The Inside Edge
If you’re desperate to get out of the rental game and onto the property ladder, there could be a way to save at least 25% on the house price in the process. Rising numbers of local authority houses and flats are being released onto the market in metropolitan areas and many can cost at least 25% less than comparable properties in the same areas.
However, it’s important to know exactly why these properties are so greatly reduced in price. There are often notable differences in the nature of ownership of the property and these financial aspects need to be taken into account.
David Kempster, a directory of property search company SearchFlow, says “If you buy a local authority house, the chances are you will do so as a freeholder. But in the case of the flats, the council tends to retain the freehold so you can only buy on leasehold.
“This is a vital distinction, because leaseholders are liable to pay not only a service charge, but potentially maintenance costs too. The legal principle of ‘caveat emptor’ or buyer beware means owners have no come-back if they unwittingly take on liabilities when purchasing a leasehold.
“For this reason, it’s important to check exactly what the service charge covers and if possible, to see previous bills. It’s also essential to check for scheduled maintenance as service charges don’t cover major maintenance and renovation work. In some cases, leaseholders can become liable for as much as £60,000 to put toward lift and roof repairs.”
If you’re going to consider one of these ex-authority properties you might also need to consider the proportion of private ownership on the street or estate. If there are other like-minded people who have bought into ex-council properties you might be welcomed a little better than if you were the only non-tenant living on the block. There is also a chance that prices on these properties might rise quite quickly.
Richard Sexton, a director of e.surv chartered surveyors said “Historically, these properties have generated less demand than equivalent private sector stock, though as private ownership increases in a given development this effect lessens. Buyers need to consider long term prospects; one day they are going to want to move up the property ladder.
“Make sure your legal adviser investigates the property fully and takes account of any communal costs. There may be clauses which require significant contributions to parts that may not even affect your flat.”
The good news is that most local authorities will ensure potential buyers have all the facts before they buy any ex-council property. In the case of shared areas there could be communal repairs required and maintenance bills to pay. All potential buyers should be given an assignment pack from the council in question detailing any works that are required to the building.
Surprisingly, some local authorities actually resent private ownership of ex-authority property and may be less than happy to help obstructing your path and failing to give you all the information you need. If you are dead set on buying an ex-council house though there is some detective work you can do.
Nicholas Ayre, a director of buying agents Home Fusion, explained: “Find out if the building or estate has a residents’ association and, if so, to get in touch.
“They might be able to provide you with a copy of their minutes from a recent meeting or talk to you about any maintenance and repair issues they are currently trying to resolve.”
When considering ex-council property it’s pertinent to ask the local authority the same questions you would ask of a private seller. Ask about council tax, how safe the area is, where local amenities are situated etc.
As long as you ensure you get all the facts, ex-council property could be the answer for young people looking to buy their first home for less.