Buying Freehold of flat - pros and cons?

[Dan32]

The block of flats I live in has been offered to buy the freeholds from the administrators. There are 8 owners in total. I'm really uneducated in these matters so was looking for any advice. I can think of couple of pros and cons such as:

pro - new building so maintenance per year could be reduced

con - 8 people would need to be consulted and get their agreement on any changes to the property, inc maintenance items that could cost them

con - 8 people would need to agree on which firms we use to clean and maintain the property

con - And the bit that puts me off - if we are all expected to pay towards repairs, how does it work if the roof needs redoing at cost of £10k, especially if we've all been paying into a pot for such eventualities but someone new has bought the property? They're not going to want to move in and find us knocking on the door looking for £1250 "Hi welcome to the building, where's your cheque book." And if we're paying into a pot for this, what happens if we move? Would we get the money back?

Any advice much appreciated and if anyone more legally minded than me wants to know more, drop me a pm.

[Calm Chris]

con - 8 people would need to be consulted and get their agreement on any changes to the property, inc maintenance items that could cost them

***So you set up a board, have a secretary and go through a simple democratic vote process

con - 8 people would need to agree on which firms we use to clean and maintain the property

***Yes, but you have the advantage of control over cost, work quality and who does the work- Maybe one of the flat owners could do the job if you have any semi retired or home based (and needing pin money).

con - And the bit that puts me off - if we are all expected to pay towards repairs, how does it work if the roof needs redoing at cost of £10k, especially if we've all been paying into a pot for such eventualities but someone new has bought the property? They're not going to want to move in and find us knocking on the door looking for £1250 "Hi welcome to the building, where's your cheque book." And if we're paying into a pot for this, what happens if we move? Would we get the money back?

***Well lets not forget that the person selling would pass on the pot they have been paying in to, so the contribution is already there.

When a property is purchased I believe any large service work has to be declared and since larger work is planned well in advance this won't be a shock to the new arrival.

Say you have £10k in the pot, this has been contributed to by all 8 flats. So £1250 each is already there. The job is £20k, so you and each of the neighbours including the new arrival would simply agree to add £1250 in to the pot.

[patently]

Been there. We lived in a development of 40 flats once.

The only reasonable way to do it was to have a management company; we were all shareholders; we were required to sell the share to the new owner on selling the flat. We volunteered to act as directors, and therefore acted with authority in relation to the company's assets. The company owned the common areas (etc) so had both a responsibility to act and the authority to.

That solved the first two of your cons. Obviously, in a group of 40 there was always someone who whinged that not enough was done, what was done was done wrong, and that the service charge was too high. We used to shut them up by offering them a directorship. It never once failed

As regards the last con, we (with consent) set the service charge at a rate that was about 150% of our budgeted needs. As stuff like cleaning, minor repairs etc was pretty predictable we could be quite confident of the level of expenditure needed. The surplus was then put in a savings account owned by the management company and left to accumulate. The theory was that when one day something happened, we could call on the cash.

Effectively, that extra 50% was the markup that an outside management firm would have taken from us. So, by doing it ourselves we accumulated the reserve instead. As and when flats were sold, the existence of the fund and a properly organised management company was something that we could make a fuss of in the sales particulars and make our development stand out, so we got some personal benefit from the fund even if we sold up.

[m4ttm4son]

Buy the freehold.

It takes a little bit of work to sort issues, but it's better to have control over your own building. You can always outsource to a block management company if none of you can be a*sed and you can afford the fees. If there are any really serious problems, management can be a money saver in the long run though.

pro: When you come to sell the property "share of freehold" is a great phrase.

[mb]

Hi Dan,

Buy the freehold if you can ! I have never lived in a flat but my mother does now (all retired people) and she has the problem the mgt company want to renew the roof & spend money when the owners don't see the need (bound to be an opposition of views) she would love a share of the freehold & to be able to control what is going on...

Re Con 4 - This is surely the case today just the mgt co would ask for the shortfall not the residents who own the freehold ?

[saab]

I would agree with what others have said - the advantages generally make it a sensible option.

Its a slightly different situation to yours but I used to live in a flat in a house which had been converted into two flats. When I bought it the freeholder couldn't be contacted, and according to the seller ground rent cheques he had sent to her had never been cashed. She had simply lost interest in the property - and wasn't undertaking her responsibilities such as insurance and maintenance. Apparently this is quite common. It made buying and selling the flat more tricky as there was additional paperwork hoops to jump through. It made life difficult and had I owned the freehold, either jointly or on my own it would have been preferable and less stressful - I'd much rather be master of my own destiny that at the mercy of a faceless individual or organisation hundreds of miles away, who's only desire is to make themselves some money - their priority clearly conflicts with yours.

As a freeholder you can ensure that work is done properly and at the frequency required and for a reasonable cost, you can have the piece of mind that the structure is insured, and (if you manage things properly) that there is enough set aside to attend to unexpected repair and maintenance issues. Also once the period of the leases starts to get a bit shorter than buyers like, you can decide to increase the leases without footing a massive bill.

There are some additional responsibilities which you need to take account of, but this situation is so common that they are well documented. One which springs to mind is the need to comply with the CDM regulations when you are having any work done - these wouldn't normally apply to domestic properties, but I believe do in the situation you are contemplating - these needn't be onerous and there is plenty of information available.

Good luck!

[CabGirl]

Con - it gets run on price rather than quality, you get told you can't afford quality (der?), you take them to an LVT and the little f**** use your money to defend themselves and lie

Move as soon as you can afford to and buy a freehold house

[Ari]

I once rented a flat in a building that was run by the property owners.

TOTAL disaster.

Three of the flats were let so the owners weren't interested and didn't want to pay. At least one owner couldn't be got hold of. There were "discrepencies" in the accounts that no one could explain. The building was in serious need of redecoration and no one would put the funds in (couple of grand each) until everyone else did. Place was in a right state. (Didn't bother me, I was just renting temporarily and meant I was able to negotiate a nice cheap rent).

In the end they gave up and gave the whole lot to a management company who trasformed the place within a year. They were willing (and able) to use legals to get money out of those who wouldn't pay up.

The kicker is, the flat next to mine (and they were small but very nice one bed places, and the block was a lovely old converted manor house in a very good area) came up for sale. I seriously considered buying it as the mortgage would have been less than the rent but the mess with the management (it was pre the managmeny company taking over) put me off, plus I needed more than one bedroom ultimately so didn't seem a good long term idea.

Anyway, he sold it eventually. For £28,000!!! Feck me isn't hindsight a wonderful thing? :smashfreak:

[CabGirl]

Anyway, he sold it eventually. For £28,000!!! Feck me isn't hindsight a wonderful thing? :smashfreak:

Proof that prices always go up in the end.... /run

[Andrew]

Hi, I'm the company secretary of our freehold company so feel free to ask any questions about the day to day running of the company - it is pretty easy.

Put simply, we bought ours about 3 years ago and I orchestrated the whole thing which included keeping everyone on-side while the freehold owners at the time made life as difficult as possible. Since buying it the bills have easily halved - probably down by 75%.

We pay in more than we need and now have a large sum sitting in a business bank account - so much so the guys upstairs benefitted from new carpets and nobody had to pay out anything extra. Our insurance is through Lockyers (insurance Jon) which is top drawer - I'd recommend them for the buildings insurance once you get the f/h.

Feel free to PM me (as I'm mega busy at work at the moment and am not on here much but will respond if I see I've got a PM).

[Insurance Jon]

Thanks for the reccomendation adrew, it's good to know that my clients are happy to reccomend me. If anyone wants any further advice on the insurance side of things my contact details are on www.lockyers.co.uk

[Ari]

Proof that prices always go up in the end.... /run

I've never said that they don't. :D

[Mac]

I'd never buy/live in a self-managed place - it's just not worth the hassle or effort that goes with it.