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Posted by: dezrezsysadmin - Wednesday, January 3rd, 2018
If you’re in the exciting position of buying a flat, that’s great news. It represents an important step on the property ladder – perhaps your first home, or the start of a new chapter in your life. Although flats offer buyers a number of advantages, there are some important things to consider when buying a flat, before you sign on the dotted line. A lot of this information will be included in the Leasehold Information Pack that will be available to you, but it’s always good to know in advance what to look out for!
Most flats are sold ‘leasehold’. You buy the right to live in the flat for a certain number of years. If the lease has 999 years on it, it’s unlikely to be a huge problem, even for future buyers. Most mortgage lenders like to see a minimum of 80 years on a lease. Even if you satisfy your mortgage lender, remember that the shorter the lease, the less attractive it will be for a future buyer if you come to sell.
Flats can come with additional costs and charges that we’ll look it in the rest of this blog. You also need to think about the restrictions that living in a flat may place on you. You may not be allowed to alter the internal lay out of the flat, keep a pet in the flat, or even change the colour of the front door. Alternatively, you may have to ask permission – which could incur a management fee. The extent of the restrictions will be included in the lease – so check this carefully.
Where there’s a lease, there’s a landlord. The landlord owns the freehold of the property where your leasehold flat is located. You may deal directly with your landlord, or have no contact with them at all. If this is the case, it will be because a management company carries out the landlord’s functions such as collecting ground rent and service charges, and acting as the point of contact for repairs.
Just as a lease means a landlord, it also means ‘rent’. In many cases, the ground rent will be a token amount. Unfortunately, the last few years has seen a worrying trend of ‘doubling’ ground rent clauses in new leaseholds. With the average ground rent recently estimated to be £371, you can see how this would soon escalate as it doubles to £742 and then £1,484 and on. The Government is seriously considering reducing ground rent to zero. For now, make sure you choose an experienced legal team to carry out your conveyancing. The team here at Dezrezlegal [www.dezrezlegal.co.uk] are very familiar with the issues involved in buying a flat and will always run a thorough check of the lease to flag up any ground rent issues.
Although you may be responsible for repairs within the flat – for example if your boiler breaks down – what about repairs to the building as a whole or to communal areas? These will be the responsibility of the landlord, although a management company may be in place to handle repairs in practical terms. Your lease will include an agreement to pay a service charge, which will cover the costs of many of these repairs.
As we have mentioned, alongside ground rent, you will probably have to pay an annual service charge as part of the lease. This will cover maintenance that the landlord will need to carry out to keep the building in good repair. Although service charges used to be fixed, you are more likely to find variable service charges in a lease today. Variable service charges may be based on estimates of the work that the landlord anticipates carrying out during the following year. This way, the landlord can be sure that his costs will be covered. There’s no set list of charges that are covered, so you need to read the leasehold information pack carefully to make sure you understand your liabilities.
If your Landlord needs to carry out major works to the building where your flat is situated, he or she must consult with you – and all the leaseholders using a procedure set out in section 20 Landlord and Tenant Act 1985. You landlord will have to tell you what the works will involve, and why they are necessary, and then give you an opportunity to put forward your views at various stages of the process. The purpose of the section 20 process is to protect leaseholders from paying for inappropriate works, or paying more than would be appropriate.
Always an important consideration when you’re buying any home, insurance to cover your own possessions within the flat will remain your responsibility. However, buildings insurance to cover damage to the building itself, will usually be the landlord’s responsibility. Your legal advisers will need to check the lease carefully and let you know the extent of the insurance cover that is in place.
Landlords often hand over responsibility for managing their property to a specialist property management company. You will need to direct your enquiries through the management company, and you may find that you are charged fees, for example to ask for permission to do something in your leasehold flat, or because you need information or documents from the landlord. These charges must be ‘reasonable’ – and the management company must provide you with a summary of the leaseholder’s rights and obligations in respect of administration charges when it raises the charges.
We’ve talked a lot about the additional costs and responsibilities that come with buying a flat – what about your rights? As a leaseholder, you have a number of rights. The most important of these is the right to ‘quiet enjoyment’. This is the right that allows you to live in your flat without interference from the Landlord. You can also expect the landlord to keep the building and communal areas well maintained and properly managed. The Section 20 procedure we mentioned means you should be consulted before any major work is carried out, and to receive information about service charges and insurance.
You can find a lot of information about leasehold flats generally from Lease [https://www.lease-advice.org/], a voluntary organisation that has been providing information about leasehold property since 1994. Your Dezrezlegal team[www.dezrezlegal.co.uk] will provide you with all the information you need about the flat you are hoping to buy so you’re fully aware of what your responsibilities will be. Read this carefully to make sure you’re making the right decision!