You are not alone when considering purchasing ex-council or Housing Association property.
Professional landlords find that younger working tenants like them, and the number of those exercising their right to buy has shot up over the last twelve months (a staggering increase of 352% of successful applications). This is hardly surprising when one considers that these applicants are entitled to a discount of between £75,000 and £100,000.
These are the important issues to consider:
1. These properties are often 20% lower than current private sector valuations. This is largely because of a perceived stigma attached to these properties, but frankly we are of the view that such a so called stigma is rapidly disappearing in this market, when any property in London and the South East is at such a premium.
2. They are often much larger than modern new build properties and better built. Prior to 1980 properties were built in accordance with the Parker Morris Space Standards i.e. 355 square feet for the first individual and 140 square feet for each other individual in the property.
3. They are often centrally located and close to shopping and transport facilities and schools.
4. Ex-public sector flats tend to have long leases and the Local Authority more often than not will still remain as freeholder.
5. There are plus and minus points to having the Council as a freeholder:
• Generally Local Authority-run blocks are better and more cheaply managed than those in the private sector. They will have regular maintenance schedules and, if they have outsourced this to the private sector, they have enough clout to drive those maintenance charges down. Additionally, there will not be an expensive managing agent to deal with.
• Local Authorities who are freeholders are not allowed to hold sinking funds; HOWEVER this brings us to the fly in the ointment: MAJOR WORKS PROGRAMMES. Make sure that either you or your solicitor checks with the Local Authority to determine whether they have any of these programmes planned for the future; ask for potential costs and timescale of the programme.
• Look back at the major works programmes carried out over the last ten years carefully. These are important because you will be paying for works carried out on other properties and you will be unlikely to receive any direct benefit from these. Remember also, the law requires them to discuss various quotations for these works, and the scale of the programme will be far greater than one would normally see in the private sector. However, don’t forget that they should be able to secure a lower price for these works than the private sector, because of their bargaining power.
6. Take your time, use your head and assess the neighbourhood, block or estate, just as if you were buying in the private sector. Is it run down? Is it a local crime spot? Are the other residents mainly young families or elderly people? Look closely at the communal areas, entrances and gardens. Are they well kept? Try and find out how any of your neighbours also own their properties or who are renting from the Local Authority. Invariably there will be longstanding tenants amongst them.
If you require any further advice and assistance please contact us by calling 020 7387 2032 or by completing our online enquiry form here.