Purchasing an apartment

Cost, service charges and restrictions

The cost of an apartment varies considerably from as little as £30,000 for a studio or one-bedroom apartment in a small country town to over £300,000 for a new two-bedroom, two-bathroom apartment in London.

Prices in London, where many apartments are purchased by investors, have risen considerably in recent years and in 2004 were £600 to £700 per ft2 (£6,500 to £7,500 per m2) in prime areas. The price may include a year’s free membership of a health club or gymnasium, but bear in mind that amenities such as this don’t come cheap.

There are often high service charges, e.g. £4,000 a year, although this may include hot water and heating. In London, cheaper apartments are available in the Docklands and south of the River Thames, where loft conversions can be purchased from around £250 per ft2 (£2,700 per m2). Apartments in cities are generally a good investment and have excellent letting potential, always assuming that the rental market doesn’t become saturated. The best-selling apartments are spacious with at least two bedrooms and good views.

Note that in popular developments, you must usually buy off plan long before a development is completed.

In an older development, you should check whether access to private grounds and a parking space are included in the cost. In new developments you must usually pay extra for a garage or a space in an underground car park. If you’re buying a resale property, check the price paid for similar properties in the same area or development in recent months, but bear in mind that the price you pay may have more to do with the seller’s circumstances than the price fetched by other properties. Find out how many properties are for sale in a development; if there are many on offer you should investigate why, as there could be management or structural problems. If you’re still keen to buy you can use any negative aspects to drive a hard bargain.

Service Charges

Apartment owners pay service charges for the upkeep of communal areas and for shared services, with charges calculated according to each owner’s share of the development. A proportion of the common elements is usually assigned to each apartment owner depending on the number and size of apartments in a development.

Service charges may also include heating and hot water. Buildings insurance is provided by the freeholder, but you’re usually required to have third party insurance for damage you may cause to other apartments (e.g. due to a flood or fire).

Always check the level of service charges and any special charges before buying a community property. Fees are usually billed monthly or biannually and adjusted at the end of the year (which can be a nasty shock) when the actual expenditure is known and the annual accounts have finalised. If you’re buying an apartment from a previous owner, ask to see a copy of the service charges for previous years, as owners may be ‘economical with the truth’ when stating service charges, particularly if they’re high.

Fees vary considerably and can run to thousands of pounds (£5,000 a year isn’t unusual) for luxury developments with a high level of amenities such as a health club and swimming pool. They may also increase annually.

An apartment block with a resident caretaker will have higher community fees than one without, although it’s preferable to buy in a block with a caretaker. If a management company is employed to manage and maintain an apartment block, the service fees are usually higher, but the building is also likely to be maintained better. High fees aren’t necessarily a negative point (assuming you can afford them), provided you receive value for money and the development is well managed and maintained. The value of an apartment depends to a large extent on how well the development is maintained and managed.

Disputes over service charges can be acrimonious and disagreements between owners and landlords should be heard by a Leasehold Valuation Tribunal (LVT) with a panel comprising a solicitor, a valuer and a third experienced person, and not by county courts. In the past, landlords have used threats of expensive court action to intimidate apartment owners into paying higher fees. Many landlords have increased their service charges significantly in recent years, which may bear little or no relationship to actual costs, and many people have been hit by high charges for major repairs (see below). It’s essential when buying a leasehold property to take legal advice and have the lease checked by a solicitor.

Ground Rent

Ground rent is a nominal rent for the land on which an apartment block is built and is usually around £100 to £200 per year. The lease should indicate whether the ground rent is fixed or can be reviewed after a certain period.

Covenants & Restrictions

Covenants are legally binding obligations of the freeholder and leaseholder to do or refrain from doing certain things. Restrictions are regulations governing how leaseholders are required to behave. They usually include such things as noise levels; the keeping of pets; renting; exterior decoration and plants (e.g. the placement of shrubs); waste disposal; the use of gymnasiums and other recreational facilities; parking; business or professional use; and the hanging of laundry. Check the regulations and discuss any restrictions you’re unsure about with residents. Permanent residents should avoid buying in a development with a high proportion of rental apartments, i.e. apartments that aren’t owner-occupied, although you may have little choice in London.

Private Gardens

Many London squares and developments have private communal gardens for the exclusive use of residents, which can add considerably to the cost of a property. London’s shared gardens date back to the 19th century when the landed gentry came up to town for the season. Gardens often have strict rules and regulations such as no animals (although you may be able to exercise your dog), ball games, barbecues, large parties and unsupervised children – their peace and tranquillity adds to their charm. Residents pay an annual fee and receive a key.

This article is an extract from Buying, selling & letting property (UK). Click here to get a copy now.

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