to sell the flat. Ultimately you should be factoring this in the price you offer/adjust your offer to as in 5 years time if you decide you've outgrown the flat there will be another thread just like this one from a potential buyer of it with exactly the same worries (the old self fulfilling prophecy)

Bookgal88

My partner owns a flat in a converted period building in Islington and thought that having the council as the freeholder would be better than a private individual. He laments purchasing the flat daily (if you Google Islington council and a PFI called Partners, you'll find plenty of unhappy leaseholders and tenants). They carry out work that doesn't need to be done and ignore things that do need to be done, the workmanship is shoddy and the costs are astronomical. I would do some digging online and see how Camden council maintain the buildings that they own. The last thing you want is this purchase to turn into a nightmare when you're getting bills for thousands of pounds left, right and centre. 

NameUnavailable

H2a said:

What's clear is that I know it will be a great flat to live in, in a beautiful neighbourhood. All my doubts come from the ability to selll or rent quickly if I need to. what to do.. what to do...

My niece bought an ex council property. When she came to sell it they contacted her and asked if they could buy it - full asking price and they paid her legal costs as well. Councils will also rent back privately owned properties.

Also bear in mind that a lot of private blocks are majority owned by BTL investors who rent to everyone and anyone.

My concerns would be around the service charges and lost opportunity to buy a freehold or right to manage but if the place seems well managed and the neighbours seem to keep it tidy then I wouldn't worry about being able to sell or rent it later.