8 Questions to ask before buying a flat
Before we exchange contracts on our dream flat, Mary-Anne Bowring, founder of leaseholdersupport.co.uk, reminds us of those extra questions we need to answer to.
What are you buying?
Find out whether the flat has a share of freehold or not, and how long is left on the lease. Having a share of freehold would give you control in making decisions such as on future repairs and service charge levels in the block. Extending a short lease is merely a formality if the flat comes with a share of freehold, else it can be expensive!
How well off is the block?
Get past sets of service charge accounts, you should from this be able to establish whether there is money accrued towards future cyclical repairs check the reserves on the balance sheet; whether there are significant leaseholder arrears making it difficult for services to be maintained check the debtors on the balance sheet; whether budgets are realistic check for accounting deficits/surpluses . But more importantly check whether any deficits have been split else the deficit will be eroding current working cash.
Who is the freeholder?
The freeholder has a responsibility to the lessees and should comply with his schedule of covenants such as keeping the building insured, effecting repairs to the structure and ensuring that communal service ducts and pipes are maintained. Check who the Freeholder is. Who is his agent? Ask for an up to date ground rent statement to make sure you are not buying someone else arrears. If there is no management company ask when cyclical works were last carried out and what funds have been accrued towards future repairs. You could be buying trouble if there is an absentee freeholder, no provision for future repairs and no-one to enforce the covenants of the lease.
Is there a management company?
If there is a management company, is this run by the residents or is there a reputable Managing Agent employed. Remember, the management companies duties are to collect service charges and manage maintenance issues on behalf of the freeholder. The Association of Residential Managing Agents say that about 3/5ths of flats are self managed, perhaps a great cheap solution until leaseholders have conflicting agendas and impartiality to uphold the lease is required. After all if your neighbour is a Director of the management company and installs a wood floor when the lease has a keep carpeted clause, who do you turn to?
How much is the service charge?
Find out whether the service charge is reasonable. When considering reasonable the factors are not compared to service charge levels in the local area, the benchmark is reasonable in light of what maintenance and services the block needs! Make sure that you are happy with not only the current but future anticipated levels of charges. When were big repairs last carried out, are there trees in the line of the drainage route, what not initially obvious costs might you need to contribute towards.
How healthy are the reserve funds?
A reserve fund is defined as a pool of money created to build up sums which can be used pay for large items of infrequent expenditure (such as the replacement of a lift or the recovering of a roof). A healthy reserve fund which has benefited from several years of payments from previous lessees is a big advantage. When out from the Estate Agent whether the leaseholders have been paying regular contributions and for how long?
How long is the lease?
With leases continuing to get shorter, for example some areas of London leases of 40-60 years are common, anyone buying a flat should be aware of their legal right to extend their lease. Your statutory right is an additional 90 years to add to whatever unexpired term you currently hold with ground rent reduced to a peppercorn after you have lived there for two years.
Don't be put off buying a property with a short lease. Ask the Estate Agent whether the seller will assign a claim notice to you. Although their might be an additional cost of a Solicitor to serve notice, it means that you won't have to wait 2 years to qualify to extend your lease.
Could you own the freehold?
Ask the Estate Agent whether the block is thinking about or owns the Freehold. Having the right to buy the freehold was given to lessees in 1993. Holding a share in a freehold company is more advantageous than just holding a lease. It not only gives you more control of the management of the block most leaseholders who also own a share in the freehold title don't pay ground rent and it can substantially increase the value of your property.
Understand your rights as a leaseholder and visit www.leaseholdersupport.co.uk for clear and simple guidelines. Click on the special offers button for FREE step by step guides.