To risk buying a leasehold flat

[Hooploop]

I'm mid 30s and I'm done with housesharing. After living extremely frugally and saving for 12+ years, all I can afford to buy is a small flat. However I have massive concerns about the risks of leasehold problems, management fees and cladding issues. Many of my friends who have owned flats have been caught up in some controversy or other and have ended up forking out thousands in legal fees and have had difficulty selling, etc. One friend with a 1 bed flat in Essex had a £20k management fee dropped on them earlier this year for unecessary maintenance work that they didn't give the go ahead for. I wouldn't have that sort of money.

I'm wondering whether it's safer to just pay 60-70% of my salary on renting my own place instead? And stop saving and forget the idea of home ownership altogether.

Move further out or to another area and buy a small free hold house

your solicitor will look at the history of service fees, the surveyor should identify any major works likely to be needed, there could well be a reserve built up for capital works.
Live in central London, so always had flats 40ish years, never any real problems.
Don't buy one with cladding, and you won't get a mortgage on anything with a short lease.
With modern builds, get your solicitor to check on any built in invrements to the ground rent detailed in the lease - or check anyway.

Capital costs (repairs) are needed with a freehold as well as leasehold - the only difference is that with freehold you have the ability to juggle when/what you can afford.

Should have clarified - the area I'm looking at is a 'cheap' part of the country for housing (in the north) But I can't quite stretch to a house.

Hi op are you looking to buy out right or will you have a mortgage?
if you are buying outright then why don’t you think about a house and get a mortgage for the difference,
. I’m sure you’ve thought of this. Yes leaseholder fees can be terrible. I’d base it on the fees now - how long it’s been managed by that company. I’d heard that if they are more than £3000 per year it’s very hard to sell. It’s like having a blinking mortgage. You maybe surprised at what you can borrow these days. Have you spoken to an independent financial advisor at all re your situation.
you will be paying services charges for life - like renting - good luck

When we were in this situation, we went for a house in a rough area of the city which was popular with first time buyers due to being cheap. We’ve recently moved somewhere nicer and it sold really fast. Could your budget stretch to somewhere tiny but in a bit great area, assuming it’s popular with first time buyers?

*not great area

pretty much all flats in blocks are leasehold of some sort. Very few do you own a share of the lease, and then you have to work out maintenance etc yourself.

So really if you are wanting a flat, you'll probably have to put up with it. It's not great, as management companies can be unreliable and unpredictable with costs, but there really isn't much of a choice in the matter for most of us. If you can only afford a flat, you can only afford a flat, and chances are high it will be leasehold.

Plenty of the leasehold flats and blocks are fine. You don't have to do building maintenance yourself, and it will likely be managed by a company. Just remember that the service charge you pay will not always cover all the maintenance that needs doing, so you might want to try to save yourself as you go, just the way that you might do for things like leaky roof, new boiler, broken windows etc as a householder. The difference with leaseholder is that you don't get much choice when/how the repairs will be done - someone else decides.

I have a leasehold flat. It’s actually a purpose built maisonette. There are lots on the estate where I live (Essex). Ground rent £20/year. 900+ years lease. I’ve lived here a long time and had no issues/concerns.

My mum bought an ex-council maisonette. It is leasehold but the leaseholder is the council. I think she pays something like £10 a year?!

Just don’t buy a new build. Flats in converted houses tend to have longer leases and cheaper fees, and won’t have cladding

Hi OP, I am an owner of a leasehold flat, most flats in England are leasehold, some (e.g. a converted house) are share of freehold. There are also risks with the latter, you are relying on the other freeholder to have enough savings in case of essential repairs to the building. A good solicitor will check out the lease and see that all funds and management are in good standing. Personally, I would steer clear of anywhere with cladding still to be replaced, any new build (likely to lose value in the short term), anything with inflated management fees to ‘maintain’ tiny patches of land or where the fee doesn’t seem to match the amenities.

As long as there are no cladding issues and you save some money for emergency repairs.you'd be ok.

The big thing is to look at the leasehold length, I sold mine 20 years ago and it had 92 years left. I’d always go for one as long as possible. It was also an ex Council one and the ground rent was £10 a year. The downside was when the council wanted to decorate the entrance hall (shared with just 4 flats) they charged each flat 2.5K for a coat of grey paint and some new flooring. Bastards.

You'll be better off buying a flat as long as you do your research. Obviously avoid anything with cladding, and I would avoid buying a flat in a high-rise. Go for a smaller building, no more than 2/3 floors. Make sure you see several years of management accounts so you can see how they budget/pay for maintainence and repairts, e.g is all the interior painted every 5 years and whether they have a reserve fund for other repairs.

Also find out if its managed by an external management firm or a residences association, and if there is a management firm if there is also a residents committee (not that this is essential, but I find buildings are more cared for when there is an active residents committee)

I know lots of people in flats, I don't know anyone that has had a massive surprise additional bills, so in my experience this is fairly unusual. I know someone who had a £1k extra bill for replacing interior carpets in common areas but I've never heard of anything bigger than that.

The other downside of renting is you can be turfed out by your landlord with not a lot of notice. Also the upside of having a mortgage is that if you pay it off before retirement you don't have to worry finding money for rent out of your pension.

I bought an ex council on leasehold and had zero issues - service charge was reasonable and never excessive.

Had no issues selling on either.

We have a leasehold flat with the council, it’s probably the best you can yet. The service charge is low and hasn’t increased much in last few years. They don’t do much apart from essential maintenance but it’s cheap! We got hold of last 5 years service charge statements, so we could check the costs. Also, buy a flat in a low block like under 4 floors and an older flat as the cladding issue won’t apply, as the flammable cladding is more recent. For us, no way we could afford a house (central south London) - location was worth the lease hold risk!

Avoid anywhere with cladding or lifts. You should ask how the building is managed, who by, and whether there is a sinking fund for recurring maintenance. Ask if any major works are anticipated and get the response in writing from the freeholder or management company.
You might find a converted house or very small block less risky, although nothing is risk free.

All flats are leasehold or share of freehold, so if you want to buy you will need to accept that. Yes there are issues in some flats, but certainly not all. I had a share of freehold flat with no ground rent. Flip side of that is that getting the others to pay for any maintenance would have been challenging.

Lifts, gates and cladding are all very very expensive to run and replace.

I work in this area, and if I were you and wanted to guarantee a reasonable level of service charge long term, I would be looking at something like a 3 storey 80s/90s built block with no lift and minimal outside space. It won't be beautiful externally but it will be the cheapest to maintain.

I have one block which has high service charges but that's because the RMC are incredibly sensible and put a huge amount into their reserves each year. It means there are never any shock bills and when things go wrong they can fix them immediately. They got their lifts reconditioned without having to go to residents (and before they became a problem), and have had all their fire stopping and fire door works done straightaway.

Things you want to ask, apart from the obvious length of lease question, are when the internal/external redecorations have been done, what the roof condition is like (have they done any roof works recently) and how big the reserve fund is. I wouldn't be too put off by significant amounts of the service charge being reserve contributions - it means they're planning ahead.

It shouldn't be challenging to get maintenance money from people. If you own a share of freehold it means that you own a share in the company which owns the freehold to the block. It entitles you to a long (999 year) lease at a peppercorn rent but you are still tied to the terms of the lease which set out contributions to the maintenance of the building.

OP, could you look on the council’s website for any planned works or do a foi request for upcoming works? I think you’re right to take more time to consider this.

Youre right, you could end up paying lots of money for works- roofing, cladding, various communal works. The difference in owning a freehold house to me is that you decide when and what works you want to do.

To the person whose mum pays £10, it’s possible that there is arrangement where there is a charge on the property for The Council to recoup their costs when it’s time to sell the property.

I wouldn’t buy a leasehold property if I could avoid it. If it’s my only option, then yes I’d buy it but save towards works or be prepared for a charge to be applied to it.

it’s a tricky thing to decide on. All the best.