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5 things to check when buying a flat

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The majority of flats in the UK are sold on a leasehold basis, meaning you are not buying the property, but rather the right to occupy it for a fixed period of time. The freeholder retains ownership of the building and their rights and responsibilities, as well as your own, are defined by the law and the specific conditions contained in your lease.

When buying a flat on a leasehold basis, there are a number of issues to consider in addition to the usual questions you should ask when buying any property. By checking the following things, you reduce the risk of being caught out by any unpleasant surprises after the deal is done.

How long is left on the lease?

When you buy the leasehold on a flat, you will usually be buying the remaining time left on the existing lease, rather than starting a new lease agreement with the freeholder. It is therefore very important to pay attention to how much time is left on the lease, as the less time remaining, the less the leasehold will be worth.

The key thing to be aware of is that when the time left on the lease hits 80 years or less, you will have to pay 50% of the property’s “marriage value” to the leaseholder if you want to extend the lease. Marriage value is the amount the leasehold will increase in value due to extending the lease, which can be a significant sum.

If a leasehold property has less than 80 years remaining on its lease, its value will start to fall significantly and you may struggle to get a mortgage on the property.

What rights do you have to extend the lease?

Once you have lived in a flat for at least 2 years, you will normally have the automatic right to extend your lease by at least 90 years, under the terms of the Leasehold Reform, Housing and Urban Development Act 1993.

However, some freeholders may be willing to allow you to renew your lease as soon as you buy the property. If the lease is nearing the 80-year threshold where marriage value will begin to be a consideration, it may be worth getting an agreement from the freeholder to allow you to extend the lease straightaway before you agree to buy the flat.

What are the services charges and ground rent?

When leasing a flat, you will normally be required to pay ground rent and service charges. Ground rent is generally a nominal amount charged annually, but service charges can be considerable.

Service charges are intended to cover the freeholder’s costs in upkeep of the building’s structure and communal areas. It is important to therefore check what these charges are and exactly what they cover.

Many freeholders will also operate a reserve fund or “sinking fund”, which you may be required to contribute towards. This fund is made up of additional money the freeholder collects towards the cost of major work on the building e.g. for repairs or renovations. If you will be required to pay into a reserve fund it is important to be clear exactly how much you will need to contribute, what work this is intended to cover and when the work will be taking place.

Is there a residents’ association?

Many blocks of flats will have a residents’ association who represent the leaseholders’ interests and deal with the building’s freeholder or management. In some cases, a block of flats will be owned directly by the occupants via a residents’ company who will be responsible for the management of the building.

Contacting the residents’ association or residents’ company will be a good way to get a clear picture of what life in the building is really like and any issues you need to be aware of.

Is there the option to buy a share of the freehold?

Leaseholders have the legal right under the Leasehold Reform, Housing and Urban Development Act 1993 to act together to buy the freehold of their building, as long as they meet certain qualifying criteria. Leaseholders also have right of first refusal to buy their property if the owner decides to sell the freehold.

If the building is owned by a residents’ company, you may have the option to buy a share of the freehold when buying your flat.

Find a reliable conveyancing team for your home purchase

Bird & Co Solicitors is a Conveyancing Quality Scheme accredited law firm offering conveyancing services for homeowners across England and Wales from our 3 offices in the East Midlands.

We provide a fast, reliable and cost-effective conveyancing service for property purchases and all other residential property transactions, making the process of buying a home as smooth and stress-free as possible.

To find out more about our conveyancing for buying a flat, call us today on 01476 591711 or use our contact page for details of your nearest Bird & Co office.