RTB Leasehold Purchase Enquiry

Julz94

Hi, 

Im in the process of buying my RTB flat which is leasehold, I just received notification from the council legal team that paperwork have been forwarded to my solicitors. 
there is a section that states the following

"I would also advice that upon completion of your purchase any future Assignment (Sale), Charge or Sub-Let made on your lease will require the formal consent of the council's Residential Conveyancing Section. Please note that should the same not be sought then you will still be liable for the payment of service charge accounts until the new purchaser's details have been supplied. I would advice that the council does make a charge for the same and this figure is assessed annually"

If i understand this correctly, Does it mean that say if after whatever years i decide to rent it out. will i need my leaseholder permission to rent it out? 

Or is it saying i must provide details of the new tenants or owners so the new service charge accounts apply to them ?  Doesn't make sense that once buying it, i need permission to rent it out? 

And yes i will be asking this question to my solicitors , but wanted the expertise of this forum first  

eddddy

Just to clarify - you will be the leaseholder, and the council will be your freeholder.

It's usual for leaseholders to require consent from their freeholder to rent the flat out. (And so it sounds like you would need consent from the council.)

There will probably be a whole list of covenants (or rules) in your lease that specify what you can and can't do, and what you need consent from the council to do, and what information you must give the council, etc

Julz94

eddddy said:

Just to clarify - you will be the leaseholder, and the council will be your freeholder.

It's usual for leaseholders to require consent from their freeholder to rent the flat out. (And so it sounds like you would need consent from the council.)

There will probably be a whole list of covenants (or rules) in your lease that specify what you can and can't do, and what you need consent from the council to do, and what information you must give the council, etc

Yes i will be the leaseholder, Is this the case with all leaseholds or just council RTB?  .. So even if i wanted to sell it down the line i need their permission ? that's doesn't sound normal, or even renting it out. what if they say no? 
obviously i'm a first time buyer and this is all new to me. 

eddddy

It's not unusual for leases to require things like the following (whether RTB is involved or not) ...

• License to Assign - i.e. theoretically you need permission to sell the flat, but in reality it wouldn't be withheld (unless perhaps you haven't paid your service charges)
• Notice of Assignment - telling the council who the new owner is
• Notice of Charge - telling the council if you have a mortgage, and who it's with
• Consent for alterations - if you want to make alterations to the flat
• Consent to keep a pet - if you want to keep a pet (but some leases ban pets)

Many councils have a leaseholders handbook available online (or perhaps by email/post) which explains their specific rules. (Do you want to say which council it is?)

You could also ask for a sample copy of the lease from the council in advance, to see the 'rules' - but sometimes they're in complex legal language.

And hopefully you realise that you'll also have to contribute to the cost of repairs to the building. Sometimes council leaseholders get hit with bills for thousands of pounds of repairs.


Edit to add...
If the lease says you need the freeholder's consent to do something, generally the law says consent cannot be withheld unreasonably.

Cakeguts

The service charge does not cover any repairs that the council might want to make to the building structure like for example replacing the roof.  If the council needs to do a repair to the building's structure you will get a bill from them for your share.  Some leaseholders of ex council owned flats have been hit will bills in the high £1000s. You need to be aware of this problem with ex council leasehold flats. Some flats have become very difficult to sell because of the potential for council repair bills. 

Julz94

Cakeguts said:

The service charge does not cover any repairs that the council might want to make to the building structure like for example replacing the roof.  If the council needs to do a repair to the building's structure you will get a bill from them for your share.  Some leaseholders of ex council owned flats have been hit will bills in the high £1000s. You need to be aware of this problem with ex council leasehold flats. Some flats have become very difficult to sell because of the potential for council repair bills. 

Yes you are right, it is a maisonette. So a converted house into flat, my Maintenance fund for next 5 years is 7.5k total. And the roof and building is in decent shape . But if was a 4 storey block I would be wary for potential council repair bills  . 

Do you know if I have to carry on paying into the reserve fund after the 5 years ? 

user1977

Julz94 said:

Cakeguts said:

The service charge does not cover any repairs that the council might want to make to the building structure like for example replacing the roof.  If the council needs to do a repair to the building's structure you will get a bill from them for your share.  Some leaseholders of ex council owned flats have been hit will bills in the high £1000s. You need to be aware of this problem with ex council leasehold flats. Some flats have become very difficult to sell because of the potential for council repair bills. 

Do you know if I have to carry on paying into the reserve fund after the 5 years ? 

The 5 year period has nothing to do with your service charge liabilities, you'll be paying for as long as you're the owner.

cattie

A reserve or sinking fund is the best option as it means there's usually money in the pot to pay for any repairs/maintenance that crop up rather than suddenly needing to find a large sum of money to hand over to pay for them.

Your solicitor is the best person to ask concerning the reserve funds payments. Private leaseholders will usually just keep paying into the fund with no time limit, though sometimes the regular amount can be adjusted down if a rather large sum has built up & no major expenditure expected for quite some years.

Julz94

cattie said:

A reserve or sinking fund is the best option as it means there's usually money in the pot to pay for any repairs/maintenance that crop up rather than suddenly needing to find a large sum of money to hand over to pay for them.

Your solicitor is the best person to ask concerning the reserve funds payments. Private leaseholders will usually just keep paying into the fund with no time limit, though sometimes the regular amount can be adjusted down if a rather large sum has built up & no major expenditure expected for quite some years.

It’s just that I strongly doubt the council will be giving it a new roof or rendering the outside any time soon and I find it unreasonable to keep paying past the 5 year mark on the reserve fund cause as I said I doubt they will do anything to it ! ( it’s just a end of terrace converted into a house ) 

Also I have a shared garden, I had a quick chat with the neighbour downstairs and told him I will be erecting the fencing wherever my boundaries fall as soon as I get the paperwork telling me where it is, he didn’t like the sound of it as the person that lived here previously ( years ago ) probably stayed 2 nights a week, so the downstairs neighbour always treated what is now my garden as his, and I recently found out when the council surveyor came over to draw up plans that the side gate ( which is the only entrance to my garden) is actually mine and they downstairs think it’s shared! 

When the council surveyor came over he drawn it on a piece of paper outlined with what is my part, and goes to me “happy with that “ ? Question is do them make it up when they get there or do they actually have some sort of boundaries plans for when the house was built ? Cause if his asking me “ happy with that “ he could technically give me the whole  back garden? 

user1977

The boundaries don't get made up just because somebody's exercised their right to buy, they should correspond with whatever your tenancy included. So, what does your tenancy agreement say about the garden?

eddddy

Julz94 said:
It’s just that I strongly doubt the council will be giving it a new roof or rendering the outside any time soon and I find it unreasonable to keep paying past the 5 year mark on the reserve fund cause as I said I doubt they will do anything to it ! ( it’s just a end of terrace converted into a house ) 

The reserve fund is really just like a bank account for repairs and maintenance.

You will pay into it each year and the council will take out money each time they have to do some repairs or maintenance to your building. Your building will continue to require repairs and maintenance after 5 years, so you will continue to pay into it after that time.

However, the amount of money in the reserve fund should be justified and 'reasonable'. i.e. The council should be able to explain to you why they want a particular amount in the reserve fund.

If you think the amount in the reserve fund is getting too big, ultimately you can challenge it at tribunal.



Here's an example where the freeholder wanted to keep £70k in a reserve/sinking fund, but a tribunal (court) ruled that £70k was not 'reasonable' - but £40k was 'reasonable': https://www.lease-advice.org/article/subleases-and-sinking-funds-reasonableness-still-relevant/

(That £40k might relate to a bigger building than yours.)