I hope you will find these suggestions helpful. (Sorry if some of them may seem a bit obvious.)
Things to consider on a first viewing:
Take the estate agent’s particulars with you. You may need to consult them. They may list what fixtures and fittings are included or excluded, and they should have a layout plan with room sizes. It’s worth taking a tape measure.
These are some basic issues to consider on a first viewing.
If you have narrowed down your search to a particular flat which you then go back to for a second visit, there are some more detailed considerations you should think about.
These are questions I would suggest you ask the sellers. You can ask the estate agents as well.
This is about trying to get the best price, but also securing other advantages, such as getting furniture included.
There is a bit of a balancing act here. When viewing, you should avoid being too critical of the sellers' home – particularly in matters relating to the current owners’ taste (or lack of). Even though the sellers want to sell, they can easily take against anyone who they think has insulted them, and you would be surprised how big a part seemingly miniscule issues of good manners can play.
On the other hand, you mustn’t sound too enthusiastic about the flat if you are going to try to negotiate the asking price. It will do no harm to leave the sellers slightly anxious as to whether you are totally in love with their property.
So don’t give too much away. Even if you love the flat, don’t say you definitely want to buy it. If they know you are really keen, that may embolden them to refuse an offer below the asking price.
If you are trying to buy a particularly desirable flat and there is a lot of competition for it, then you may have to simply accept a seller’s asking price if you want to be sure of getting your offer accepted and moving on with the deal. The problem may be that other prospective buyers also offer the asking price – or more. (Even after your offer has been accepted, the estate agent is under a legal duty to pass on other offers to the seller.)
The seller is in a comfortable position, faced with multiple offers. When competing buyers simply keep upping their prices in competition, it is known in the trade as a ‘bidding war’. One option the seller may adopt is to have a ‘Dutch auction’ in which competing purchasers outbid each other until someone emerges as the highest paying one. A seller may even formalise this by having ‘sealed bids’ or ‘best offers’ organised by the estate agents.
Another option for the sellers is to opt for a contract race. Papers are sent out to two or more buyers: the first to be ready to exchange contracts gets the property. (That’s the theory — but the sellers can still go with someone else.) If the sellers like you but are tempted to have a contract race, offer to exchange within a fixed period and ask them to give you a clear run just for that period, such as two or three weeks (if that is realistic).
If the seller is not being besieged by prospective buyers, you may be able to negotiate a reduction in the asking price. Sellers used to put properties on the market at slightly inflated prices simply because they expected buyers to try and knock the price. That is not so often the case nowadays. But it is quite probable that when the sellers put the flat on the market they went to several estate agents who each gave them different possible sale prices. Human nature being what it is, they probably chose the agent who proposed the highest price. But if you make an offer which is in line with the lower part of the band of suggested prices, there is a good chance that the sellers will be able to reconcile themselves to a sale at the lower price.
Sellers probably have to buy another property and will be worried about losing their new dream home if the buyer of the property they are selling messes them around or the deal falls through. So even if you do not offer the highest price, you may pip other competitors to the post if you have another advantage. For example, having a mortgage lined up in principle may be an advantage – also not having a property to sell, or being prepared to fit in with the seller’s needs about the completion date.
One maxim is: Decide the top price you would go to, and then offer 10% less. That gives you some scope for negotiation. (Even if the estate agents think your offer is ridiculous, they are under a legal duty to pass it on to the seller.)
If you don’t have money for new curtains or furniture, it is a good idea to ask the sellers to include those items at the time you’re agreeing the price. If you agree a price and then later ask about them, the sellers will want extra. If it is all part of agreeing the property price at the outset they are more likely to just throw them in.
Estate agents are negotiating for the sellers, so it is part of their job to try to persuade applicants that their offers are too low and get them to increase them. Ask them to justify their argument by reference to other recent sales. But they do know their market, so you should take note if what they are telling you makes sense.
You are usually better off making the offer to the estate agents, not to the sellers direct. We are not a nation used to bartering, so an attempt to negotiate a price direct with the sellers can result in a confrontation and a lot of emotion. If you make the offer to the agents, then the sellers can let off steam to the agent, without the whole deal collapsing in recriminations and insults. Once the sellers calm down, the agent can then come back with any counter offer. The agent can also attempt to reason with the sellers (and with you) to arrive at a figure you can both accept. That may mean you never become best buddies with the sellers, but do you really care?
Generally, it is a bad idea to make an offer while you are viewing the property. Certainly avoid getting into a handshake with a seller, because, if you later need to pull out or want to modify your offer in any way, you will be treated as if you’ve broken some mediaeval rule of chivalry.
If you offer a lot less than the asking price, always give reasons to the estate agents to pass on to the sellers. If the sellers think you are just trying to take advantage of them, they may dig their heels in. But if they can see that there is some reason behind your proposal, they may be prepared to take it into account. Even if they don’t agree with what you say, at least they are more likely to stay in negotiation with you than pull out abruptly, and this gives you scope to back down if you have to.
When it comes to making an offer, here are some pointers to bear in mind.
Once a deal is agreed, you move forward to the stage of detailed investigations. You instruct your solicitor and your surveyor. The mortgage process starts. But remember that nothing is certain until contracts are exchanged.
Make sure the estate agents take the property off the market. Check whether the agent is the sole agent. If several firms of agents had the property on their books, the other ones will want to find an alternative buyer, so it is particularly important to make sure they are also instructed to take it off the market. Ask the various agents for details of available properties anonymously a few days later to make sure.
There are several factors which can contribute to the time it takes to find a property and move in. The legal work itself shouldn’t take more than 2 to 3 weeks to reach exchange of contracts, if there is nothing legally wrong with what the current owner is selling. Then a further 2 weeks is needed between exchange of contracts and completion to make the necessary arrangements. (If necessary, that period can be reduced.) But that is the situation in a perfect world. These are factors which can change that timescale:
Legal problems. If there is something wrong with the sellers’ lease, or the sellers have carried out alteration works without the necessary consents from the landlords or the council, it can take extra time to solve those issues. But that’s rare.
Landlords and management companies. Information is often needed from the landlords or management companies about the running of the building. This can add time, depending on how fast the landlord and management company are prepared to move.
Chains. If the sellers do not need to buy another property to move into and if you are a cash buyer with nothing to sell, then everything can go through quickly. But sometimes, the sellers will be planning to use the sale proceeds to buy a new home, and if you are selling as well, your buyers may also be selling a property to finance their purchase. You can end up with quite a few buyers and sellers linked together in that way, each needing the money from their sale to finance their purchase. Because of this, everyone has to exchange contracts on the same day, and arrange for completion to take place on a mutually agreed completion date, so that they can all move at the same time. Until everyone in the chain is ready, no one can exchange contracts. If someone is falling behind, because of problems on their particular purchase, it holds everyone up.
When you buy a flat, you buy a 'leasehold interest' in the flat, created by a 'lease'. The person who receives the leasehold interest is called the ‘lessee’, ‘leaseholder’ or ‘tenant’. The person - usually the developer of the estate - who gives the leasehold interest is the ‘lessor’ or ‘landlord’. Once created, this leasehold interest can be bought and sold. If you buy a flat from existing flat owners, you become the new owner of the lease.
The 'lease' is a document of many pages, setting out all the rules, rights and obligations of the landlord and the flat owner. It is created when the flat is sold by the developer to the first owner, and then it is passed on from seller to buyer.
The lease gives the flat owner ownership for a specified 'term' - number of years, often about 100 years initially. There are usually statutory rights for flat owners to extend their lease term in the future.
Leases are fairly standardised. For leases to be bought and sold for a purchase price, they have to conform to a standard set of requirements. The market accepts these. The lease has to be checked by a good firm of solicitors – we recommend one – to make sure it meets the necessary requirements, but if it check out, then it’s normal and safe to buy.
Leasehold property is the accepted legal structure, universally used for virtually all flats in England. (Recently, Parliament created a form of ownership called ‘commonhold’ which is similar to the New York condominium arrangements, but it hasn’t really caught on.)
The legal side of buying or selling a property is called ‘conveyancing’. It is done by solicitors. Solicitors are all regulated by the Solicitors Regulation Authority.
The solicitors’ job is to organise the purchase of the property for you. This is some of what they do:
Your solicitors are required by law to carry out ‘anti-money laundering’ checks on you. Usually this consists of them taking copies of your passport and some recent utility bills or credit card statements so that their file contains written evidence of your identity. They have to do this even if they know you.
You may wish to arrange for a surveyor to carry out a survey of the flat. This is different from a mortgage valuation required by mortgage lenders. A survey checks for physical defects. Basically, there are two standard types of survey.
The most important issue from a surveying point of view is really the structure of the block, which is not something the surveyor can easily check thoroughly.
Full structural survey. This - the traditional structural survey - is the most detailed form of survey. The surveyor will carry out a physical inspection of the property and produce a report which will be fairly comprehensive (but not totally comprehensive – the surveyor will not normally investigate services such as water, drainage and electrical systems).
Homebuyer’s report. The home buyers’ report is a more limited type of survey than a structural survey. A homebuyer’s report is a printed form which the surveyor fills in, as opposed to a full structural survey report which will be drafted by the surveyor from scratch.
There are various costs to take into account when budgetting for your purchase.
You have to pay a deposit at exchange of contracts. This is traditionally 10% of the purchase price. The deposit is usually held by the sellers’ solicitors until completion as ‘stakeholder’. This means that the sellers’ solicitors must hold the money as middlemen between the two sides. They can only release the money to the sellers after completion of the sale has taken place. If the sellers fail to complete, then the deposit would be returned to you.
There is one practical exception to the rule that the deposit money is held by the solicitors. If the sellers are themselves buying a property, then the normal rules allow them to use your deposit as part of their deposit on their purchase. (Similarly, if you are selling as well as buying, you may be able to use your buyers’ deposit towards the deposit on your new home.)
There are various fees to be paid at completion, including:
Stamp duty land tax (‘SDLT’) is a tax you have to pay when you buy a property. SDLT is a percentage of the property’s purchase price. Check the amount payable with your solicitors - it is a substantial cost. SDLT has to be paid to your solicitor before the completion date because he has to pay it on to HM Revenue & Customs within a month (or else you pay a penalty).
When you buy a flat, where there are rent and service charges, then these have to be split or ‘apportioned’ between you and the seller as at the day of completion. For example, rent and service charge are usually billed every three months. If your completion date falls in the middle of one of these periods, then the sellers only have to pay for the period up to the completion date, and you are responsible after that. If the sellers have already paid for the whole period, they will want a refund for the period after completion, and this must be taken into account in the completion calculations.
As a buyer, you may be worried that when the management company does its full accounts for the year, it may find some further amount due from the flat owner. Since some of that responsibility will relate to the sellers’ period of ownership, you may want some assurance that the sellers will meet their bit of the debt. So sometimes it is agreed that one of the firms of solicitors will hold back a retention of a few hundred pounds as security for the potential liability. If there is a liability, then the sellers’ share comes out of that retention, and any balance is then released to them.
If you need a mortgage loan, it is a good idea to arrange a 'mortgage in principle' before you start looking for a flat. Once you have agreed a deal, you need to action the second half of the mortgage process and get your lenders to value the property. (Although they have confirmed how much they will lend you based on your income, they will still only lend you an agreed percentage of the value of the property, if that turns out to be less.) They will choose a surveyor to do their valuation. If you have a surveyor you plan to use for a structural survey, the lenders may agree to use your surveyor. You need to get the lenders to organise their valuation as soon as possible, because delays in this can hold up the mortgage offer. Also, the sellers will understandably get anxious if there is a long delay before a surveyor arrives; that is often taken as evidence that a buyer is not serious.
You need to make sure you have your mortgage offer before you exchange contracts. This is a formal document from your lender’s head office, confirming the terms of the loan and setting out any special conditions - e.g. as a requirement that you repay a hire purchase debt, or that you take out life insurance. It is important that you do not exchange contracts until you have this offer, because you need to make sure you can comply with the conditions and requirements in it. Once you exchange contracts you cannot back out.
'Exchange of contracts' is when you and the seller are legally committed to the transaction.
You are ready for exchange of contracts when you have your formal mortgage offer, and your solicitors have approved the contract and other paperwork.
A property contract has to be in writing and the contract has to set out all the agreed terms, and be signed by all contracting parties. The contract can be signed as one document, or as two identical documents. For convenience, that is normally how it is done – the sellers sign one copy and the buyers sign an identical copy. Then the parts are exchanged – hence ‘exchange of contracts’.
If there is a need for speed, or you are abroad, your solicitors may sign the contract for you if you give them written authority.
Property contracts are in a more or less standard form. There are so many relevant issues which can arise that the Law Society has devised a set of standard conditions which will govern most circumstances. These are part of a printed form called ‘the standard conditions of sale’.
At this contract stage, the deposit - usually 10% of the purchase price - is paid as security.
Completion means turning the contract into reality. Exchange of contracts merely imposes an obligation on the parties to buy and sell the property at a specified date - the completion date. Traditionally, that used to be one month after exchange of contracts, to allow time for the legal work to be done. Now that solicitors no longer rely on the post for everything, that time can be cut back to two weeks relatively comfortably, or even to a matter of days if necessary.
Your solicitors will ask your lenders to send the mortgage loan money to them by bank transfer on the completion date. They will ask you to send them any balance you are providing. That will include stamp duty land tax, Land Registry fees and legal fees. You normally have to give your solicitors the funds for those items before completion. Funds should be provided by bank transfer.
Your solicitors send the necessary funds to the sellers’ solicitors by bank transfer. Once they get the money, the sellers’ solicitors ‘complete’ the transaction and instruct the seller’s agents to release the keys to you, so you can move in. The sellers’ solicitors send the title documents to your solicitors so that your ownership is documented. They will use part of the purchase funds to pay off the sellers’ mortgage loans on the property. The sellers only receive the balance.
Your solicitors receive the title documents. They have to arrange payment of the stamp duty land tax to HM Revenue & Customs. They then apply to the Land Registry to record the change of ownership, and also to record your lenders’ charge on the property. After a few weeks, the registration will be completed and you will be shown on the Land Registry’s electronic register as owner of the property.
Your solicitors have to register the transfer document and the lender’s mortgage with the landlord, so that they know to send rent demands and service charge demands to you rather than to the previous owners.
In England, the basic ownership of land and buildings is called 'freehold'. Freehold is unlimited ownership, theoretically down into the ground and up to the sky.
There is a freeholder of the estate or development into which you will be buying.
The freehold is usually owned by the developer, or one of its companies.
Sometimes, the freehold is bought by all the flat owners. Then there will be company to hold it and the flat owners will be shareholders or members.
The freeholder can let someone else have ownership rights over the property, or part of the property, for a period of time. This is done by giving the other person a ‘leasehold’ interest in the property. (The document is called a ‘lease’.)
The person who receives the leasehold interest is a ‘lessee’, ‘leaseholder’ or ‘tenant’. The person who gives the leasehold interest is the ‘lessor’ or ‘landlord’.
Once created, this leasehold interest can be bought and sold. If you buy a new flat from developers, you become the original owner of the lease. If you buy a flat from existing flat owners, you become the new owner of that lease. The lease continues to exist, only its owners change.
Flat owners can get together to purchase the freehold from the original landlord.
If you own a leasehold property, your ownership has two limitations compared with owning the freehold. It’s for a number of years specified in the lease, not forever. And the leaseholder has to obey obligations to the landlord (which are set out in the lease).
‘Leasehold’ is the basis on which flats are owned in this country. (Recently, Parliament created a form of ownership called ‘commonhold’ which is similar to the New York condominium arrangements, but it hasn’t really caught on yet.)
The essence of leasehold is that it is a direct contract between the landlord and the individual flat owners. The lease imposes obligations on the flat owners as to how they can use the property, and also imposes obligations on the landlord, such as maintenance of the building, which is paid for in service charge by the various flat owners.
At first sight, 'leasehold' doesn’t seem as good as 'freehold'. But leasehold is better suited than freehold for flats.
The nature of freehold is that the owner has few obligations to his neighbours and has few rights over their property.
It is said that 'an Englishman's home is his castle'. But when you live in a block of flats, you can't just pull up the drawbridge.
When you live in a block of flats you need a legal structure which does create mutual obligations - e.g. maintenance of the structure of the building which affects everyone- and mutual rights - e.g. shared rights over stairs and the use of water and drainage services.
For this, leasehold is ideal because a leasehold requires a lease, and the lease sets this all out.
Leases are fairly standardised. For leases to be bought and sold for a purchase price in the property market, they have to conform to a standard set of requirements. The market accepts these.
The use of leases for estates and blocks of flats is the accepted legal structure, universally used for all flats in England.
Usually in a purpose-built block or estate your flat - what you own - will be limited to the internal plasterwork.
The lease wording will specifically exclude from your ownership all main walls and structure.
(The structure will usually be part of the ‘common parts’ maintained by the landlord or management company out of the service charge fund.)
There will usually be some description of whether dividing walls are split between flats or are part of the common parts, and whether the main door, and the window frames form part of what you own.
I keep saying ‘usually’ because there are many variations, and these are just examples. You need to look at the actual provisions of your flat's lease to make sure they really do make practical sense.
It is an important issue because you can only alter what you own. So if you might later want to make changes to your flat's layout, you need to know that it is all yours.
(That still doesn't mean you can automatically do alterations. See the section on 'Alterations'.)The lease will usually require you to maintain and decorate the parts of the building you own.
You will usually find that one of these arrangements applies to the building you buy into.
The simplest ownership scheme for an estate is that there is a landlord - usually the original developer or one of its companies - which owns the freehold.
The landlord then carries out the services, like repairing the roof, and recovers the cost from the flat owners by way of the service charge arrangements in the leases.
In modern leases, management of the building is often arranged by a separate management company owned by the flat owners. That way, ongoing maintenance and day-to-day services are controlled by the people who actually have an interest in them – the flat owners.
An even better arrangement is that the flat owners buy the freehold of the estate so that they become their own landlords. Then they have complete control over the management of their own homes.
Flat owners often have the right to buy the freehold of their building from the landlord and even if they don’t buy the landlord out, they can, in some circumstances, force the landlord at least to hand over management of the building to them.Whether it is the landlord-developer or the flat owners' company which is responsible for management, they will usually appoint specialist managing agents to actually carry out the day-to-day operations on their behalf.
In an estate of flats, maintenance, repairs and other services can realistically only be handled by one party (the landlord or a management company) on behalf of the whole building.
The expense will ultimately be borne by the flat owners. The proportions they pay will normally be based on the relative sizes of their flats.
Flat owners will pay estimated amounts to cover anticipated expenses in advance. There will be a final accounting at the end of the year.
The landlord has the responsibility for looking after the estate as a whole, or there may be a management company involving all the flat owners.
If the landlord performs services such as maintenance, flat owners are protected by law against the most obvious abuses.
Landlords can’t carry out substantial works without getting quotes from several builders and consulting the tenants. Landlords are required by law to act in a reasonable way in many situations, or find themselves unable to recover the money.
The simplest service charge arrangement involves flat owners only contributing to costs each year as they are incurred. But replacing lifts or roofs can then be a huge financial burden in the year when the work occurs. The better arrangement is for there to be a ‘sinking fund’. This means the flat owners contribute towards future large expenses by putting a proportion of the anticipated costs into a special bank account each year and so spreading the cost over several years.
Mutual rights. When you own one flat among many (or even one of two) you need various rights over the other flats and over the common parts. For example:
Other flat owners will want similar rights, – e.g. in respect of pipes passing under your floorboards to reach their flats.
Mutual obligations. Most of the pages of the lease will be taken up with a long catalogue of your obligations. Other flat owners should be subject to similar obligations so that everyone operates under the same set of rules.
Landlords’ obligations. Most leases will contain clauses saying that the landlords will carry out the services, including maintenance of the structure and insurance of the building (while of course recovering the cost in the service charge).
The lease should also say that the landlord will make sure that all leases in the building are in a similar form, so that everyone knows they are obeying the same rules as everyone else.
If you want to carry out any alterations in your flat, you will need to check the wording of your lease carefully. Individual flat owners usually can’t do works to the exterior or structure of the building, but they should be allowed to alter the interior. But it is rare for a lease to give the flat owner an unrestricted right to alter the interior. Usually leases forbid any alterations at all unless you first get the landlord’s consent. below.
This is fine if it also says that the landlord’s consent cannot be unreasonably withheld, because then the landlord can only refuse permission if there is a good reason – e.g. your works would damage the ceiling
But without that ‘not to be unreasonably withheld’ wording, you could find yourself unable to carry out even minor changes to the internal layout.
This is less of an issue if the flat owners as a group own the building, and are therefore the landlords, because neighbours may be sympathetic to reasonable changes which they might want to make themselves.
When you buy a flat, you should always check the layout plan in the lease against the actual layout to check for unauthorised alterations in the past.
The landlord or the management company will usually maintain buildings insurance on the entire building under a single policy. The premium cost is then billed to the individual flat owners in the same proportion as they pay service charge.
The alternative – each flat owner insuring their own flat – isn’t practical, because if someone forgot to insure a flat in the middle, there wouldn’t be enough money in total to rebuild the building if it burnt down.
You must separately arrange a 'contents' insurance policy for the interior of your flat, what's in it, and your responsibility for any harm suffered by a visitor.