Buying a property is quite a big deal for anyone. Whether you are buying a property for the first time or the tenth time you need to be sure of a lot of things and take a look at a lot of factors to make sure you are getting a good deal. Although buying any kind of property requires you to go through a long and complex process buying a leasehold flat can be a little trickier. There are plenty of things you need to figure out and know before buying a flat that is already on lease.
It may look a little intimidating to buy a leasehold flat however it is not that difficult. You need to make sure that you are aware of the contract between the seller and their tenants and know how you can manage stuff when it comes to property transfer.
If you are going to buy a leasehold flat for the first time then you need to make sure that you have full knowledge of the flat and the tenants as well as the lease contract. For this, you need to ask the right questions so that you can get all the information you need before you buy the flat.
Since you are here, you must be looking for the article that featured the best questions to ask before buying a leasehold flat and that is exactly what you will find here. Go ahead and have a look at the following article and see what questions you need to ask before buying a leasehold flat.
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Questions to ask before buying a leasehold flat
1. How Long Is Left On The Lease?
The most important questions you can ask the seller are about the term of the lease and how long is left on the lease. You should know that it is difficult to get a mortgage on a property with a short lease and the cost of extending the lease can increase significantly if it drops below 80 years. That is why some mortgage lenders want there to be as much as 90 years left so that you can extend the lease before the price goes up.
Overall, it is important that you know the lease term and how much time you would need to extend the lease again. You require to own the property for at least two years before you can extend the lease so keep that in mind as well.
2. How much is the ground rent?
Ground rent refers to the amount you have to pay to the landlord for nothing. Yes, you heard it right, ground rent is a fixed amount written in the lease that the tenants have to pay the landlord. There should be a due date on which the ground rent needs to be paid every month.
You should also ask if you can change the ground rent and how often you can do so. How you can change the rent and what procedure you would require to do? In some cases, the ground increases over a certain period regardless of inflation.
There can be a ground rent review clause in the leasehold agreement that would allow you to review and re-structure the ground rent as well as how it operates. You should be aware of the rules and regulations regarding ground rent.
3. How much are the service charges?
Leaseholders are required to pay some service charges to the landlord as the cost of managing and building repair. These costs cover the expense of these services provided by the landlord or building under the lease.
The service charges should be written explicitly in the lease agreement. It will cover the cost of maintenance, repairs, and building insurance. It includes the costs of central heating, lifts, porters, lighting and cleaning shared areas, and more. It may also include management costs and services.
Overall, you should know what are the services charges and what does it include, and when and how these charges are going to be paid.
4. How often is the rent reviewed?
Rent is reviewed from time to time and it differs from one property to another. That is why if you are buying a leasehold flat you should check how often the rent is reviewed and what is the specific period mentioned in the leasehold agreement.
You should also see when will the next review happen. Sometimes the rent review happens for a long time and it may affect you in some ways as a new landlord or tenant. So make sure that you know the frequency of the rent review as well as when the next review will happen.
5. Are there any major expenditures coming up?
If any major expenditures are coming up, the landlord will need to disclose that and give notice to the leaseholders. So you should be aware of any plans or expenditures that might happen shortly.
6. Is there a sinking or a reserve fund?
Every leasehold estate should have an asset management plan that shows what will be the cost of maintaining the property. This may cost the leaseholder to give some extra service charge that will go to the reserve fund. This helps in case of any large expenditures or unforeseen damage or repair work. Once the amount is paid to the reserve fund you may not get the amount back but it will be beneficial in so many ways when you buy a new property.
7. What consent do I need?
While buying a new property you will need many consents from various authorities or bodies, or even from some people. So it will be helpful if you know what consent you would need to buy the leasehold flat. You may also need to meet some requirements to get consent from the ideal bodies or people.
8. What are the administrator’s fees?
You should also ask about any administrators fee. This is the amount the landlord charge from the leaseholders for granting approvals under the lease, for provision of information or documents, dealing with failures by the leaseholder to pay ground rent or service charge, or in breach of the lease.
You need to check what is the administrator’s fee and what it covers. You should also review the fee and if you have any concerns regarding the administrator’s fee you should ask your solicitor to advise you or help you with it.
9. Are there any restrictions on how you live in and use the property?
Buying a property comes with lots of responsibilities and regulations that you need to follow and respect. So it is important that you know the restrictions and regulations imposed on your property and how they affect you.
Once you buy the leasehold flat you will be bound to oblige to the restrictions or regulations written in the agreement. These restrictions can include a lot of things such as rules and regulations regarding keeping pets or using the property for business purposes.
If any of the regulations or restrictions on the property concerns you then you should talk to your solicitor or conveyancer.
10. What are the ‘demised premises’?
While buying a leasehold flat you should know what is included in the demised premises. Demised premises refers to the leaseholder’s ownership under the lease agreement. It usually defines the lease agreement and talks about the interior of the flat (surface of the walls included) and ups the ceiling above and joints below.
Each lease varies from another so you can fund many details regarding the flat and the property you are buying. You should read the demised premises carefully and know if there are any alterations you need to make or if there is a space for improvements. You should read it carefully and thoroughly.
11. Have any alterations been made to the property?
It’s important that you know if there are any alterations have made to the property and the building. Any kind of workup or alterations done to the property require certain approvals and consents, and if they haven’t been given then you may need to pay the fine as a new owner in the future.
To know if any alterations have been made or not, you should compare the lease plan to the current layout of the flat. The ‘Property Information Form’ and ‘Leasehold Property Enquiries form’ should disclose the information regarding any work done to the building and the flat, so you should ask your solicitor to review these forms and update you about any alterations that have been done the past to the flat.
Conclusion
Here we have come to an end for the article which means now you know all the questions you need to ask before buying a leasehold flat. The goal is to understand what kind of contract has been signed and how it will impact you. This is why you should be asking the right questions so you can make a well-informed decision and get a good deal as well.
That would be all for now and we hope you got everything you were looking for and now you are ready to commit to a leasehold flat!
