How to have your cake and eat it…
Avoiding some of the pitfalls of flat purchase
Investing in an apartment, as opposed to a house, is a popular low maintenance choice for many buyers, either as a home or an income generating ‘buy to let’ property. Without doubt, getting rid of the responsibility for management and maintenance of the main structure and common parts of buildings and grounds is attractive, especially if you don’t like gardening. These responsibilities generally lie with the freeholder or management company, depending on the wording of the lease and leaving all these headaches to someone else is particularly seductive to the investor flat owner who lives abroad or some distance away.
Whilst the visual appearance of the building will give an indication as to how well the development has been maintained, a pre-purchase survey of the flat, main structure and common parts is a must. Undertaken by an experienced surveyor, the survey will show whether any major remedial works are required. In addition, an inspection of the last three years’ management accounts by an experienced solicitor will reveal the level of service charge paid and the extent of the sinking fund available to pay for any works.
Problems can and often do occur if either landlord or management company fail to carry out their obligations under the lease (including regular maintenance). It may also become evident that the annual service charges collected have been insufficient to create a viable sinking fund to pay for any future works that are needed. Any anomalies found would certainly play a part in the negotiation of purchase price.
These problems are often minimised when flat owners have shares in the management company of their development. As shareholders they can appoint directors of the company who can be removed if they do not carry out their responsibilities. In addition, many landlords/management companies delegate their responsibilities under the lease to managing agents. These agents have professional experience in running developments, thereby ensuring that the lease and any statutory obligations have been complied with; however, professional fees charged for agents will usually increase the service charge levied on owners. By and large managing agents should ensure the development remains an attractive place to live and the flat a sound, saleable investment.