How to buy a flat
Buying a flat can be very different to buying a house. From maintenance costs to leasehold vs freehold, there are some things unique to flat-buying which are important to get your head around before you begin your search. But don’t worry – help is at hand; this guide on how to buy a flat will put you in good stead.
Key differences between buying a flat and a house
Land: Although there are exceptions to the rule, with a house you’ll usually also own the land that the house is on. With a flat, a landlord or company does and you’ll need to formalise an agreement – known as a lease – about what you can and can’t do with this land.
Building maintenance: Unless you own part or all of the freehold, with 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 contribute financially. When you own a house, the responsibility usually falls to you. 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.
Restrictions: If you buy a flat, there may be restrictions about the kind of alterations you can make – for instance, if you live above another residence, wooden floors may be a big no-no.
What is leasehold?
When it comes to flat-buying, one of the most common areas of confusion is around the leasehold. As we’ve already mentioned, a lease is a legal agreement between the owner of the flat and the owner of the building and land that it sits on.
New leases generally start at 99, 125 or 999 years. This may seem like an awfully long time, but bear in mind that the same lease is passed over from each owner, so it needs to be.
Who can extend a lease?
According to the Leasehold Reform Housing and Urban Developments Act 1993, most flat-owners are entitled by law to have 90 years added to their lease for a fair market price.
As long as you’ve owned your flat for at least two years, you will be able to extend your lease, should you wish to. Bear in mind, if this is a buy-to-let, this time-frame will still apply since you don’t actually have to live in the flat to extend its lease.
How to 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 can add thousands to its value. Just how much it will add will largely depend on how long your lease is to begin with – if your lease is 95 years or more you’ll probably just cover your costs. Less than this and you’ll be able to increase your asking price to cover what you’ve paid for your lease, and then some.
When to extend a lease?
It’s generally agreed that if you’ve 85 years left on your lease, you should begin to look into extending.
How much to extend a lease?
This will all depend on the length of your existing 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 and add significant value to your property – so it’s well worth looking into. Ask us for lease advice that’s tailored to your own situation.
Restrictions on your lease – what to check beforehand?
Are pets (dogs, cats – or both) allowed in your flat? Some leaseholds prohibit keeping pets – or at least, require permission from the freeholder first.
Making renovations: Have a Grand Design in mind for your flat? You’ll probably need to check with the freeholder first. Planning permission, building regulation approval and the okay from your mortgage provider may also be needed.
Subletting: Planning to rent out a room or the entire flat? You may need to check that your lease or mortgage doesn’t prohibit this.
What is a property service charge?
As anyone who has ever lived in a flat will know, service charges in residential properties are a fee – that’s paid either annually, monthly or quarterly – which contributes towards the maintenance of your building and its grounds.
What does a property service charge include?
This will obviously depend on where your flat resides and the facilities it has. However, at the very least, the property service charge should contribute towards:
Upkeep of communal areas, such as the hall or any shared facilities.
Maintenance of any communal grounds or gardens.
Lift servicing, if applicable.
Maintenance of communal heating or lighting systems.
Repairs in communal areas
How are service charges calculated?
Property 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.
Bear in mind that your annual service charge can go up or down – depending on how much maintenance and/or repairs are needed. Some leases have a fixed service charge but you’ll need to check with your freeholder if this will apply to you.
On average, how much is a service charge?
The location of your flat and the facilities which it offers will all influence how much you can expect to pay. However, on average, you can expect to pay between £1,000 to £2,000 per year as a service charge for your flat.
If you let out your flat, you could pass this charge onto your tenants – this will have to be set out in your tenancy agreement ahead of time, however.
To sum up, how does buying a flat differ from buying a house?
By and large, whether you’re currently looking for houses, bungalows or flats to buy in Kent, both your search and buying journey will feel very much the same. However, there are some exceptions:
Typically, when you buy a flat, you’ll be offered it as leasehold not freehold.
Leasehold means that you’ll need to formalise an 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 may have to pay a property service charge for your new flat, so this cost should be factored into your budget.
Property service charges vary, but on average in Kent you should expect to pay between £1,000 and £2,000 per year.
Take a look at the latest flats for sale in Kent or pop into your local Wards branch for more service charge or lease advice.