Part One – House or Flat?

by Adele Parkinson

With lending to first time buyers at its highest since December 2007, it looks as though it is becoming just that little bit easier to get your foot on the property ladder.

Anyone contemplating buying their first property should consider speaking to a financial adviser who will be able to give you an idea of what is available in terms of lending options, give you a budget to work towards in terms of your maximum purchase price and typical monthly repayments.

Once you have a budget, you can begin the fun part – looking for the right property! But are you going to be looking for a house, or a flat? If you are looking in Bournemouth,Pooleor the surrounding areas, then the closer you get to the coast the more likely it will be that the only properties within a first time buyer’s budget will be flats or apartments.

Here are just a few considerations you may want to take into account before you decide whether to opt for a house or a flat.

In legal terms, most houses are “freeholds” and most flats are “leaseholds”. The difference is that with a freehold, you own the land absolutely but with a “leasehold” property you buy exactly that – a lease for a number of years.

Although it sounds obvious, it is important to check at an early stage how long is left to run on the lease. Many mortgage companies (i.e. lenders) are unlikely to lend on flats where there is 70 years or less to run on the lease because of their concern that it may devalue the property and be less easy for them to sell on if they were to repossess.

When you buy a leasehold property, there will also be a “freeholder” who owns the freehold of that land, i.e. an individual or a company that owns the block as a whole.

The residents of the block may have formed a company and bought the freehold themselves. This is known as “share of freehold”. As a purchaser, you would also become a shareholder or member of the company on completion.

Many people see “share of freehold” flats as preferable because the residents have more control of the upkeep of the block and most importantly, they are free to extend and update their leases when necessary.  If the block is not share of freehold then the freehold owner may charge a large premium to extend the lease.

So, my tips when buying a leasehold property would be:

• Check with your Solicitor or Estate Agent who owns and manages the freehold  3(they might not be one and the same)

• Check to see whether the flat is “share of freehold”

• Check how long there is left to run on the lease and whether the lease term could be extended

• Check the restrictive covenants contained within the lease – for example, are you required to have sound proof flooring? Are pets allowed?

• Check the level of ground rent and maintenance charges and work them into your monthly budget along with the rest of your outgoings.

For more information, please ask for Adele Parkinson in the Property team, adele.parkinson@kiteleys.co.uk or telephone 01202 708634