More and more people are buying Flat’s these days. It used to be mainly city dwellers who lived in flats, but as house prices rise around the country, more and more houses are being converted into apartments. This is to cater for the increasing demand for new homes. Also many previous council flats are coming onto the open market.
When you look at the particulars of the flat you will be told if it is a leasehold property or if you are buying a share of the freehold. When you buy a freehold - as is common when you buy a house - you buy the land on which the property stands and the right to live on that land indefinitely. Leasehold is different; you do not own the land.
Some flats are sold with a share of the freehold, meaning you buy a stake in the land. However most are leasehold properties. You have to be aware that the freeholder who owns the ground will have an impact on you whilst you own the flat.
You buy the right to live in the building for a set number of years - the number that the lease has to run - but the landlord retains an interest in the property. You pay them a ground rent, and a service charge to manage any communal areas inside and outside the building. Details of these will be laid out in the lease.
The first point to look out for is the length of the lease that is remaining. Many mortgage lenders will want to see at least 30 years remaining at the end of the mortgage term. Without a long lease remaining it will affect the re-sale value of the flat, as it will put off potential buyers.
At the end of the lease, ownership of the flat reverts to the freeholder, so if you buy a flat with a short lease you're buying a depreciating asset.
Alternatively, you could consider extending the leasehold. Under current law, anyone who has lived in a qualifying flat for at least three years - either the last three or a total of three years during the last decade - has the right to purchase a lease extension.
The new lease will add another 90 years to the existing term and run under the same conditions as the current lease. To purchase the extension you must give notice to your landlord who will give you his terms. These can be negotiated - you have two months for these discussions. After that time, if you still cannot agree you can apply to your local Leasehold Valuation Tribunal for the terms, including the price, to be settled.
When you're buying a leasehold flat its well worth bearing in mind that three years down the line you will have this option open to you. Your lease may be relatively short now, meaning a limited number of lenders willing to offer you a mortgage, but in the future you may have more choice.
Another pitfall when you buy a leasehold flat is the maintenance and service charge. You have to bear a proportion of what the freeholder spends on maintaining the communal areas.
Details of the service charge and what it covers should be included in the lease. Examine communal areas to check they are being looked after, and speak to people in similar properties in the area to find out how much they pay. If the work isn't being done, or the charges are unusually high, perhaps you should consider a different property.
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