I’ve started my first job and want to get my own place. My parents are telling me that if I rent somewhere then it’s money down the drain but I am afraid to buy. The newspapers say that the housing market has crashed. My parents say that maybe now is a good time to buy. I don’t have much savings but my parents will help me with the deposit. I’m so confused by the whole thing. What should I do? Please help.

It’s quite usual for us to aspire to home-ownership. It’s part of the British culture, but I won’t go into the political reasons for that right now. But buying isn’t necessarily right for everyone. As a home owner, you would have sole responsibility for maintenance and repairs – and you can never predict what might happen or what might go wrong and how much it might cost to put things right. You will have far fewer responsibilities if you rent somewhere. However, as your parents have said, “it’s money down the drain” – in other words you are paying to contribute to someone else’s investment, not your own. There are pros and cons of both renting and buying a place to stay, so let’s have a look at them.

Advantages of renting

• The landlord, not you, has responsibility for repairs and maintenance.
• You don’t need such a large deposit – usually one month’s rent.
• Renting isn’t such a long-term financial commitment as buying.
• You can move more quickly if you change jobs or decide to move away for whatever reason.

Disadvantages of renting

• You have no financial investment in the property – the rent you pay is just a monthly expense like any other.
• The landlord may ask you to leave when your lease ends or other statutory period of notice*.
• You can’t usually make any major improvements. Even if you do, with permission, it’s the landlord not you who benefits from any increase in value to the property.

Similarly there are pros and cons of buying your own place.

Advantages of buying

• Money you put into your own home is an investment – but in the current economic climate you may well find that the value of your property could decrease. In the 1980s and 90s it was almost guaranteed that it would increase – not so now.
• Buying may give you more choice of types of property – old, new, perhaps even something that needs doing up.
• Security of tenure. You own it so there’s no landlord who can come along and tell you to move out.
• As a general tendency, you will have more choice of properties to buy rather than rent.
• Subject to planning permission, you can do what you like to your own home. Paint the place red!

Disadvantages of buying

• Buying a home is an expensive process. You will need to pay all sorts of fees to lawyers, and other professionals.
• You can’t predict how the mortgage rates may change and if mortgage rates rise, so will your monthly payments (unless you have a fixed rate mortgage for a number of years).
• If you got a job in another area, it would be much quicker to move if you were renting somewhere. If you own the house you would have to go through the lengthy and expensive process of selling it.
• You are responsible for repairs and maintenance of your property.

As you can see, home-ownership is an expensive business and not one to be entered into lightly without weighing up all the pros and cons. It’s difficult for me to advise on any specific situation, given that I don’t know all your circumstances. In your shoes, I would try renting for a few months, perhaps sharing with friends or colleagues. Get a better feel for living away from the parental home. Then a few months down the track you may have a better idea of what’s right for you. Good luck!

* Things aren’t always that simple, as our Trashed House story explains. We were legally entitled to get our home back but we had to go to court and get the bailiffs in to enforce that right. The law often seems to take the tenant’s side, unfairly in many cases.

This exhibition is the property event for serious investors. So if you are considering buying residential or commercial property for investment purposes – in the UK or abroad – this show will answer all of your questions.

This year’s event will feature property and property related services from approximately 100 exhibitors including major house builders, developers, estate agents, lenders, brokers, property investment training companies and other leading property experts … many of whom will be appearing at the show for the first time.

For more information see:
2008 Property Investor Show official website

We are in the process of buying a house in London. We have found a house which we like, but it has the bedroom on the first floor and the bathroom and toilet on the ground floor. Is that unusual, and will it mean that I get a lower price if I want to sell the property after few years, as the bathroom is not near the bedroom?

The vast majority of houses in the UK – apart from flats and bungalows, of course – have the bathroom on the first floor, rather than the ground floor. The reason is obvious: a first-floor bathroom offers better privacy than a ground-floor one. You may even be able to have the window open and still not be seen while you’re using the bathroom in whatever state of undress you happen to be in at the time.

However, in some older properties it’s by no means unusual to find the bathroom on the ground floor instead. Many of these houses probably originally had no bathroom at all, just an outside toilet at the back of the house; bathing would take place either at a public baths or in a tub filled with water heated on the kitchen stove or over the fire.

When indoor bathrooms became the norm, it was simpler (and therefore cheaper) to provide the plumbing using the existing installation for the outside toilet, than it was to convert an existing room on the first floor of the house. A doorway would commonly be knocked through from the kitchen, and the outside toilet extended (often by making use of other outside areas such as the coalshed, which fell into disuse as clean air legislation banned the use of coal fires in cities).

Anyway, that’s the background.

In answer to the question, here are a few things to consider:

• A downstairs bathroom may well put some buyers off and force the price of a house down. But on the other hand, that will be the case when you buy the house as well. So you’re likely to be buying cheap as well as selling cheap.
• The price of a house in any given location is likely to vary by the same proportion over time, regardless of whether it’s got an upstairs bathroom or a downstairs one.
• In some areas the downstairs bathroom is very common (particularly where a whole estate has been built or adapted in the same way at the same time) and the price you can expect to get your house will be similar to the asking price of the others nearby.
• Some buyers (for instance, elderly or disabled people) may find it an advantage to have the bathroom downstairs.

One possible negative to bear in mind is that Building Regulations require food preparation facilities (ie the kitchen) to be separated from toilets by at least two doors, so you may find that there’s a small ante-room (in other words, space that’s more or less wasted) between the kitchen and the bathroom.

Ultimately, though, you’ll have to make your own mind up whether you like the house enough for the unusual layout not to matter.

If you’re lucky enough to have all the leaseholds in a building of flats, it’s natural and sensible to want to consolidate your ownership in whatever way is available to you.

If you can afford it and the freeholder’s willing to sell, then by far the best means of securing your possession is to take over the freehold on the property outright. (The legal term for this process is enfranchisement.)

That way, the house and the land are yours to do what you want with (subject to council permission, conservation listings and any restrictive covenants – you’ll need to check all of these out if you’re planning to make any major changes). Owning the freehold will give you complete control as to how the property is managed. You won’t have to pay ground rent or service charges, but you will have sole responsibility for maintenance.

Of course, whether you can afford it will depend very much on where the building is located – and how good a negotiator you are!

The first thing to do is to find out who owns the freehold. Check the details of your leases or visit the land registry website: http://www.landregistry.gov.uk

If the freeholder doesn’t want to sell outright for whatever reason, it may well be worth extending the shorter lease so that it’s synchronised with the other two. This is partly because of the basic principle that the longer the lease has to run, the more saleable the property is. But if you should ever want to sell all three leaseholds to one person, the package will be that much more attractive to the buyer if all three leases have the same length of time to run – and deprive them of an obvious handle to try to negotiate a cheaper price.

Your best course of action also depends on your plans for the future. You may be planning to let or sell one or more of the flats, or you may want to keep the property to live in or as an investment. The answer above is merely a broad description of the benefits of freehold versus leasehold. Your own particular circumstances will determine what’s “best” for you.

I am looking at buying a retirement flat (one in a block of 6). Can you tell me what a ‘shared freehold’ is and what are the pros/cons and things to look out for/ be wary of??

Freehold and leasehold property ownership

In England and Wales properties can be owned by either freehold or leasehold.

Scotland has a different set of rules for property ownership. Freehold equates to feuhold and leasehold doesn’t exist there. This article therefore refers only to England and Wales.

What’s the difference between freehold and leasehold?

Freehold means that you own the property, and the land it’s built on, outright. Subject to planning and other laws, you can do what you like with your property, including bequeathing it in your will.

Leaseholders do not own their property outright but own the property only for the duration of the lease. There may also be several conditions and restrictions contained in the lease, so a leaseholder is not free to do as they wish with the property.

If you consider buying a leasehold property you should take the greatest care to make sure you understand the terms of the lease. You should seek legal advice from a professional who specialises in this area of law before signing any lease.

What are the advantages and disadvantages?

One suggested advantage of leasehold over freehold is that rights and responsibilities are clearly laid down regarding repairs and maintenance and what you are entitled to expect. On the other hand, with freehold you have more control over how your flat is managed. You have more freedom to choose what is and isn’t done to the property.

It can be more difficult to obtain a mortgage on a leasehold property, depending on how long the lease has left to run and other factors. Freehold properties are also usually easier to sell than leasehold, which is likely to add to the property’s value.

Freehold ownership is more secure than leasehold. Just about the only way you could be evicted is if you fail to make payments on a mortgage or other loan secured on the property. Leaseholders don’t have the same level of security and eviction may be possible if they break the terms of the lease.

Freehold is therefore a more desirable form of ownership than leasehold and, as such, freehold properties are often more expensive than equivalent leasehold properties.

(Sometimes it is possible for a leaseholder to buy the freehold but this can be a complex and expensive process. The legal term for this process is enfranchisement.)

In the case of flats, the freehold is shared between the owners (shared freehold). This is where it starts to get a bit complicated, so please read on to Part 2 of this article which specifically discusses ownership by shared freehold.

A final point about types of ownership which may be worth mentioning:

Additionally there is a new form of ownership which was introduced in 2004. This is called commonhold. This is where a company or association owns all the common parts of the block of flats and individual flat owners pay a service charge to the owners for services. This form of ownership is not yet widespread but it’s possible you might encounter it if you’re buying a purpose-built retirement flat. If you need any more information about commonhold ownership, please get in touch again.

I am looking at buying a retirement flat (one in a block of 6). Can you tell me what a ‘shared freehold’ is and what are the pros/cons and things to look out for/ be wary of??

In Part 1 of this article we discussed the differences between freehold and leasehold ownership. In the case of flats, the choice is usually between shared freehold and leasehold. And explaining shared freehold can get a little bit tricky. Let’s have a closer look.

To recap, freehold means that you own the property, and the land it’s built on, outright. This clearly isn’t possible when you’re talking about flats so there are various scenarios – some logical and some not – which could arise.

Shared Freehold – how does it work?

First, how it doesn’t work.

One might expect that all the owners in the block (six in this case) own a joint share of the freehold and this entitles them to the use of a particular flat as well as having a share in the land it’s built on and the common areas.

This would be a very strange situation as legal matters are very rarely as simple as this. You can probably ignore this possibility as it’s highly unlikely to ever happen. If it does turn out that this is the case for the flat you’re considering buying – run away!

A more likely scenario

The most usual way for shared freehold to work is that a company owns the freehold and the flat purchaser/owner leases the flat from that company. (So now we’re back talking about leasehold again.)

When you buy a shared freehold flat it’s possible that you’ll be buying a proportional share of the company which owns the freehold. You’ll be buying one flat out of six, therefore you could assume that you will own a sixth share of the company. You will then take a lease on your flat from this company.

Mostly this is quite safe. After all, think about how many people own flats via shared freehold and never have any problems. However, it doesn’t hurt to be aware of the implications and potential pitfalls of shared freehold ownership.

Possible problems

Many people, including mortgage lenders and even shared freehold owners themselves, don’t understand the issues involved. The flat owners might insist that they own the freehold and the mortgage lenders dispute this, by saying it’s only a leasehold property.

Further complications could also arise if all the flat owners’ names are indeed on the freehold title. Or maybe someone else entirely different owns the company that owns the freehold!

It could be a can of worms despite being such a popular and perfectly good type of ownership. The main thing is to be aware of and understand the issues involved – and don’t sign anything without first having taken appropriate professional advice.

The next step?

As you’ve seen, just like any legal process, it can be a bit of a maze for the unwary or the novice to get through. Don’t despair; there are thousands of people successfully buying shared freehold flats every day in England and Wales. But don’t attempt this alone. This is something where you really MUST have a qualified professional working for you. At least if s/he gets it wrong you’ll have some comeback.

To minimise legal costs you can do some of the initial digging yourself. Lawyers usually charge an hourly rate so the fewer hours you need from them the cheaper the process should be.

The next thing to do is to find out who actually owns the freehold of the block of flats where you’re thinking of buying yours. You could ask the seller to give you copies of their title deeds.

Better still, go to the Land Registry website (http://www.landregistry.gov.uk/) to find out – with any luck the flat will have been registered there and you’ll be able to find out who owns the freehold.

Armed with this knowledge, you’ll have a much better idea of whether buying the flat is an attractive proposition for you.

Good luck with your retirement and your search to find a new home!

1. The shorter a lease is, the more problematic your flat will be once you come to sell. This is not because of any legal implications, more to the point is the fact that banks won’t lend money (mortgage) for a property that has a short lease. “Short” in this instance is usually anything less than 80 years.
2. It is possible to extend a lease under the terms of the Leasehold Reform (Housing & Urban Development) Act 1993.

My suggestion would be to approach a solicitor who has more knowledge of this in order to get full and frank advice.

More reading:

• Leasehold Reform, Housing and Urban Development Act 1993

Not much direct advice from me, sorry. Well, I hope that this answer helps a bit!

As soon as you know your completion date, book a removal firm if you need one and make sure they are prepared to pack your belongings as well as transport them.

Allow yourself plenty of time to sort out all your things before the removal men arrive. Decide what is going where in your new home and label each container with its contents and the room where you want it to go. Remember to pack important items – such as the kettle – where you will be able to find them quickly and easily.

In the last week or two before the move, contact the companies that supply your gas, electricity water and telephone services to let them know you are moving out (if you are currently renting or own a property). Ask them to arrange for the meters in your old home to be read so that you do not end up paying for services the next occupant uses. You may also want to ask the Post Office to redirect your mail for a while. You will also need to let the Council know you are moving so that you are not liable for Council Tax payments at your old address.

Co-ordinate with the estate agent and the vendor to make sure that the meters are also read at your new home.

Once you move in, ensure that you carefully file away all the important information you have gathered (i.e. addresses and contact details for the utilities and the council, the original estate agent’s particulars for the property and your mortgage details). They will come in handy should you ever decide to go through the whole process again!

By this time, your solicitor should have a draft contract ready for you and the vendor to sign. Once you have signed this contract, there is no going back, so be very sure you are happy with all the sale arrangements before you commit yourself. Typically at exchange (unless exchange and completion are on the same day), you will have to put down a deposit of around 10% of the purchase price. You also need to make sure that the building is insured as you are now legally obliged to buy it (the lender or your solicitor will help make sure that this happens).

Check that:

• Your solicitor has completed all the local searches;
• The surveyor’s report is complete and accepted by all concerned;
• You have a formal mortgage offer in writing which you have read and understood;
• You have the agreed deposit available;
• You have agreed a firm completion date for the sale, and this date is noted in the contract;
• There are no outstanding issues remaining to be settled between you and the vendor. If, for example, there is any doubt whether or not the property’s existing carpets are to be included in the sale price, get the matter sorted out in writing before you sign the contract.
• When you have signed the contract, your solicitor will deliver it to the seller in exchange for the contract he has signed. From this point onward, both you and the seller are legally committed to the deal.

In almost every case, we recommend strongly that you get a more detailed report on the condition of the property to protect not only your lender’s interests, but your own as well. Make sure that the surveyor you use is a member of the Royal Institution of Chartered Surveyors or the Incorporated Society of Valuers and Auctioneers.

There are two kinds of surveyor’s report beyond the basic valuation:

• A House Buyer’s Report comments on the condition of only those parts of the property which are easily accessible or visible. The surveyor will recommend any further investigations he thinks are necessary – for example if he thinks the wiring needs checking or there is the possibility of some structural problems.
• A Full Structural Survey involves a more extensive investigation. A full survey is more expensive than a house buyer’s report, but should tell you much more about any work that may need doing on the property if you buy it. Full surveys are recommended in many cases, particularly if you are buying a property that is more than 100 years old or the building is more than three storeys high.

When you view the property yourself, look out for any signs of problems like cracks or damp patches so that you can point these out to the surveyor later for him to inspect properly.

When you set out on the home-buying process, you should budget for the cost of more than one survey. You might find the surveyor’s report on your first property uncovers serious faults (such as subsidence or rot) which mean you want to withdraw your offer. Even if there are no problems with the property itself, another bidder could step in with a better offer at the last minute.

Either way, you will have to start the whole process again, and that includes organising a survey for the next property where your offer is accepted.

Where the survey does reveal serious problems, you are free to withdraw your offer. If the problems can be fixed, you may be able to use the survey results to negotiate a reduction in the sale price to compensate you for this extra expense.