Buying our own home is still a target for most of us. Many new would-be buyers are now looking at flats or maisonettes rather than houses – but the legal side of owning such a property can be rather more complicated than buying a house.
Most first-time buyers know little about legal stuff, and in the excitement of buying your first home it is understandable that you want to get rush on and move in. But it is worth doing a bit of homework beforehand, and this article will try to highlight some of the important things you should know about when buying a flat.
Flats have leasehold title – what does that mean?
When you buy a house you usually get a freehold title – this means that you own both the building and the land it stands on outright.
But virtually all flats throughout England and Wales are owned on leasehold title. What that means is that the person or company who owns the building (the freeholder) has granted a lease of each individual. Leases are like a very long-term tenancy agreement – most are initially granted for a period of 99 years or longer. During that period the flat-owner has exclusive right of occupation, but at the end of the lease the flat goes back to the freeholder.
The reason for this arrangement is that a flat forms part of a larger building – it might be just two or three flats in a converted house or many hundred in a large development – and there have to be legally enforceable arrangements in place for the building to be maintained and insured, and who has to pay for this. The lease will set out these arrangements so it is an important document.
This leasehold arrangement also means that there is someone who owns the freehold title of the building – this might be a private individual, a property company, a local authority or housing association. Freeholders often appoint another company or managing agent to deal with the day-to-day management of the building and arrange repairs and insurance.
You will often see a flat advertised with a share of the freehold. This normally means that the freehold is actually owned jointly by all the flat-owners in the building (or by a company owned by the flat-owners. ) It does not mean that it is a freehold flat and you don’t have to worry about a lease – each flat still has its own separate lease.
Look out for service charges and other payments
When you buy a flat, you may have to pay an annual rent (known as a ‘ground rent’) to the freeholder.
If flat is in a building which is maintained by the freeholder (usually the case with larger blocks of flats) you will have to make regular payments (known as ‘service charges’) towards the cost of maintaining repairing and insuring the building.
These payments can amount to several hundreds or even thousands of pounds each year, so you need to take them into account when looking at properties.
The exact arrangements for building maintenance vary widely between properties and your solicitor will get all the details for you. However you should appreciate that you will often have little or no say over what work is done or how much it will cost. There is legislation which does give flat-owners some rights but it can be difficult to enforce.
Will you be liable to repair your part of the building?
With maisonettes and flats in smaller buildings each flat-owner is usually liable for maintaining and insuring their own part of the building – so for example the owner of a top-storey flat will be responsible for the roof. The lease may require the owners of other flats in the building to contribute to the cost but not necessarily.
The problem with this type of property is that other owners may be reluctant to do necessary work to their part of the building even when it affects your property ( e.g. leaking gutters), or may refuse to contribute to your costs if you have to do work to your part of the building . You should get a full survey carried out on the whole of the building if possible to check that there will not be any problems with parts of the building which other owners are responsible for.
How much longer has the lease got left to run?
Another thing to look at when buying a flat is how much longer the lease has got left to run, because this can affect the property’s value and whether you can get a mortgage. If you are buying a new home then the developer will be granting a new lease so you won’t have to worry about this.
But when you are buying an existing flat the lease will have less time to run than when it was first granted. If the period is anything less than 60 years it will be very difficult to get a mortgage, and therefore worth much less. If it over 60 years but less than 80 years the value may still be less than for a longer lease. It is always worth having an independent valuation carried out by a surveyor so that you can be sure you are not paying too much.
You may be told that the lease can be extended for an additional period – this may be true, but it will cost. It can also be a long and complicated job, and you will need to get independent advice, so it may be worth looking for another flat instead.
Restrictions on use often affect flats
Finally you should be aware that leases contain many restrictions or covenants setting out what you can’t do – for instance any structural alterations to the interior are usually prohibited, as is playing loud music or causing annoyance to neighbours.
It is also common to find that keeping cats, dogs and other pets is not allowed. Sometimes letting is prohibited or only allowed if consent is obtained, so if you are buying to let the flat you should check whether this will be a problem.
When buying a flat you can expect a lot of help and information from your solicitor. Do be prepared to look at this carefully – especially the lease itself and any information provided by the freeholders about the service charges you will have to pay. Leases are often intimidating documents written in obscure legal wording so do ask your solicitor to explain anything if you are not sure about it.