Buying a leasehold property?
There are several things to bear in mind when buying a leasehold property and these are just a few of the important ones.
Read the lease; have your legal advisor read your lease, they should be more than willing to help review and explain the obligations and highlight any concerns. The lease is very important as it will set out everything you need to know in regards to your future obligations including ground rent, maintenance, service charge and what you are allowed and not allowed to do. I cannot stress enough the need to read the lease. It can be quite ‘wordy’ and complicated but unless you read it you won’t know what you don’t understand or know what questions to ask your legal advisors or surveyor.
Is there a sinking fund? What is the condition of the block of flats? How are any future works going to be funded? There is nothing worse than buying your property and being hit by a large bill for urgent repairs. Ideally service charge should collect a sinking fund for future repairs on a regular basis so that the current owner contributes towards future repairs even though they may sell before such works are completed. If this is not the case the lack of contribution should be taken into account in the sale price.
Is there a Planned Maintenance Plan (PMP)? A PMP will show when works are proposed, what works are proposed and importantly how much they are likely to be. Having a good maintenance plan in place for a property is a good sign of a well-managed building. This will allow for budgeting and collection of service charge to save for important items of repair and hopefully reduce the likelihood of any unwanted unexpected large bills.
Section 20 Notices. Have any notices been served on the current leaseholders? This is something that your legal advisors should check but is always worth understanding what the current position is yourself. Before any works, which cost a single leaseholder over £250 Section 20 Notices should be served to all leaseholders. The first notice (The Notice of Intention) will set out what works are proposed and will give leaseholders 30 days of consultation on the works and allow them to recommend contractors to tender for the works. The second Notice (The Notice of Estimates) will set out the cost obtained for the works, again leaseholder will have 30 days to review the costs and make observations and ask questions). The final notice (The Notice of Reasons) should set out who has been instructed and why.
Proposed work. If you propose to do any works to the property, read the lease first before you buy. Although the freeholder cannot reasonably refuse permission for works there may be terms in the lease which could make your proposals impossible before you start. Ask your surveyor to review your proposals on site and with the lease during his inspection, they can often provide useful hints and tips to realise the properties potential.
Meet the neighbours! If the block is small or has a management company or residents association, and it is at all possible try and meet with them before you purchase, ask them how they feel the property is managed and how they see the building’s future. The cost for any future works is likely to be shared between the leaseholders and their and your involvement will matter.
I hope that helps for now, if you think we have missed anything, would like any advice or would like to make any comments in regards to the above please do not hesitate to contact us at Miller Metcalfe.
Blog provided by Colin Chapman (MRICS)