What to consider when buying a flat

One of the biggest decisions first-time buyers grapple with is whether they should buy a flat or a house. There are advantages and disadvantages of both kinds of property, and it’s also important to consider long-term value. To help you weigh up the options, we’ve highlighted some pros and cons of buying a flat:

The pros of buying a flat

• Affordability (typically cheaper)
• Lower maintenance
• Location
• Typically more energy efficient and secure

The cons of buying a flat

• Service charge and ground rent
• Less autonomy
• Typically smaller space
• No or limited outside space

Difference between freehold and leasehold

With a freehold property, you own the house and the land it’s built on including outdoor spaces like gardens. Freehold is the most common way to buy a house in the UK. A leasehold property is essentially where you buy the right to occupy the property, which sits upon land that belongs to someone else (the freeholder). Flats or apartments are leasehold because you share a building with other people.

With a freehold property, once it is transferred into your name, it remains yours until you decide to sell it or pass it on to your children perhaps. Whereas, with a leasehold property you are essentially leasing the property for a set amount of years (e.g. 99, 125 or 999 years) which gives you the right to occupy and use the flat and share the use of other areas of the building or estate.

How long is left on the lease?

With a leasehold property, you’re essentially buying the right to occupy the property for a set amount of time. Which can be any amount up to 999 years. As soon as the flat is initially bought (from the builder) the time on the lease start to reduce. It is essential that you know actually how long is left there is on the lease as this will affect its value. The lower the length of the lease, the lower the value of the flat.

As the lease length impacts the flat’s value, some mortgage lenders insist that properties have at least 70 years left on their lease before they approve a new mortgage. This means, if you are buying a flat with less than 75 years of the lease remaining, you may struggle to sell it in 5 years’ time.

Can I extend a lease?

In short yes. However a lease extension can cost tens of thousand pounds and take many weeks to complete. So, if the lease is running out, you should try to push to have it extended before you buy. In some circumstances the seller may even agree to organise it.

What are service charges and ground rent?

When you buy a leasehold property, you will likely be required to pay an annual service charge and ground rent.

A service charge is an amount payable by a leaseholder (you), for services, repairs, maintenance, improvements, insurance and the cost of management of the communal areas. Put simply, when you pay the service charge, you are contributing to the upkeep of the communal areas. For example, it is likely the communal hallways and landings will be cleaned professionally on a weekly or monthly basis, and the decorations to the stairwell will need renewing every 5-10 years, and this is what your service charge covers.

The cost of service charges vary from building to building. Typically, the greater number of leaseholders (number of flats) the lower the service charge; as the cost is split across more flats. It is extremely important to check how much the service charge is before you proceed with buying a flat, some service chargers can be in excess of £4,000 a year, which means you would need to pay an additional £330 a month.

Ground rent is a further payment that you will be required to make when you buy a flat. As touched upon in our previous paragraphs, when buying a leasehold flat you typically do not own the overall building, and this is owned by the freeholder. In return for allowing you to live in the building, the freeholder requires you to pay ground rent. Unfortunately, your landlord does not have to provide a service in return. As with the service charge, it is extremely important to check how much the ground rent is, although typically it is much less (circa £250-300 a year).

Who is responsible for major repairs

Although you will be paying your service charge, this typically covers smaller repairs and ongoing maintenance, although some of it may be used to contribute to the major repair. So, in the event of a major repair, it is likely that a section 20 notice will be issued which requires you to pay additional costs towards the repair.

What restrictions are there on the flat

One of the negatives of owning a flat is that you have less autonomy over how you live and what you can and cannot do. Most leases contain clauses which restrict what some owners can do and these are some of the most common:

• You cannot own a dog, cat or similar pet
• You’re not allowed to play music after a certain time
• You are not allowed to hang washing on your balcony
• You are not allowed to take down or move internal walls

Typically, the leases have been drafted to benefit all occupants and help maintain a high standard of living. Nevertheless, it is worth asking the estate agent and your conveyancer to confirm if there are any onerous clauses.

Conclusion of buying a flat

Flats can be a great starter property, or provide a brilliant place in a great location at an affordable rate. But make sure you do your research and ask plenty of questions during the viewing process.