Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • Samfre
    • By Samfre 11th Jun 19, 8:00 PM
    • 8Posts
    • 4Thanks
    Samfre
    Buying a highrise council flat in city centre
    • #1
    • 11th Jun 19, 8:00 PM
    Buying a highrise council flat in city centre 11th Jun 19 at 8:00 PM
    My partner and I have been living in a council flat, 15 storey high, in Manchester city centre for 9 years. As we now have to children we have been working very hard to save some money for a deposite so we can buy our own house. The building has been upgraded so it is now in good standard. We have managed to save about 25000 to enable us to be able to get a mortgage but due to the location of the flat we are tempted to buy the flat using saved cash as we can put together a deposit of 10000 from family and buy a house. The building has about 10% owner occupier and the flat can be rented out for about 650 monthly with service charge of 100 per month. We are very divided about this and we could do with some words of advice. The flat value is approximately 80 000 and we have to pay about 33 000 to buy it.
Page 2
    • skint_chick
    • By skint_chick 12th Jun 19, 2:01 PM
    • 786 Posts
    • 5,654 Thanks
    skint_chick
    That is my main worry and possibly some unexpected maintenance charges but it has recently been upgraded and the cladding is safe from fire point of view.
    Another worry is whether potential renal income will be counted for the future mortgage application.
    Originally posted by Samfre
    So if you're selling it on after the 5 years then there are only a couple of lenders who will consider the ex-authority high rise over a certain floor level. You can't rent it out for the first five years so you will need to stay there while saving a deposit for a house. If you sell between 5 and 10 years most councils expect you to offer it back to them for first refusal so you'd need to check on this clause too.

    Once you decide to buy a new place if you want to keep the flat and rent it out then some lenders would take rental profits into account as self-employment income, but you would need at least a year's self-assessment done. So unless you moved out of the flat and rented somewhere for a year - which makes no sense because that will cost more than just living in your place - then no, you can't use the rental income to get a bigger mortgage on a new house.

    If you buy your flat cash, and then in 5 years time decide to rent it out while living elsewhere you will have to pay 20% tax (if you're a basic rate taxpayer) on the rental income, minus a few allowances such as letting agent fees, service charges etc. So your profit is down to about 350/mth which would only cover some of the cost of renting elsewhere.

    Plus you'll have an additional 3% stamp duty to pay on your new home if you keep the flat to rent out. If you buy a house at 150k for example then you'll have to pay 5,000 stamp duty instead of 0 if you don't buy the flat and just buy a house when you have the savings. That's over a year of rental profits gone.

    Plus what everyone else said about building repairs esp if it's only 10% owner occupied. You basically have zero say in what happens if the council is majority owner.
    "I cannot make my days longer so I strive to make them better." Paul Theroux
    • muhandis
    • By muhandis 12th Jun 19, 2:13 PM
    • 982 Posts
    • 740 Thanks
    muhandis
    Unless the rules for Right-to-buy differ across councils, I don't think this is accurate. From a council RTB FAQ

    https://www.lewishamhomes.org.uk/your-home/tenancy/right-to-buy-scheme/right-to-buy-frequently-asked-questions/#_Can_I_sell -

    "You can rent out your property as soon as you complete the purchase."

    You can't rent it out for the first five years
    Originally posted by skint_chick
    • hazyjo
    • By hazyjo 12th Jun 19, 3:03 PM
    • 12,358 Posts
    • 16,874 Thanks
    hazyjo
    Sure, there's a risk of that happening. It's all about whether you think the potential return is proportionate to the risks associated with buying a high-rise ex-council flat.

    I do, but you (or the OP) may not.
    Originally posted by muhandis
    Indeed. But it's not a risk of it happening - it's a fact. There will be roof repairs/replacement if a flat roof, and there will be lift replacements. It's just whether they can get out in time to dodge that bullet.

    Also, as above, it's likely to be unmortgageable. That means auction and/or cash buyers/investors.

    If the OP buys and gets hit with a large bill when selling, or if they get notice of works within the next couple of years around the time they eventually sell it, they will find it VERY hard to sell to an investor.

    I'm not saying don't do it, I'm telling the OP to consider things that they won't have thought of, or won't be aware of. Major things. Flat roofs will last 10+ years rather than 100+ years, and lifts will only last 20 years or so if lucky. Probably nowhere near as long in a council highrise. Window replacements are also a favourite of theirs. Not to mention general repairs. No way is that 100 going to cover everything, nor is there likely to be a sinking fund...
    Last edited by hazyjo; 12-06-2019 at 3:06 PM.
    2019 wins: Bottle of Prosecco; Popcorn Shed popcorn; Moisturising 'M&S Time Capsules'; Case of Boost Sport + 30 Just Eat voucher; Battle Proms tickets and hotel; under-eye serum...

    "Should know better." Apparently.
    • muhandis
    • By muhandis 12th Jun 19, 3:12 PM
    • 982 Posts
    • 740 Thanks
    muhandis
    As I said earlier, I don't dispute what you are saying could happen and completely agree that anyone looking at it needs to be clear eyed about the potential issues that could crop up. And it's great that you have described them in detail.

    But I guess we'll have to agree to disagree whether the chance to buy a city centre ex-council flat at 33k (which as per what the OP said sells for 70-80k cash in the open market) is worth the risk or not.

    Indeed. But it's not a risk of it happening - it's a fact. There will be roof repairs/replacement if a flat roof, and there will be lift replacements. It's just whether they can get out in time to dodge that bullet.

    Also, as above, it's likely to be unmortgageable. That means auction and/or cash buyers/investors.

    If the OP buys and gets hit with a large bill when selling, or if they get notice of works within the next couple of years around the time they eventually sell it, they will find it VERY hard to sell to an investor.

    I'm not saying don't do it, I'm telling the OP to consider things that they won't have thought of, or won't be aware of. Major things. Flat roofs will last 10+ years rather than 100+ years, and lifts will only last 20 years or so if lucky. Probably nowhere near as long in a council highrise. Windows are also a favourite of theirs. Not to mention general repairs. No way is that 100 going to cover everything, nor is there likely to be a sinking fund...
    Originally posted by hazyjo
    Last edited by muhandis; 12-06-2019 at 3:39 PM.
    • Samfre
    • By Samfre 12th Jun 19, 3:34 PM
    • 8 Posts
    • 4 Thanks
    Samfre
    I understand there might be lift replacements in the future but I can't see any major upgrades happening as this was done about three years ago and to my knowledge this was the first one since it was built
    • Samfre
    • By Samfre 12th Jun 19, 3:46 PM
    • 8 Posts
    • 4 Thanks
    Samfre
    Good points. Particularly the first one that is what has stopped me so far. A family member have promised me to assist for the deposit for buying a house. I am just worried the flat will count for nothing in the eye of the lender and the fund I am able to use now for a house will be tied up. At best 10000 is the best assistance I might get.
    • Owain Moneysaver
    • By Owain Moneysaver 12th Jun 19, 4:18 PM
    • 10,121 Posts
    • 12,767 Thanks
    Owain Moneysaver
    You're a council tenant and presumably have security of tenure on a social tenancy.

    The council will cover repairs and replacement of kitchen and bathroom on their repair schedule. They will cover all building repairs and maintenance and service charges through your rent.

    If you are out of work then housing benefit is likely to cover most or all of your rent.

    If you buy your flat and cannot pay the mortgage, your home is at risk of repossession.

    In many cases the long-term advantages of home ownership outweigh the short-term advantages of social housing, and you end up with owning a nice house for a lot less than a non-right-to-buy. For a high-rise council towerblock I don't think there is a long term. In ten years' time (despite recent refurbishment) it might be demolished for 'regeneration'. Even if it isn't, you will never own a nice house. It will always be a council tower block.

    I'd be happy to live in one as a council tenant, but own a flat in one - no way.

    Personally I would look at applying for different council housing or even a house swap to get to a council house, even if that means more rent to pay in the short term. Then use right-to-buy to buy a house. Or a low-rise flat or maisonette (preferably not with flat roof or deck access) can be a good compromise if they're available.
    A kind word lasts a minute, a skelped erse is sair for a day.
    • Owain Moneysaver
    • By Owain Moneysaver 12th Jun 19, 4:21 PM
    • 10,121 Posts
    • 12,767 Thanks
    Owain Moneysaver
    I understand there might be lift replacements in the future but I can't see any major upgrades happening as this was done about three years ago and to my knowledge this was the first one since it was built
    Originally posted by Samfre
    Councils are quite able to spend money redoing work that was only done a few years ago.

    It may have been a new lift three years ago but perhaps next year they'll decide as policy that all lifts have to be firefighting lifts, or have some new disabled access feature, and the fact that yours is only three years old won't stop it having to be redone.
    A kind word lasts a minute, a skelped erse is sair for a day.
    • hazyjo
    • By hazyjo 12th Jun 19, 4:22 PM
    • 12,358 Posts
    • 16,874 Thanks
    hazyjo
    A family member have promised me to assist for the deposit for buying a house.
    Originally posted by Samfre
    As a gift or a loan? (Excuse me if I've missed it, didn't see when glanced back through comments.)
    2019 wins: Bottle of Prosecco; Popcorn Shed popcorn; Moisturising 'M&S Time Capsules'; Case of Boost Sport + 30 Just Eat voucher; Battle Proms tickets and hotel; under-eye serum...

    "Should know better." Apparently.
    • ethank
    • By ethank 12th Jun 19, 5:54 PM
    • 2,084 Posts
    • 1,101 Thanks
    ethank
    My issue with council/HA leases is that they will have refurbishment programmes every 10-20 years.

    I recently read of a block in London where a leaseholder was asked to pay 146,000 towards rerfurbishment.

    https://www.theguardian.com/money/2019/may/18/a-terrible-shock-council-flat-owner-bill-tustin-estate

    Ask the Council if they have recently done a dilapidations survey on the block, or if they have a programme of works for the refurbishment?
    • buglawton
    • By buglawton 12th Jun 19, 6:37 PM
    • 8,727 Posts
    • 5,467 Thanks
    buglawton
    OP did say in 1st post that 'building has been upgraded so it is now in good standard'. And later that the cladding is safe. But yeah, council could potentially try to pull a fast one. Flat may be worth 200k on open market so providing there are no reselling catches, probably still a no brainer.
    • csgohan4
    • By csgohan4 12th Jun 19, 8:43 PM
    • 6,512 Posts
    • 4,405 Thanks
    csgohan4
    You cannot sell your house within a certain amount of years after buying without incurring a RTB discount claw back


    RTB putting morals aside is a potential money dump


    https://forums.moneysavingexpert.com/showthread.php?t=6003024


    https://forums.moneysavingexpert.com/showthread.php?t=5856039


    https://forums.moneysavingexpert.com/showthread.php?t=5789909
    "It is prudent when shopping for something important, not to limit yourself to Pound land/Estate Agents"
    • MobileSaver
    • By MobileSaver 13th Jun 19, 7:17 AM
    • 1,926 Posts
    • 2,939 Thanks
    MobileSaver
    But I guess we'll have to agree to disagree whether the chance to buy a city centre ex-council flat at 33k (which as per what the OP said sells for 70-80k cash in the open market) is worth the risk or not.
    Originally posted by muhandis
    If it were as simple as that I'd agree it's a no-brainer but the fly in the ointment is the five year clawback period.

    A lot can happen/change in five years (Grenfell was only two years ago, for example) and that's why I think most financially savvy people would give this opportunity a miss.
    Respect to 3 of the greatest actors of all time; amazing people who are totally believable as the characters they play & almost single-handedly make the shows they starred in:

    Peter Dinklage as Tyrion Lannister in Game of Thrones
    Daniel J. Travanti as Frank Furillo in Hill Street Blues
    Claire Danes as Carrie Mathison in Homeland
    • muhandis
    • By muhandis 13th Jun 19, 7:20 AM
    • 982 Posts
    • 740 Thanks
    muhandis
    I agree, it's definitely not as simple as that. The fact that it's an ex-council high-rise flat brings with it a lot of risks as I've repeatedly acknowledged.

    If it were as simple as that I'd agree it's a no-brainer but the fly in the ointment is the five year clawback period.

    A lot can happen/change in five years (Grenfell was only two years ago, for example) and that's why I think most financially savvy people would give this opportunity a miss.
    Originally posted by MobileSaver
    • Lioness Twinkletoes
    • By Lioness Twinkletoes 13th Jun 19, 9:06 AM
    • 1,513 Posts
    • 5,396 Thanks
    Lioness Twinkletoes
    You've had excellent advice and there is little point in reiterating the points made. I will only add this: I worked in Leasehold Services for my council for circa 12 years and I wouldn't buy a flat in a high rise. Councils are poor freeholders and the service charges will be high with the risk of the major works bill being astronomical

    Go and buy something on the open market closer to the ground.
    • buglawton
    • By buglawton 13th Jun 19, 10:53 PM
    • 8,727 Posts
    • 5,467 Thanks
    buglawton
    You've had excellent advice and there is little point in reiterating the points made. I will only add this: I worked in Leasehold Services for my council for circa 12 years and I wouldn't buy a flat in a high rise. Councils are poor freeholders and the service charges will be high with the risk of the major works bill being astronomical

    Go and buy something on the open market closer to the ground.
    Originally posted by Lioness Twinkletoes
    For 33k in Manchester city centre?
    • chunkytfg
    • By chunkytfg 14th Jun 19, 7:01 AM
    • 773 Posts
    • 820 Thanks
    chunkytfg
    For 33k in Manchester city centre?
    Originally posted by buglawton
    33k now with a 150k bill 3 years down the line or 150k upfront. I know which i'd rather choose
    Those who risk nothing, Do nothing, achieve nothing, become nothing
    MFW #63 0/500
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

163Posts Today

1,606Users online

Martin's Twitter