Purchasing a property located within a private residential management company

Purchasing a House:

If you are considering purchasing a property located within a private residential management company, there are a number of considerations you must make or at the very least be aware of. Purchasing a house will require you to contribute to the development's "Estate" charge. 

The "Estate" charge is designed to provide funds to meet the day to day running of the external areas of the development, including the day to day administration of the limited company.

Although not exhaustive, some heads of expenditure may include: Landscaping/ garden maintenance, external electricity supply for street lighting, repairs to roadways, car park areas, Public Liability Insurance etc . Heads of expenditure s may vary depending on the development and any additional amenities and or facilities available.  We would advocate choosing your property conveyancer or solicitor carefully given they have a duty to collate all relevant information as part of the "search" process. 

Merlin Estates will ensure all solicitors enquiries are responded to in detail ensuring to purchaser is provided with as much relevant information as possible prior to the purchase of the property. Such information should include the current service charge status for the vendor's property to ensure there are no outstanding monies owed to the limited company.

If your management company is limited by Shares, Merlin Estates will ensure a new share certificate is issued to the purchaser, if the company is limited by guarantee, we will issue a membership certificate is issued to the new owners.

Purchasing  an Apartment:

If you are considering purchasing an apartment located within a private residential management company again, there are many considerations you must take in to account, probably more so than if you were purchasing a house.  Purchasing an apartment will involve making an annual contribution to the service charge budget calculated for maintenance and insurance of the block building.  These costs could involve contributing toward the service and maintenance of a lift and electric entrance gates (if applicable), cleaners, electricity supply to the internal communal areas, door entry system, Fire detection system and general repairs and maintenance.

If the apartment block is located within a development that also includes houses, then you will also be expected to make a contribution towards the service charge budget for the maintenance of the "Estate".

Again this is the kind of information provided by Merlin Estates to your licenced conveyancer or solicitor as part of the solicitor's enquiries.    Generally, unless the Freehold of the apartment block was transferred into the Management Company, the Leaseholder will be expected to pay ground rent to the Freeholder.  This is the annual payment demanded by the Freeholder or Landlord of the block of apartments, via their respective Agent.  

Under the Commonhold Leasehold Reform Act (2002 Amendments), Leaseholders are entitled to purchase the Freehold of the relevant apartment block. This is something Merlin would advocate, if and when the opportunity arises.

Owning the Freehold of the property certainly adds value to the investment, however, the application to purchase is only possible if 50% or more of the Leaseholders apply together under the relevant legislation.

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