New Apartment & Legal Advice

godtabh

I put a booking deposit on a new apartment a couple of weeks ago.

The apartment is still under construction and literally only has the foundation just poured.

I'm going to sign the contract on Wednesday and was just wondering does any one have any advice on what I should look out for and what should I ask to put in?

The only thing I'm worried about is a closing date i.e when I can move in. I've worked many apartment jobs that have run over time but I've never been on the other side of slow contractors.

antoinolachtnai

Well, if you want legal advice, you should ask your solicitor. You do have one, right? You shouldn't sign a binding contract for property without one.

You obviously know more than most about the construction business. The reality is that there is never a guarantee as to exactly when a building will be ready to occupy, and no builder will guarantee anything other than a very pessimistic date.

You don't get to 'put things in'. Unfortunately this is a seller's market. The developer dictates the terms, not you. If you aren't happy with it, you walk away.

godtabh

antoinolachtnai wrote:

Well, if you want legal advice, you should ask your solicitor. You do have one, right? You shouldn't sign a binding contract for property without one.

You obviously know more than most about the construction business. The reality is that there is never a guarantee as to exactly when a building will be ready to occupy, and no builder will guarantee anything other than a very pessimistic date.

You don't get to 'put things in'. Unfortunately this is a seller's market. The developer dictates the terms, not you. If you aren't happy with it, you walk away.

I have a solicitor but I want to know what questions to ask him.

lomb

what the number of years lease on the unit is-this depends in turn on what the developer has in terms of title and what hes willing to grant, hopefully its more than 100 years although some are quite short..

what the closing date is, what the interest rate is if u dont close on the closing date, what the signing contract deposit is, are the common areas and recreation areas marked and whether u have legal title to use them. whether u have a right to be a member of the management company and what the developers responsibility is in handing over the units to the management company is.all this is in the draught lease which he SHOULD have given u a copy of imho. u should know what u are signing in advance.

thats pretty much it, main thing is title, closing date, penalty interest rate for late closing, and anything else the solicitor thinks is relevent.

godtabh

lomb wrote:

what the number of years lease on the unit is-this depends in turn on what the developer has in terms of title and what hes willing to grant, hopefully its more than 100 years although some are quite short..

what the closing date is, what the interest rate is if u dont close on the closing date, what the signing contract deposit is, are the common areas and recreation areas marked and whether u have legal title to use them. whether u have a right to be a member of the management company and what the developers responsibility is in handing over the units to the management company is.all this is in the draught lease which he SHOULD have given u a copy of imho. u should know what u are signing in advance.

thats pretty much it, main thing is title, closing date, penalty interest rate for late closing, and anything else the solicitor thinks is relevent.

How does the number of years of the lease effect me?

How likely is the is the developer going to accept penalities if they are late from closing date?

What do you mean about being a memebr of the management company and why wouldnt you be allowed to join the management company?

Also why would I recieve a draft lease? I'm buying the apartment so I was expecting a contract for purchase.

lomb

kearnsr wrote:

How does the number of years of the lease effect me?

How likely is the is the developer going to accept penalities if they are late from closing date?

What do you mean about being a memebr of the management company and why wouldnt you be allowed to join the management company?

Also why would I recieve a draft lease? I'm buying the apartment so I was expecting a contract for purchase.

first things first, because u are buying an apartment , a communal property on shared ground,u are not the owner of the property, and never will be, u are buying an interest in the unit u have chosen, an interest governed by the fresh issue of a long term lease usually 999 years at a very low annual rent like 10 euro a year. if the developer doesnt own the freehold of the land but owns a long lease of 50 years he cannot give u what he does not own so can only give u what he has like a 50 year interest.

at the end of the lease term ur interest finishes and the property reverts to the freeholder.

in the issue of a new lease, u need to see this lease and accept it. many terms are standard but u should know what u are signing.

u will not be able to get the developer to accept penaltys inhis late closing, not a prayer to be honest, they have 28days to close from the date a completion notice is issued anyway so u can issue a completion notice the next day after the closing date if he is late closing.

the contract u sign is irrelevent except the closing date, and interest rate,and its the draught lease that accompanies it thats important.when u sign contraact one of the terms in it is u accept the draught lease.

my advice is dont stall the sale or they might reneg on the deal in these boom times.

lomb

lomb wrote:

thats pretty much it, main thing is title, closing date, penalty interest rate for late closing, and anything else the solicitor thinks is relevent.

???

Title? If your Solicitor isn't going to make sure you get good and marketable title, then frankly I don't know where to start. Plus the interest rate is only relevant in about 1 in every few hundred transactions - surely you don't plan on defaulting on the contract at this stage? And if it's a new builkding in the course of construction, you won't get a closing date, merely a completion period within which the house must be completed.

The most important things to ask are (i) what checks you have to carry out yourself ie. engineer survey on completed structure, planning checks etc. (ii) go through the finance pack with your Solicitor and make sure you can comply with all the bank's requirements (iii) if it's an apartment, what are the covenants and conditions - get a full extract from the lease (iv) what is the initial management company fee and what percentage are you responsible for afterwards (v) are there stage payments (vi) is there a car park space or merely a licence to use an area (vii) is the property covered by HomeBond or a similar guarantee scheme.

antoinolachtnai

the other thing is to find out whether there is any way for you to sell on your interest before the closing.

At the end of the day, there is really not much you can do though. You end up having to take the solicitor's word for it that everything is OK. Your only other comfort is that you aren't in this alone - the bank, which is also represented in the transaction by your solicitor also has to be happy that the title is sound. There are standard forms blessed by the Law Society's conveyancing committee that govern all of this.

You won't be talking about draft leases. This is an actual contract that you are going in there to sign.

Short leases are not necessarily such a bad thing. The reality is that the building will probably need to be rebuilt or stripped out in 100 years time and it might be more practical to clear everybody out at that point rather than waiting for the building to be condemned. (I hope you live long enough to run into this issue.) You generally own a share of the freehold or the very long leasehold through the management company so you don't lose all your interest at that point.

Best of luck with your new home!

antoinolachtnai

antoinolachtnai wrote:

the other thing is to find out whether there is any way for you to sell on your interest before the closing.

Good questoin alright.

That could be relevant for someone looking to make a quick buck, though in most cases now developers put in a clause stating that the contract cannot be assigned without their consent - they just HATE seeing the punter make a few quid!

lomb

lomb wrote:

if the developer doesnt own the freehold of the land but owns a long lease of 50 years he cannot give u what he does not own so can only give u what he has like a 50 year interest.

at the end of the lease term ur interest finishes and the property reverts to the freeholder.

Nonsense. The freehold reverts to the management company. They purchase the common areas and freehold reversion as standard in all apartment developments. You don't think the builders hang around for 999 years waiting to pick up the property again, do you? Or that someone buys it off them to benefit their great great great (repeat to the power of 16) grandchildren?

As for 50 year leases, believe you me if a Solicitor buys a 50 year lease for you you have an open and shut case of negligence against him.

lomb

Deleted User wrote:

???

Title? If your Solicitor isn't going to make sure you get good and marketable title, then frankly I don't know where to start.

ud b surprised, and the bank will loan for 35 year leases but prefer 50, u may need even know ur kids may get nothing, and the solicitor will be retired or dead by then, know what u sign, get a copy of everything and read it urself, its YOUR money.

lomb

Deleted User wrote:

Nonsense. The freehold reverts to the management company. They purchase the common areas and freehold reversion as standard in all apartment developments. You don't think the builders hag around for 999 years waiting to pick up the property again, do you? Or that someone buys it off them to benefit their great great great (repeat to the power of 16) grandchildren?

As for 50 year leases, believe you me if a Solicitor buys a 50 year lease for you you have an open and shut case of negligence against him.

the freehold only reverts if the developer lets it under the terms of the draught lease or if he has a freehold to begin with. how can he let it revert to the management company if he doesnt own it?

and 50 years is not negligence, i have talked to a solicitor and it happens, the banks will loan for it, no ones any the wiser:D

lomb

lomb wrote:

the freehold only reverts if the developer lets it under the terms of the draught lease or if he has a freehold to begin with. how can he let it revert to the management company if he doesnt own it?

But obviously if he himself has a leaese he will only be selling the reversion in that lease. It's not in the draft lease, there is a contract for sale included in most booklets of title (I say most because some developments do not have management companies of course).

Either way, do you honestly think that a builder running out of time in a lease and spending millions to develop the land thinking that all the Solicitors for the Purchasers will turn a blind eye is a common problem?

Finally, as regards 50 years, the Solicitors obligation is to ensure that the Purchaser (or more pertinantly the bank) gets 'good and marketable title'. The Law Society practice was that in the case of a leasehold this meant at least 70 years to run. Your Solicitor may be happy to certify less, I wouldn't.

Lomb, you'll give poor kearnsr high blood pressure if he thinks he has to double check the title his own Solicitor will check!

lomb

many developments in the city are built on leased commercial terms. its a LANDMINE area, the developer sells the development giving what he has or less.he CANNOT give u what he hasnt got.
if u say 70 yrs id believe u, i know for a fact the banks will loan on 50 so the title is 'good'

lomb

lomb wrote:

the banks will loan on 50 so the title is 'good'

The banks? Sure the banks don't even look at the title for standard apartment/house purchases, so how would they know? They simply rely on the undertaking given by the Solicitor. And I must say I have yet to meet the Solicitor who is happy to risk giving an undertaking in respect of a 50 year lease while at the same time forgetting to tell the client about it.

godtabh

I'm still not 100% sure about this lease thing.

I know that you cant own the land on which the aparment is built (as it could be 50ft in the air or what ever) but i thought that just meant that you cant say add an extension to your apartment or what ever.

I didnt realise that I'd never own my aparment (then why would I be gettting my self in so much debt!)

Just say I get a 50 year lease and I end up living in the aparment for longer than the lease (or I hold on to it for that long) what happens? Surely I'll have an interest in what ever is built after the lease is over? Or do I?

So what would people recommed about the lease?

kearnsr

kearnsr wrote:

I didnt realise that I'd never own my aparment (then why would I be gettting my self in so much debt!)

You will own your apartment. You will own a leasehold interest in it. Stand in the middle of Dublin and look all around you, big businesses, apartments, houses - almost all of them will be held under a form of leasehold and very few freehold. A leasehold is a perfectly valid way of owning property, it just means you don't own the freehold, but not that you don't own the property. Apartments are invariably leasehold so the landlord (the management company) can enforce certain terms eg if you had the freehold, you could paint the place luminous pink and subject to compliance with public order play rock music all night long. A Lease is the only way of controlling the development.

antoinolachtnai

Don't worry about this stuff, it's all fine detail, but if it makes you more comfortable, talk it through with the solicitor so you understand what is involved.

50 year remaining on a lease might be fine, it depends on what happens at the end. If the building is in good nick, the management company owns the freehold and the management company is in good shape, then there might not be a problem. Also, it is likely that in such a case you would be entitled to buy out the freehold under those strange landlord and tenant laws from the seventies.

I find it hard to believe a bank or a solicitor would accept a 50 year lease on a new build as security for a 30 year mortgage. For a start, the developer would have a tough time getting his own finance from his bank to start on the project if he didn't have something a little better than that.

But Lomb obviously has had the experience and I have to admit, some pretty crazy things happen in a bull market - can he give us a clue what developments have this sort of short lease?

In the end we are depending on the solicitor knowing what the hell he is doing, and on him having insurance if he doesn't.

Not to cast aspersions on solicitors, but I wouldn't think every bank in Ireland will accept an undertaking as regards title from every single solicitor in Ireland.

The bank is likely to have some idea about whether the title of new builds is ok, because they are dealing with issues regarding the same development day-in, day-out. Also, they may be dealing directly with the developer as well, or they may have had a mortgage on the site at an earlier stage. If there is a serious problem they have a good chance of finding out about it, if not from one solicitor, from another.

lomb

banks will certainly accept from 35 years on as good title. they prefer 50, i can only relay what my solicitor told me, and he has hugh experiance, he regularly deals for developers, and transacts deals of 10 mill+.he has done a single deal of 50 million. id believe what he says.
i think there is a form the solicitor sends to the bank certifying the lease situation and one of the questions MUST be what the years remaining is. i cannot believe a bank would rely on the solic
itor with regards to this. it seems they are happy with 50+..

my experiance is in buying a commercial property on a 900 year lease, he printed off the draught lease, and gave me one copy of the contracts and told me to read it. frankly he saved me a fortune with his sound advice and desicion to give me a copy of both documents. we were able to neotiate lease terms that were VITAL to the value of the property. this was a fresh lease granted by a freeholder so u can negotiate to some extent being a non standard property (commercial)

i dont expect or think u will need to negotiate on a residential lease as the terms are standard but u should read it shouldnt u first? its u thats going to be paying for it for the next 20=35 years. its your money not the banks, u that will be holding the pot not the bank or solicitor in 20 or 30 years.

u need to understand, that the building will be wrecked in 40 or 50 years time and even if u own a share of the freehold through membership in the management company ul b paying to refit/rebuild it. also over 50 years expect to pay 100000-200000 euros(considering inflation) in maintainence charges of the common area. a lease will contain a clause that u are legally obliged to pay the rent and the service charges and there will be conditions that prohibit u from subdividing. structural alterations, floor overloading, noise , machinery , etc etc. this is good as it protects u from other nasty neighbours also. the payment of rent (10euro)allows the tems of the lease to be enforced against all leesess by the management company.

i personally would not buy a 50 year laese unless it was priced appropriately. check its a long lease 150+years if u are paying market value, that way u can still sell it when u are old.

also im not saying leases are bad, they are a NECESSARY evil in property in many cases. most commercial property is leased from leases issued 100+years ago. u can only buy a lease out if u are NOT an apartment or commercial property.these will be leased for ever. i would NEVER buy a apartment in the suburbs outside dublin 1 or 2 and would far prefer a house even for a few more quid. apartments are too dear for what they are and the onerous terms of the lease that run with them. ul get a house of the same size 'worth' 2 or 3 times an apartment for say 20-30%more.ud be insane to choose the lease over the free. and resale inthe future when pwople get pissed off with delapidating buildings will be difficult and prices will reflect this.

most apartments are indeed sold on long leases like 999 years as the developer bought the freehold and then transfersthe freehold to management company in which u have a share.but some inner city unit sare built on commecial land leased maybe in 1850(and being commercial never had the lease bought out as u cannot legally force a freeholder to sell unless its residential) and they may not have that long to go till the lease terminates and in 50 years u could be paying market rent to some british lord...

incidentally i would still buy an apartment in dublin 1 or 2 having said all the above.and i would also still buy commercial on long leases as its a tool to make money, but if u want a home in the suburbs forget it imho. please remember though if u got a good price, BUY it, then start looking in a year for something else.

antoinolachtnai

Well, if it was converted into residential, then surely the provisions regarding buying out freeholds would begin to apply?

In the UK, you can extend these short leaseholds on residential property and further provisions are being made to allow residents to buy these out. If there are genuinely a lot of these, I would think that the law will eventually be changed here too. I would think this is what the banks are depending on. It also depends on how much of the funds the banks are putting up - if they're putting up 30 percent, it's probably ok, if they're putting up 95 percent, it probably isn't.

Obviously buying out leaseholds is a complicated area.

I of course agree that anyone should understand what they are signing up to before they put their name on the dotted line.

I would say that there are sometimes good reasons to buy apartment property outside 1 and 2. It might be all you could afford for one thing. For another, there is the odd tax break still to be had, which might make it worth your while. Also, there are some areas where there is a good plan for urban development which will lead to higher densities, a comfortable living environment and good transport in years to come. (I'm thinking of Ballymun as an example here. Don't laugh, have some vision!)

lomb

lomb wrote:

i can only relay what my solicitor told me, and he has hugh experiance, he regularly deals for developers, and transacts deals of 10 mill+.he has done a single deal of 50 million.

:eek:

He told you all this?

Being a Solicitor myself, it wouldn't cross my mind to talk about the great titles I have certified or the rich clients I have. After all, handling 50m that belongs to someone else is no great boast tbh...

godtabh

I signed the contracts today.

The lease was for 999 years so I'm happy enough with that.

The builder has 12 months from when he signs the contracts to complete the apartment but hopefully it wont take that long.

kearnsr

kearnsr wrote:

The lease was for 999 years so I'm happy enough with that.

But think of your children's children's children's children's children's children's children's children's children's children's children's children's children's children's children's children's children's children's children's children's children's children's children's children's children's children's children's children's children's children's children's children's children's children's children's children's children's children's children!!

Best of luck with it. Nothing like getting that first step on the property ladder, you won't regret it.

godtabh

Deleted User wrote:

Best of luck with it. Nothing like getting that first step on the property ladder, you won't regret it.

Yeah lets hope so!