Buying a flat with tenants in...yay or nay?
Discussion
So I'm a first time buyer looking to get my own place. I put an offer on a flat last week and it's been accepted.
The flat is a reposession, apparently one guy owned 3 blocks of flats and went bankrupt and now the bank is selling them all off. Anyway, there are currently tenants living in the flat, and they're on a contract until November. They've been given notice.
I have two options, I can either buy the property now and take on the role of their landlord, or I can wait until November and just move in then.
At first I thought, wahey, I can pick up the rent that they're paying for 3 months... bonus. But then I had advice from other people saying things like, what if they don't leave in November, what if they can't meet the rent payments, what if they're more hassle than they're worth.
I don't know these people, I have no idea what kind of tenants they are. Am I allowed to vet them before I make a decision on this? Or am I worrying unnessarily? Any suggestions?
The flat is a reposession, apparently one guy owned 3 blocks of flats and went bankrupt and now the bank is selling them all off. Anyway, there are currently tenants living in the flat, and they're on a contract until November. They've been given notice.
I have two options, I can either buy the property now and take on the role of their landlord, or I can wait until November and just move in then.
At first I thought, wahey, I can pick up the rent that they're paying for 3 months... bonus. But then I had advice from other people saying things like, what if they don't leave in November, what if they can't meet the rent payments, what if they're more hassle than they're worth.
I don't know these people, I have no idea what kind of tenants they are. Am I allowed to vet them before I make a decision on this? Or am I worrying unnessarily? Any suggestions?
Freehold you own the building and land it's on for as long as you like, leasehold, which usually covers flats within a block/unit, one owns for a set number of years.
As for the tenancy agreement, all tenancies after October 2010 will become Assured Shorthold Tenancy Agreements, being a good thing for you.
I would not be very concerned about purchasing a flat with tenants in occupation, simply ensure the Tenancy Agreement and any Deposit paid is assigned/transfered over to you. Go chat to the tenant/s, who will then need to be accorded the statuary landlord’s 2 months Notice, that being given on the same day in the month the Tenancy started, and the rent is due, so if Tenancy has to end on 5th November 2010, the latest you can give Notice is 6th September 2010.
As for the tenancy agreement, all tenancies after October 2010 will become Assured Shorthold Tenancy Agreements, being a good thing for you.
I would not be very concerned about purchasing a flat with tenants in occupation, simply ensure the Tenancy Agreement and any Deposit paid is assigned/transfered over to you. Go chat to the tenant/s, who will then need to be accorded the statuary landlord’s 2 months Notice, that being given on the same day in the month the Tenancy started, and the rent is due, so if Tenancy has to end on 5th November 2010, the latest you can give Notice is 6th September 2010.
SunnyD said:
Apart from a service charge I don't have to pay any ground rent as far as I know. How can I have a freehold on a block of flats when I'm only buying one of them?
As the owner has had to sell all of them off, he'll also be getting rid of the freehold.This lot are suggesting you grab it with both hands and become the maintenance company for the whole building, which means you can collect maintenance fees from everyone. Down side is you need to sort out insurance, claims, gardening, maintenance of the halls/building/grounds.
illmonkey said:
SunnyD said:
Apart from a service charge I don't have to pay any ground rent as far as I know. How can I have a freehold on a block of flats when I'm only buying one of them?
As the owner has had to sell all of them off, he'll also be getting rid of the freehold.This lot are suggesting you grab it with both hands and become the maintenance company for the whole building, which means you can collect maintenance fees from everyone. Down side is you need to sort out insurance, claims, gardening, maintenance of the halls/building/grounds.
My estate agent has only been in the job for 3 weeks having just moved here from another country, and I've got no clue about all this stuff, so it's like the blind leading the blind.
I know I need to sit down with someone and talk all this through, but I'm so clueless I don't even know what questions to ask someone if I DID sit down with them.
You need to get a Solicitor involved who knows about conveyancing.
Someone will own the Freehold to the block of flats. You will get a lease on the flat you are buying, you are buying a lease only. Usually this is for a limited period, 99 years, 125, 999 years etc. The longer the better, you may not get a Mortgage if the lease term is too low (less than 75 years??)
Usually with a leasehold property you have to pay a 'ground rent' to the Freeholder, can be £50 per annum, can be £500! Often the Freeholder will arrange the Building Insurance for the property, you will need to contribute, also the general maintenance and gardening etc, again you will pay a contribution. Could be £50 per month, could be more!
Although you own the Lease you will never really own the property, unless you buy the freehold to the whole block!
Again get a Solicitor involved if you are serious about buying.
Someone will own the Freehold to the block of flats. You will get a lease on the flat you are buying, you are buying a lease only. Usually this is for a limited period, 99 years, 125, 999 years etc. The longer the better, you may not get a Mortgage if the lease term is too low (less than 75 years??)
Usually with a leasehold property you have to pay a 'ground rent' to the Freeholder, can be £50 per annum, can be £500! Often the Freeholder will arrange the Building Insurance for the property, you will need to contribute, also the general maintenance and gardening etc, again you will pay a contribution. Could be £50 per month, could be more!
Although you own the Lease you will never really own the property, unless you buy the freehold to the whole block!
Again get a Solicitor involved if you are serious about buying.
Edited by cjs on Tuesday 6th July 09:32
cjs said:
You need to get a Solicitor involved who knows about conveyancing.
Someone will own the Freehold to the block of flats. You will get a lease on the flat you are buying, you are buying a lease only. Usually this is for a limited period, 99 years, 125, 999 years etc. The longer the better, you may not get a Mortgage if the lease term is too low (less than 75 years??)
Usually with a leasehold property you have to pay a 'ground rent' to the Freeholder, can be £50 per annum, can be £500! Often the Freeholder will arrange the Building Insurance for the property, you will need to contribute, also the general maintenance and gardening etc, again you will pay a contribution. Could be £50 per month, could be more!
Although you own the Lease you will never really own the property, unless you buy the freehold to the whole block!
Again get a Solicitor involved if you are serious about buying.
The estate agency provides a solicitor, is that not good enough? I've been told there's a service charge of £1000 per year which I presumed covered things like gardening and maintenance etc?Someone will own the Freehold to the block of flats. You will get a lease on the flat you are buying, you are buying a lease only. Usually this is for a limited period, 99 years, 125, 999 years etc. The longer the better, you may not get a Mortgage if the lease term is too low (less than 75 years??)
Usually with a leasehold property you have to pay a 'ground rent' to the Freeholder, can be £50 per annum, can be £500! Often the Freeholder will arrange the Building Insurance for the property, you will need to contribute, also the general maintenance and gardening etc, again you will pay a contribution. Could be £50 per month, could be more!
Although you own the Lease you will never really own the property, unless you buy the freehold to the whole block!
Again get a Solicitor involved if you are serious about buying.
Edited by cjs on Tuesday 6th July 09:32
SunnyD said:
cjs said:
You need to get a Solicitor involved who knows about conveyancing.
Someone will own the Freehold to the block of flats. You will get a lease on the flat you are buying, you are buying a lease only. Usually this is for a limited period, 99 years, 125, 999 years etc. The longer the better, you may not get a Mortgage if the lease term is too low (less than 75 years??)
Usually with a leasehold property you have to pay a 'ground rent' to the Freeholder, can be £50 per annum, can be £500! Often the Freeholder will arrange the Building Insurance for the property, you will need to contribute, also the general maintenance and gardening etc, again you will pay a contribution. Could be £50 per month, could be more!
Although you own the Lease you will never really own the property, unless you buy the freehold to the whole block!
Again get a Solicitor involved if you are serious about buying.
The estate agency provides a solicitor, is that not good enough? I've been told there's a service charge of £1000 per year which I presumed covered things like gardening and maintenance etc?Someone will own the Freehold to the block of flats. You will get a lease on the flat you are buying, you are buying a lease only. Usually this is for a limited period, 99 years, 125, 999 years etc. The longer the better, you may not get a Mortgage if the lease term is too low (less than 75 years??)
Usually with a leasehold property you have to pay a 'ground rent' to the Freeholder, can be £50 per annum, can be £500! Often the Freeholder will arrange the Building Insurance for the property, you will need to contribute, also the general maintenance and gardening etc, again you will pay a contribution. Could be £50 per month, could be more!
Although you own the Lease you will never really own the property, unless you buy the freehold to the whole block!
Again get a Solicitor involved if you are serious about buying.
Edited by cjs on Tuesday 6th July 09:32
On topic, I've just found out that my estate agents are actually handling the tenancy and put the tenant in there, so did all relevant checks on him already. So I feel it would be ok, if they're managing it then I don't technically need to get involved for the three months anyway. Atleast this is the hope...
SunnyD said:
cjs said:
You need to get a Solicitor involved who knows about conveyancing.
Someone will own the Freehold to the block of flats. You will get a lease on the flat you are buying, you are buying a lease only. Usually this is for a limited period, 99 years, 125, 999 years etc. The longer the better, you may not get a Mortgage if the lease term is too low (less than 75 years??)
Usually with a leasehold property you have to pay a 'ground rent' to the Freeholder, can be £50 per annum, can be £500! Often the Freeholder will arrange the Building Insurance for the property, you will need to contribute, also the general maintenance and gardening etc, again you will pay a contribution. Could be £50 per month, could be more!
Although you own the Lease you will never really own the property, unless you buy the freehold to the whole block!
Again get a Solicitor involved if you are serious about buying.
The estate agency provides a solicitor, is that not good enough? I've been told there's a service charge of £1000 per year which I presumed covered things like gardening and maintenance etc?Someone will own the Freehold to the block of flats. You will get a lease on the flat you are buying, you are buying a lease only. Usually this is for a limited period, 99 years, 125, 999 years etc. The longer the better, you may not get a Mortgage if the lease term is too low (less than 75 years??)
Usually with a leasehold property you have to pay a 'ground rent' to the Freeholder, can be £50 per annum, can be £500! Often the Freeholder will arrange the Building Insurance for the property, you will need to contribute, also the general maintenance and gardening etc, again you will pay a contribution. Could be £50 per month, could be more!
Although you own the Lease you will never really own the property, unless you buy the freehold to the whole block!
Again get a Solicitor involved if you are serious about buying.
Edited by cjs on Tuesday 6th July 09:32
One other problem is that if you are mortgaging you might have problems because it is not a residential mortgage at the moment, and BTL is apparently tricky for FTB's now, at any LTV.
I'm not sure if you can even try and let it slip by, since the solicitor will know that it is not vacant possession and might be obliged to tell the lender.
I'm not sure if you can even try and let it slip by, since the solicitor will know that it is not vacant possession and might be obliged to tell the lender.
Seriously check the lease, if it is short and short is circa 75 years left then you may struggle to get a mortgage, also if you are likely to have the lease drop below this length while you own the flat then you will have to extend the lease before you can sell as it will be un-mortgageable. So irrespective of any other concerns get the lease length checked and if necessary find out if it can be extended, I believe you may have to own the property for 2 years before you can extend the lease though.
Also with a lease extension you need to negotiate the price given initially is a starting point for negotiation.
Also with a lease extension you need to negotiate the price given initially is a starting point for negotiation.
Gareth79 said:
One other problem is that if you are mortgaging you might have problems because it is not a residential mortgage at the moment, and BTL is apparently tricky for FTB's now, at any LTV.
I'm not sure if you can even try and let it slip by, since the solicitor will know that it is not vacant possession and might be obliged to tell the lender.
Apparently you can get permission from your lender to temporarily rent out the property, it's on a case by case basis. I'm hoping that I'd be ok, due to my situation. The mortgage is only about 20% of the property value too.I'm not sure if you can even try and let it slip by, since the solicitor will know that it is not vacant possession and might be obliged to tell the lender.
anonymous said:
[redacted]
Specifically:Who owns the ground rent. Really owns it. Can you trust them not to make your life hell?
Who pays when the roof leaks?
Who pays when the lift/etc/sewage system. breaks?
Who controls the maintenance - is it in your control or a gouging company?
As it's a flat I'd also get a stiletto walking test and a stereo test on the flat above to see how good the soundproofing is - it's too late when you move in.
Occasionally you do get Freehold flats, but beware they are not usually mortgageable and are very difficult to sell on.
As for the tennants, if they are on an assured shorthold tennancy that can be asigned to you then that is fine. If they have any other sort of agreement, or worse no agreement then consult a property solicitor. You run the risk of creating a "sitting tenant" and they are very hard to remove. You normally have to wait for them to die!
Watch out for tennants whose rent is paid by the state because they are on benefits. The is a liklihood that benefit payments for rent will be falling as part of the cuts.
Make sure your mortgage company know that he flat is rented and that you hav ethe right type of mortgage, otherwise you are commiting mortgage fraud. At the moment most mortgagees are wary of buy to let apartments as thats where they lost most of their money in 2007/8
As for the tennants, if they are on an assured shorthold tennancy that can be asigned to you then that is fine. If they have any other sort of agreement, or worse no agreement then consult a property solicitor. You run the risk of creating a "sitting tenant" and they are very hard to remove. You normally have to wait for them to die!
Watch out for tennants whose rent is paid by the state because they are on benefits. The is a liklihood that benefit payments for rent will be falling as part of the cuts.
Make sure your mortgage company know that he flat is rented and that you hav ethe right type of mortgage, otherwise you are commiting mortgage fraud. At the moment most mortgagees are wary of buy to let apartments as thats where they lost most of their money in 2007/8
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