Flat ownership can be complicated, as there needs to be a way of managing ownership of the whole building as well as the individual flats within it. We’ve spoken to a couple of owners who have run into problems, and put together some tips for avoiding similar nightmare scenarios.
Whether you’re buying a leasehold or a share of the freehold, buying a flat means entering into a relationship with other owners in a way that freehold home ownership doesn’t.
In many cases, everything goes smoothly, but understanding the things that can go wrong can help you look for warning signals during the purchase process. And knowing the right questions to ask about the ownership and management arrangement can help you avoid big problems later down the line.
This article provides general information and discusses some particular (and personal) scenarios. It is not legal advice and you should always seek professional help if you need it.
My friend - let's call her Sara - has a buy-to-let property, which is a leasehold flat in a small block. When she bought the property, she was a bit concerned about the expensive maintenance charges, which would eat into her rental profit. However, she really liked the flat and she went ahead with the purchase anyway.
A while later, her tenants told her that the communal front door was broken and couldn’t be locked properly. She went round and saw that besides the broken door, the communal areas were very dirty and had fallen into quite bad disrepair. She contacted the freeholder’s managing agent to get this sorted, but the agent sent lacklustre emails in reply and failed to do anything.
Sara was in a situation where she was paying a high monthly fee to a freeholder who didn’t seem to be fulfilling their responsibilities. Problems with the communal areas were causing issues for Sara’s tenants, and she was also concerned that the scruffy appearance of the building would make it more difficult to let the property again in the future.
The freeholder was breaking the conditions of their lease, but taking them to court seemed like a massive hassle, so Sara felt stuck.
Another friend, 'Max', owns a share of freehold in an old house that’s split into four flats. There’s no management company - the freeholders just figure things out between themselves. Or that’s the idea, anyway.
When Max first bought his flat, he didn’t even have the details for the other freeholders, and because they were all buy-to-let landlords and none of them lived at the property, he had to track them all down via their tenants.
When the buildings insurance was due for renewal, Max paid the premium himself, and then got the other owners to pay him back. It wasn’t ideal and involved some chasing, but they all paid. But then Max discovered a pile of electricity bills had been gathering dust in the communal hallway.
It turned out that nobody had been paying the electricity for the lights in the hallway and the building’s smoke alarm, and the electricity company were now threatening to gain entry to the property and disconnect the supply.
When Max called the electricity company, they told him that if they went ahead with the disconnection, they’d have to inform the council’s environmental health department, who would then insist that any tenants were housed in alternative accommodation until the supply was reconnected. A disconnected supply would also mean a disconnected fire alarm, which would likely breach their leases and invalidate their buildings insurance.
When Max told the other owners, they were alarmed but reluctant to pay the bill. After all, a couple of them had only bought their flats recently, and they pointed out that the unpaid bills stretched back over several years. It was also difficult to find a way to pay the bills going forward.
Setting up a managing company felt like a lot of work (and could mean all the leases needed amending) but opening a joint account in the names of all the owners would mean that everyone’s credit records would be connected. The only other option was for one owner to agree to pay the bill, and for everyone to pay them back. Nobody wanted to do this.
With the electricity company threatening to cut them off, Max was stuck. Short of paying the bill himself, he didn’t know how to solve the issue.
So that you don’t hit problems like these, do the following when you’re viewing flats and going through the purchase process:
Have you had any issues with your freeholder or with your share of freehold arrangements? Tell us in the comments.
12 March 2020 • 2-minute read
Chancellor Rishi Sunak announced the first UK Budget since October 2018 amid continuing political and economic uncertainty. Here’s the key…
6th Floor99 Gresham StreetLondonEC2V 7NG
Sol House29 St Katherine's StreetNorthamptonNN1 2QZ
© Copyright 2020 Simply Business. All Rights Reserved. Simply Business is a trading name of Xbridge Limited which is authorised and regulated by the Financial Conduct Authority (Financial Services Registration No: 313348). Xbridge Limited (No: 3967717) has its registered office at 6th Floor, 99 Gresham Street, London, EC2V 7NG.