How to buy a flat
If you’re planning on buying a flat in Essex this year, you may have already been faced with terms such as leasehold or service charge which, if you’re being honest, you’re not entirely sure about. Relax. We have it covered. Our essential guide on how to buy a flat will tell you all you need to know about flat-buying. Something specific to ask? Simply get in touch.
3 differences between buying a flat rather than a house
You don’t own the land: Although there are exceptions to the rule, usually with a house, you’ll also own the land that the property sits on. With a flat, a freeholder, person or company owns it and you’ll need to formalise an agreement – known as a lease – about what you can and can’t do with this land.
Usually someone else will manage the building maintenance: When you own a flat, things like gutter cleaning and repointing are managed by the freeholder (also known as the building owner or landlord), although you’ll be expected to help pay for it. Bear in mind, this may not be the case if you own the freehold or part of the freehold.. If this is the case, you’ll have to take responsibility for arranging the maintenance as well as footing at least some of the bill.
There may be restrictions: Flat owners may face restrictions about the kind of alterations they can make – for instance, if you live above another residence, wooden floors may be forbidden.
What is leasehold?
A lease is the name for the legal agreement between the owner of the flat and the owner of the building and land that it sits on. There’s often some confusion about why this is needed and how long this should be, so below we’ve tried our best to answer the most common questions that we're asked about leases:
How long are leases?
New leases generally start at 99, 125 or 999 years. This may seem like a long time, but bear in mind that the same lease is passed over from owner-to-owner and is gradually reducing every year.
Who can extend a lease?
If you currently own the flat in question, and have done so for at least two years, you’re legally allowed to have 90 years added to the lease for a fair market price (according Leasehold Reform Housing and Urban Developments Act 1993).
This still applies if the property in question was purchased as a buy-to-let since you don’t actually have to live there in order to extend its lease.
How can you find out how much time is left on the lease?
Your estate agent should be able to tell you how much time is left on the flat’s lease, however this will usually be based on what the seller says so always seek legal advice.
So, what should you do if the flat that you wish to buy has a short lease? In most cases this is considered to be below 85 years. A flat with a shorter lease shouldn’t necessarily put it out of the running for you. In fact, you can request that your seller gets the ball rolling with extending the lease to coincide with your purchase. It’s best to be done and dusted by the time you complete or you’ll have to wait the specified two years to be entitled to a lease extension.
Why extend your lease?
A longer lease will not only improve your chances of selling your flat, it could potentially add thousands to its value. Just how much more will largely depend on how long your lease was in the first place. If the original lease was less than 95 years, extending it will make the property a much more attractive prospect when you come to sell it.
When to extend a lease?
Property experts agree that the magic number is between 83-85. If you’ve between 83 and 85 years left on your lease, you should look into extending.
How much does it cost to extend a lease?
If your current lease is between 80-90 years, you can expect to pay less than £10,000 to extend. Anything below this and your costs could spiral into the tens of thousands.
The good news is that, unless your current lease is more than 95 years, you can expect to cover your costs by adding significant value to your flat – so it’s well worth looking into. Get in touch with Douglas Allen for lease advice that’s tailored to your own situation.
Potential lease restrictions to check beforehand
Pets: Some leaseholds prohibit any pets or at least, require permission from the freeholder first.
Renovations: Have a major renovation in mind? You’ll probably need to check with the freeholder first. Planning permission, building regulation approval and the okay from your mortgage provider should also be sought.
Subletting: If you’re planning to rent out a room or your entire flat, you need to check that your lease or mortgage doesn’t have any restrictions on this.
What is a service charge?
Paid either annually, monthly or quarterly, service charges in residential properties go towards the on-going maintenance costs of your building and its grounds.
What does a property service charge include?
At the very least, the service charge should help pay for the maintenance of:
Communal areas, such as the hall or any shared facilities.
Grounds or gardens.
Lift or stair lifts, if applicable.
Communal heating and lighting.
Bear in mind that if your building has a communal gym, swimming pool or other leisure facilities, your service charge is likely to be higher.
How are service charges calculated?
Service charges are based on the total costs of repair, maintenance, management and insurance of the building in any given year equally divided by the number of flats in the building. They should be itemised in your leasehold agreement.
These charges can fluctuate according to how much maintenance and/or repairs were required in the previous year. It is possible to have a fixed service charge but this is decided by the freeholder of the builder.
On average, how much is a service charge?
The location of your flat and the range of facilities it offers will affect how much you should expect to pay. However, on average in the UK, this figure should be somewhere between £1,000 to £2,000 per year.
If you rent out your flat, you could pass this charge onto your tenants – but this will have to be set out in your tenancy agreement ahead of time.
At a glance: how does buying a flat differ from buying a house?
Whether you’re currently looking for houses, bungalows or flats to buy in Essex, both your search and buying journey will feel very much the same. However, there are some exceptions to the rule:
When you buy a flat, you will probably be offered it as leasehold not freehold.
Leasehold simply means that there will be a formal agreement (or a ‘lease’) with the owner of the freehold about what you can and can’t do with your property and the land it sits on.
If the flat’s lease is 85 years or less, you should look into extending it.
You’ll probably have to pay a service charge for your new flat, so this cost should be factored into your budget.
Property service charges vary, but on average in Essex you should expect to pay between £1,000 and £2,000 per year.
Take a look at the latest flats for sale in Essex or pop into your local Douglas Allen branch for more advice on how to buy a flat.