Service charges are charges that are levied by landlords or freeholders for costs they incur in relation to the maintenance, upkeep or insurance of a property or for providing any services. These may include costs for a managing agent. Details of what can be charged will be set out in the lease so check what is rightfully claimed. Examples of these are cleaning or maintenance of common parts, improvements, gardening, heating, maintaining any services such as lighting or lifts, insurance, security etc. The landlord or freeholder is not obliged to provide any services other than what is provided for within the lease and the leaseholder is not obliged to pay for any services being claimed that are not provided for in the lease.
When you buy a leasehold property, usually a flat, you have to pay ground rent for the land the property is standing on. It’s usually paid annually or every 6 months with any service charges due.
In a freehold - you own the land and the building completely. In a leasehold - you own just a right to live in the property for the duration of the lease, at the end of which you own nothing so if you buy a leasehold flat you buy the right to live there but you don’t actually own the property. Generally being a freeholder is more desirable. Freeholders can have responsibilities in the deeds if there are other leaseholders present e.g. where you own a building but sell the flats individually to different owners who each get a leasehold of their own flat. Leaseholders in a block with several properties often choose to buy the freehold between them, giving them each a share of the freehold and more control over the management of the property. Share of freehold means that when you buy the lease on a flat, it comes with a share of ownership of the building. ‘Commonhold’ ownership is a new system allowing you to own your flat outright in the same way as a freeholder owns a house so there is no landlord to pay. At the same time you will have a share in the common areas of the building including the roof, walls, stairs and hallway - and be partly responsible with the other commonholders for the upkeep of those areas. The idea is that a commonhold association is set up to manage the communal areas of the building and flat owners who don’t want to get involved in the extra work can appoint a managing agent. The price of a commonhold flat could well be higher than a leasehold one, but any difference is likely to be small. This would come from the fact that leaseholds dwindle over the years and so the nearer they get to the end, the less they are worth. Commonholds are open-ended.
Once the property has been surveyed, your formal mortgage offer received and your solicitor has made all the relevant legal checks, you will then be ready to exchange contracts, sign your mortgage deed and then complete your purchase which is when all money transactions are completed. This is usually between 2-4 weeks after exchange but can be on the same day or at any time as agreed between the parties. All that’s left to sort out now is the moving date.
The next step is to get a survey done and your mortgage company will want to arrange a valuation survey to check that they are willing to lend on the property you want to buy and that you are not applying to borrow more than the property is worth. There are three main types of survey available: a valuation survey - which covers valuation only, a homebuyers report – which includes basic info about the fabric of the property and any superficial defects and problems, and lastly a full structural survey – an in-depth report on the property’s construction, condition, any defects and problems. What you choose will depend on the nature of the property you are buying – you never know what problems exist so check what is best for you.
You need to be able to act quickly to secure the property you’ve found which is why it’s important that you sort your finances out as early as possible so you know exactly what your budget is. You are then ready to make an offer and once this is agreed in principle, you can then get the ball rolling on the purchase. The next step is to obtain your written mortgage offer (mortgage offers are often agreed verbally before you find a property) and then instruct a solicitor to deal with all the legal aspects of the purchase.
When you know how much you can afford you can then decide on location, how much space you need and can afford, what kind of layout will work for you and any other specifics relevant to your needs. Make a list of what’s important, what’s nice to have and start from there. If you’re buying to let, choose an area that has a stable rental market and has good access to amenities, transport etc. Make a list of areas, postcodes or even streets that appeal to you and make the time to look around and research the area to familiarise yourself with what it’s like and what’s going on. Ask yourself all the relevant questions – do you need schools nearby, shops, nightlife, buses, tubes or trains, do you need parking, do you travel by car a lot and need easy motorway access? Work out what’s most important for you and go from there.
It’s a good idea to work out how much you can realistically afford before you get serious with your search, that way you can be sure of what your budget is and you won’t get disappointed falling in love with a property that you can’t afford. Also it enables you to provide specific instructions to your agent which will help enormously with your search. Starting with your net monthly income work out what all your realistic outgoings are and what you have left over is your ‘disposable income’. Ideally you will need to have a 10% deposit but some developers offer deals as low as 5% with additional benefits like paid legal expenses, stamp duty or cash back. With this information, your mortgage advisor will be able to quickly work out what you can afford with examples of what the monthly repayments would be on different types of mortgage deals. Be realistic about what you can afford so you don’t run into trouble early on with your repayments.
