For first-time buyers, knowledge is key. A recent BBC article quoted one first-time buyers as saying “If I could go back in time I definitely wouldn’t buy this house…I feel I am essentially renting a property with the responsibility of owning a property.”
Her complaint is based on the high levels of service charge and ground rent associated with her leasehold house, the restrictions imposed by the lease, the reduction in the value of the property since she purchased and that she was told she could purchase the freehold and this is now no longer an option.
Feeling like you cannot sell your property and move on is very distressing. I experienced this myself. I purchased my first property, a one and a half-bedroom flat, a couple of weeks before the Northern Rock crisis. Our property value plummeted, but lucky we still had our jobs and kept up the repayments. I remember thinking ‘this is silly; I’m just paying the bank’s interest. We’re never going to be able to sell this property and walk away with the deposit for another one.’ We remained in the flat for seven years, having our first child there, when we only planned to be there for three.
Nevertheless, there are some lessons here for all buyers, especially those going through the process for the first time. It is important to get the right legal advice at the outset. The solicitor should have made the first time buyer aware of the service charges and the risk of them going up, the restrictions in the lease and also should have explained that, although the seller promised to sell the freehold, nothing is certain unless it is included in the contract.
Some first time buyers go into property transactions with rose-tinted glasses. Every day they have been saving their deposit they have also dreamt about their first home. I always enjoyed acting for first time buyers, as they were always so excited about this first step towards independence. However, the colour of the walls and the type of sofa was always more important to them than the legal title and service charge estimates. They should be asking themselves – what happens if there is a change in the property value? What happens if there is a change in my circumstances?
Buyers should do their own research as well. A solicitor will not inspect the property, yet alone the block or estate. Is there anything which may drive up the cost of the service charge? Politely knock on neighbour’s door and ask them about the management of the block and the problems they have encountered. Read online about similar developments, the Landlord and the potential issues of owning the type of property. Walk around the neighbourhood as well and visit the local planning office to find out about nearby developments which could have an impact on the value of your property.
If you don’t understand something in the conveyancing transaction make sure you ask. Professionals who deal with property transactions every day sometimes forget the complexities of the purchase for a buyer. Speak up so that you understand exactly what you are buying.
A combination of good advice and self-education will better prepare first-time buyers to face the realities (and sometime uncertainties) of owning property.
Ashleigh was told that after three years she would be able to buy the freehold from the developers... But the freehold was sold on by the developers to an overseas investor. When she called the investor Ashleigh was told that buying the freehold was no longer an option.