Buying a flat without a management company

[Daydreamermummy]

I am very close to buying a flat but have just been told that there is no management company. The company that owns the freehold also managed the maintenance but currently no one is doing this. My solicitor has seen the LPE1 but not all of it is complete or correct. My solicitor has not said whether I should pull out of the sale. I was just hoping someone could give me some advice as to whether this could work out OK? The flat is in a good location and in my budget and currently the maintenance costs are low. I have no experience of buying a flat. I'm worried that lease holders could be made to pay for repairs or that repairs will not be carried out or that monthly charges will increase.

Do you need a mortgage? If so it's unlikely the lender will permit this. If you can buy it because you don't need a mortgage, think about how small a market you'll have when you come to sell.

Join the National Leasehold Campaign on FB and ask for further advice there. I expect the overwhelming message to be to walk away.

Thank you. Yes I will need a mortgage. It has already been approved and we were supposed to complete next week so I wasn't expecting this. My solicitor has just emailed this information and asked if I want to proceed. They haven't mentioned anything about the mortgage so I do appreciate your advice.

I lived in many flats with shared freehold..., it's fine
You all agree on repairs get some quotes and off you go!
Much better than paying management fees for doing sweet FA

Shared freehold is a much better prospect than a managed freehold owned by someone else!

Yes you could get massive service charges if maintenance is not being completed. A well managed block of flats (however small or big) will have service charges set up, a schedule of annual maintenance, a reserve fund being added to etc......

A freeholder does have a legal responsibility to keep the fabric of the building in good condition and the costs of this is passed on to the leaseholders (generally that is, you would need to read the lease for specifics). If your freeholder is not upholding their part of the job then I would walk away to be honest as you could get very stitched up.

@ponkydonkey

I lived in many flats with shared freehold..., it's fine You all agree on repairs get some quotes and off you go! Much better than paying management fees for doing sweet FA

But your situation is different. The OP isn't buying a share of freehold. There is an existing freeholder but they don't use a management company.

OP your solicitor needs to contact the freeholder direct (although I assume they've already done that?)

we were supposed to complete next week

How is this possible? Your solicitor should have (I assume they now have) contacted the freeholder and got a management pack from them which includes all details of service charges, reserve funds etc. So does this mean the freeholder has responded? But your concern is that the service charge is being paid but no maintenance done?

Note that the absence of a management company isn't necessarily an issue if you have an engaged and responsive freeholder. But for larger buildings, you would expect the freeholder to appoint a managing agent as it can be very time consuming.

Sorry that this is off-topic but @CorrBlimeyGG I'm so intrigued by your username. Please explain

Hmm. If I were you, I’d check the situation with the block/other freeholders before proceeding. How well-maintained does it look from the outside? How many other flats are there? Are they owner occupied or tenanted? How old is it? Is it likely to need major work like a new roof in the next few years? New windows? Etc. How long do you see yourself living there for?

We had a slightly similar situation in that we had a flat where there was no management company for maintenance. It was a first floor flat with a flat underneath and although it was leasehold, you didn’t pay a service charge. Maintenance was sorted with the other flat. Obviously it could be enforced via the lease and the freeholder. If you don’t mind declaring a dispute when you sell, that is.

In reality, if both flats were owner occupied and the owners had similar views on maintenance and were willing to discuss - no problem. In our case, the downstairs flat was tenanted and the landlord had zero interest in roof repairs because it didn’t affect his flat. I would not recommend that.

So I would not proceed unless I was confident I was dealing with a small number of owner occupied flats in a well maintained block with no likely prospect of major maintenance expected imminently. But that’s me - you may feel differently. What a crap time to find out.

Thank you for all your replies. My solicitors email was quite brief and I haven't been able to speak to them yet. The freehold is owned by a limited company. Someone was dealing with the management of the building but they have passed away. There is a monthly maintenance charge but this is currently very low. It is a very small block of flats and the communal areas are very clean and tidy. My solicitor has not mentioned contacting the freeholder. I was told a couple of weeks ago by my solicitor that they were happy with the lease and didn't anticipate any problems with the management. As I hadn't heard anything more and the estate agent had said that the vendor wanted the sale to go through as soon as possible I assumed everything was OK.

I really would pull out OP, and I speak from experience unfortunately...

I've recently withdrawn from a purchase, 3 months down the line. A two bed flat/maisonette. The freeholder has been absent along with the management company for at least 15 years and no maintenance or repairs have been carried out on the block for over 10 years. No service charge or ground rent taken for at least 15 years either. My solicitor didn't find this out until the 11th week. There is no official agreement in place to outline who pays for what and there is also the issue of buildings insurance and how that works. I briefly spoke with some of the neighbours who were very forthcoming and told me not to bother. They've struggled to sell their properties for years and the people who managed to did so at a reduced price. Most of the properties that have been sold over the last few years have been bought by cash buyers and now the majority of the development, which has around 12 flats and 10 houses (some of which are also leasehold) are now owned by landlords. People who need a mortgage just can't buy there. The flat that I tried to buy had several issues which would have cost me quite a bit to repair had it gone ahead. The vendor inherited it from her brother and supposedly he did not pay for anything and the flat itself needs the roof repairing along with other things. As a first time buyer struggling to get on the property ladder, I'm just not in a position to afford to pay for lots of repairs so soon after moving into a property. I want to move into a property knowing that it's safe and isn't going to cost me an arm and a leg years down the line or be a legal nightmare. My solicitor advised me that it's a money pit and a really bad investment, and even if I'd had the green light from my mortgage lender, I'd probably struggle to sell it on later down the line. I'm just lucky that I had an amazing and very vigilant solicitor.

It was devastating. I'd put all my hopes and dreams into it and I thought I'd found the perfect home, but sometimes we have to go with our heads over our hearts. I've now given up with the flats as problems like this are far more common. I'm taking a break until the new year and then will start looking at terraced houses instead. Good luck OP, you will find your perfect home one day

Your solicitor needs to contact the freeholder and ask who is now responsible for the management of the building. You may get a sensible response that x will taking over or you may get no response. It will give you an indication of what the freeholder is like. Your solicitor doesn't sound great to be honest. Have you been provided with a set of service charge accounts? Your say the charge is low but what exactly does it cover? Is there a contribution to a reserve/sinking fund? Does it include building insurance? What about the ground rent? I would be cautious about proceeding until you are comfortable that you have answers to these questions.

I'd also suggest you do some reading up about leasehold, freehold and service charges. It's quite shocking how little most people know, often including people who actually own leasehold flats. Leasehold flats are nothing to be scared of (despite what some people on MN say - usually people who live in houses but "know someone" who had a flat). Note that those people saying they own freehold flats are wrong in 99% of cases. They own a leasehold flat AND a share of the freehold. That doesn't make their flat a freehold, it is still leasehold (this seems to be a popular misconception on MN, including some posts on this thread).

(Note: I used to work for a very large housing trust-developer and I specialised in service charges and reserve funds. I also own a leasehold flat and a share of the freehold in a large-ish development worth approx £50 million. The majority of leaseholders got together and we bought out the former freeholder - we now own the freehold through a limited company and I am the current Chair of the Board of Directors for that limited company - and yes, we employ a managing agent).

Hope this helps a bit OP!

Your solicitor needs to contact the freeholder and ask who is now responsible for the management of the building.

Actually, sorry, your solicitor needs to get the seller's solicitor to do this. Or the seller has to get their solicitor to do it. Sounds like the only info you have far is from the seller??

How many flats are there, how many of them have a share of the freehold and who controls the freehold company?

It's worrying that the LPE1 hasn't been completed properly. I assume the freeholder completed it? If they can't answer questions re service charge and buildings insurance and there is no management company then I'd have a lot of questions. A building with four flats or more should have a management company.

Thank you, I haven't actually been provided with anything. The charge covers ground rent and maintenance. I just assumed that building insurance would be included. This is on my list to ask. My solicitor told me a couple of weeks ago that the lease was ok and that they had all the paperwork they needed from the sellers solicitor. I've not had any contact with the seller as the flat is empty. There are 8 flats. There is only one director for the limited company that owns the freehold.

I wouldn't touch this. Does the 1 freehold director own any of the flats? Do they live in the block?

I don't know if they own one but they do not live in one.

@ponkydonkey

I lived in many flats with shared freehold..., it's fine You all agree on repairs get some quotes and off you go! Much better than paying management fees for doing sweet FA

This is silly advice. I live in a small block with 14 flats and we'd struggle without our building management - and yes this is with share of freehold. I wouldn't underestimate the amount of time it takes to organise quotes and works to be carried out, as well as general maintenance. I'm one of the Directors of our block, and that alone can be a time drain. Even with 3 directors, we rely on our management to get on with the day to day.

@ponkydonkey

I lived in many flats with shared freehold..., it's fine You all agree on repairs get some quotes and off you go! Much better than paying management fees for doing sweet FA

But OP isn't buying a share of the freehold so that's irrelevant.

@Daydreamermummy

I don't know if they own one but they do not live in one.

Then they have no motivation to keep the building well managed. Don't buy this flat.

Hi, what did you do in the end. I'm in the exact position now, I was ready to get my keys weeks ago but this management thing is holding me back. The lady who does all the management has cancer and is dying so she can't answer any of the questions my solicitor is asking, I literally can't afford or find anything else in my area for sale. Did the sale go through in the end?

yes i live in a property where the communual parts are run by the freeholders and it is all decided what need to be done and when - nothing but problems as some of them do want spend any money - garden maintenance bare minimum - fences failing down - had to press for public liability insurance (was not deemed necessary) using relatives who were not qualified to work on electrical installations. directors all the same type who do not want to spend - any estimates i get are far too expensive and then nothing gets done and drags on to save money for them

it seems a good idea but in theory it rarely works

Exactly this. I own a flat in a block witth shared freehold. We employ a managing agent and have had over the years to spend a lot of money to reverse mistakes and neglect that happened over the 10 years or so following the leaseholders buying the freehold in the late eighties and not wanting to pay a managing agent.

Just as @LINDAHOAD says it resulted in people not wanting to spend money or trying to bodge repairs themselves. (That attitude still lingers on some - we recently caught one elderly resient attempting to "fix" a malfunctioning corridor light sensor recently - we have electricians on account FFS!)

Luckily in the last 15 years a number of new directors came on board (including me) who have seen the need to have things organised properly. We now have professional managing agents and we are getting on top of things. I can tell you as a resident and director it is definitely worth it to spend money on a good agency.

art the end of the day you do not want to pay good money to see your property that you are paying for look neglected and run down because as anyone knows when you come to sell it appearances count. some people are not bothered if the lights are out of action or the gardens look a mess or the gates need painting bu it reflects on your property when you come to sell it i all depends on your standards and what level of maintenance you want and are prepared to pay for. i prefer to pay and have a nice communual area rather than the gardens hacked down once a year. you need a good management company who knows the law relating to property management.