Buying an apartment without any management company in place.

RickyG · 08-11-2015 1:44pm #1

Hi . I'm just wondering if anyone has any experience of buying an apartment without any management company in place?I found a nice 2 bed downstairs mid terrce apartment with no common entrance etc to the upstairs apartment.nice big garden etc and perfect for my financial situation.however after submitting all my paperwork for the mortgage the bank decided to refuse application because of no management company in place . I'm gutted.has anyone come across this situation before or is there any way around it?cheers ...

Del2005 · 08-11-2015 1:58pm

If there's no management company who do you buy the lease off? Start looking elsewhere as with no management company there will be no work done on common areas, no sinking fund and more importantly no insurance.

FishOnABike · 08-11-2015 2:06pm

Unless you were a cash buyer, buying at a substantial discount, had done your homework and had assessed and was willing to accept the attendant risks I'd look for something else where everything was in order.

As you have already experienced no financial institution is likely to back you taking on such a property which does not have a functioning management company.

RickyG · 08-11-2015 2:13pm

Del2005 wrote: »

If there's no management company who do you buy the lease off? Start looking elsewhere as with no management company there will be no work done on common areas, no sinking fund and more importantly no insurance.

As far as I can see every house in the estate independently owned.only common area is the green in the middle of the terrace and residents look after that themselves.i wonder how the other house owners got their mortgages tho when I can't..confused..

RickyG · 08-11-2015 2:16pm

FishOnABike wrote: »

Unless you were a cash buyer, buying at a substantial discount, had done your homework and had assessed and was willing to accept the attendant risks I'd look for something else where everything was in order.

As you have already experienced no financial institution is likely to back you taking on such a property which does not have a functioning management company.

Yep I'm thinking the same but I'm confused as to how the other home owners in the estate got their mortgages drawn down in the same circumstances.terrace only 10 yrs old..

Paulw · 08-11-2015 3:52pm

RickyG wrote: »

As far as I can see every house in the estate independently owned.only common area is the green in the middle of the terrace and residents look after that themselves.i wonder how the other house owners got their mortgages tho when I can't..confused..

Buying a house is very different from buying an apartment. A house tends to sit on the ground. An apartment sits on top or below another property.

A house can be bought freehold, but an apartment (almost always) is leasehold. You buy a lease, usually for 999 years. A house, you can insure the structure. With an apartment, since you only have a lease, the management company insure the structure.

Your initial post said buying an apartment, but now you are talking about a house. Which is it??

RickyG · 08-11-2015 4:00pm

Paulw wrote: »

Buying a house is very different from buying an apartment. A house tends to sit on the ground. An apartment sits on top or below another property.

A house can be bought freehold, but an apartment (almost always) is leasehold. You buy a lease, usually for 999 years. A house, you can insure the structure. With an apartment, since you only have a lease, the management company insure the structure.

Your initial post said buying an apartment, but now you are talking about a house. Which is it??

Sorry for misunderstanding..The terrace has about 25 houses with the duplex/apartment I'm interested in right slap bang in the middle of it.its flanked on both sides by houses.going by the comments here I'm best walking away I reckon..pity tho because it's a bargain..oh well..

the_syco · 08-11-2015 4:44pm

RickyG wrote: »

pity tho because it's a bargain..oh well..

I'm guessing that although it's a bargain now, it'll end up costing you a lot in the long term.

RickyG · 08-11-2015 4:51pm

the_syco wrote: »

I'm guessing that although it's a bargain now, it'll end up costing you a lot in the long term.

Yes quite possibly..mortgage payments would have been less than what I'm paying for rent right now so twas very tempting.

volchitsa · 08-11-2015 4:53pm

If it's a terraced house, why would it need a management company? Does it have a shared roof (maisonnette-type place) or other shared built areas? If it doesn't, and the shared space is only outside, garden-type space, surely that can't be a major issue?

Edit: okay I see it has an upstairs apartment so with a shared roof then. I don't know how that works, but I'd have thought as the downstairs place you'd be less at risk of having problems getting insurance than the upstairs one. Have you asked th neighbors how they managed to buy/insure?

RickyG · 08-11-2015 5:00pm

volchitsa wrote: »

If it's a terraced house, why would it need a management company? Does it have a shared roof (maisonnette-type place) or other shared built areas? If it doesn't, and the shared space is only outside, garden-type space, surely that can't be a major issue?

It is an actual house divided into 2 apartments with 2 separate owners..there is actually no shared space whatsoever..downstairs has big back garden and upstairs a balcony.both have independent front door entrances.seems simple but bank not interested in the joint insurance policy between the two owners...

CIARAN_BOYLE · 08-11-2015 5:01pm

RickyG wrote: »

It is an actual house divided into 2 apartments with 2 separate owners..there is actually no shared space whatsoever..downstairs has big back garden and upstairs a balcony.both have independent front door entrances.seems simple but bank not interested in the joint insurance policy between the two owners...

who owns the land though, and how long would your lease be if you "buy" the apartment?

RickyG · 08-11-2015 5:06pm

CIARAN_BOYLE wrote: »

who owns the land though, and how long would your lease be if you "buy" the apartment?

I'm assuming it would be 999 yrs going by other comments.who owns what land tho?do you mean what the house is standing on or the back garden?

RickyG · 08-11-2015 5:12pm

volchitsa wrote: »

If it's a terraced house, why would it need a management company? Does it have a shared roof (maisonnette-type place) or other shared built areas? If it doesn't, and the shared space is only outside, garden-type space, surely that can't be a major issue?

Edit: okay I see it has an upstairs apartment so with a shared roof then. I don't know how that works, but I'd have thought as the downstairs place you'd be less at risk of having problems getting insurance than the upstairs one. Have you asked th neighbors how they managed to buy/insure?

No and I'm intending to call to the guy that lives next door tomorrow to ask him how they managed to get mortgage /house insurance etc.the two owners of these apartments drew up a joint policy for entire building.a block policy of sorts but bank still wouldn't accept it..

volchitsa · 08-11-2015 5:12pm

Have you thought about trying another bank?

CIARAN_BOYLE · 08-11-2015 5:13pm

RickyG wrote: »

I'm assuming it would be 999 yrs going by other comments.who owns what land tho?do you mean what the house is standing on or the back garden?

Exactly. Both the house and the back garden. Usually a management company owns the land and you lease the land for 999 years (from the date the apartment was built) from the management company.

If there is no management company then who owns the land? Who is the lease with? How long is the lease?

Thats what you need to know. If you can settle those issues you might be able to get finance and proceed with the purchase. If not stay away.

RickyG · 08-11-2015 5:23pm

volchitsa wrote: »

Have you thought about trying another bank?

I only got refused on Friday so I'll do a bit of ringing around this wk.have feeling lack of management company will be an issue with all of them tho..

RickyG · 08-11-2015 5:30pm

CIARAN_BOYLE wrote: »

Exactly. Both the house and the back garden. Usually a management company owns the land and you lease the land for 999 years (from the date the apartment was built) from the management company.

If there is no management company then who owns the land? Who is the lease with? How long is the lease?

Thats what you need to know. If you can settle those issues you might be able to get finance and proceed with the purchase. If not stay away.

Well the back garden is definitely part of the downstairs apartment..I'm thinking with lack of management company that everyone in the terrace bought their houses outright tho I know apartment scenario entirely different.both apartment owners independently own their own properties far as I can detect so I assume they bought directly from builder/developer.the issue with the bank is the joint insurance policy being unsuitable..

jd · 08-11-2015 5:56pm

It's more likely there was an OMC in place when the scheme was first sold, but developer is gone and the owners didn't take it over and keep it running. It needs to be resurrected. The people who tried to get insurance were refused because they don't own the building.

Anyway none of this should be your concern - run a mile.

RickyG · 08-11-2015 6:03pm

jd wrote: »

It's more likely there was an OMC in place when the scheme was first sold, but developer is gone and the owners didn't take it over and keep it running. It needs to be resurrected. The people who tried to get insurance were refused because they don't own the building.

Anyway none of this should be your concern - run a mile.

Yep it's looking like that alright tho the ppl selling did get the joint insurance in place but bank's legal team saw there was no management company and pulled the plug.might be just as well..

April 73 · 08-11-2015 7:59pm

How many apartments are there? By your description it sounds like it's all houses with one house divided into an upstairs & downstairs unit?
If that's the case I doubt there would be a management company as such.

Maybe the bank don't understand the set-up. Or maybe I misunderstand the description.

In the UK it seems common to see buildings divided into apartments. I never see a mention of a management company.

RickyG · 08-11-2015 8:08pm

April 73 wrote: »

How many apartments are there? By your description it sounds like it's all houses with one house divided into an upstairs & downstairs unit?
If that's the case I doubt there would be a management company as such.

Maybe the bank don't understand the set-up. Or maybe I misunderstand the description.

In the UK it seems common to see buildings divided into apartments. I never see a mention of a management company.

Yep you have the set up described perfectly there.i think originally unit was designed as a retail unit but developer scrapped that and converted the house into 2 independent apartments.surely be ridiculous to have management company but I've described the set up in detail to mortgage advisor etc and the bank still baulked..

April 73 · 08-11-2015 8:43pm

I guess that scenario raises a few questions. Who is responsible for maintaining the building, especially the roof & gutters? Who owns the garden? What exactly would you be buying?
The management company seems like it would overly complicate things but the bank has used this as a get-out clause.

It might be worth approaching the other owner. They must have had similar issues. Or it may be safer to run a mile!

RickyG · 08-11-2015 9:04pm

April 73 wrote: »

I guess that scenario raises a few questions. Who is responsible for maintaining the building, especially the roof & gutters? Who owns the garden? What exactly would you be buying?
The management company seems like it would overly complicate things but the bank has used this as a get-out clause.

It might be worth approaching the other owner. They must have had similar issues. Or it may be safer to run a mile!

The other owners rent out top floor apartment tho its vacant now.the garden is definitely part of the downstairs unit same as the balcony is belong to the top unit.would imagine both owners responsible for the upkeep of entire building and insurance of it etc.place is only 10 yrs old so very little maintenance required thus far.the 2 owners both had separate insurance up until I decided to buy.they then bought a joint policy for entire building but bank still refuse..

riclad · 09-11-2015 12:19am

What will happen is someone will buy that for cash,
bank might refuse to give a loan on it . cos its not clear who is responsible for repairs ,
if there,s a leak in one or both of the apartments for example .
Who pays for repairs ,if its not covered by the building insurance.
IN the case of the non existance of the managent company.
Maybe the other 2 apartments were bought from the builder who might be gone out of business .
So that may be the reason its going cheap .

RickyG · 09-11-2015 12:27am

riclad wrote: »

What will happen is someone will buy that for cash,
bank might refuse to give a loan on it . cos its not clear who is responsible for repairs ,
if there,s a leak in one or both of the apartments for example .
Who pays for repairs ,if its not covered by the building insurance.
IN the case of the non existance of the managent company.
Maybe the other 2 apartments were bought from the builder who might be gone out of business .
So that may be the reason its going cheap .

Imagine it can only be sold to a cash buyer really when banks won't give out finance.there is joint insurance in place but have no idea how it would work if we'll say top apartment had the leak and flooded the apartment below . it'll be a gamble for whoever buys it I guess..

Mrs OBumble · 09-11-2015 12:54pm

Can the two owners just form a management company for their two unit? I wonder how much the legal work would cost?

the_syco · 09-11-2015 1:17pm

Check if you can access to the above apartment, and do a Riverdance. See how much you can hear it below. Also play some music. There may be a reason why the downstairs apartment is for sale, and the above apartment is empty.

RickyG · 09-11-2015 7:07pm

Mrs OBumble wrote: »

Can the two owners just form a management company for their two unit? I wonder how much the legal work would cost?

I guess they could do that but would imagine it would take hell of a long time and cost a small fortune.there also seems to be an issue with the bottom apartment being originally planned as a retail outlet and then converted to residential afterwards..its a mess really..

RickyG · 09-11-2015 7:12pm

the_syco wrote: »

Check if you can access to the above apartment, and do a Riverdance. See how much you can hear it below. Also play some music. There may be a reason why the downstairs apartment is for sale, and the above apartment is empty.

As far as I know there is a thick concrete slab between the 2 apartments so noise not an issue..

pwurple · 09-11-2015 10:01pm

There needs to be a management company in place for insurance and other regulations. An apartment owner owns the inner shell.

I own an apartment in a block where the management company dissolved. We (the owners) had to set up our own management company to replace it. it can be done quite quickly and it's not particularly expensive to do, talk to your solicitor. You already have a solicitor for the conveyancy, discuss with them.

It could be complicated to do while you are not an owner? Legal advice really is required for this situation. What happens if you create a management company, become a director of it, and then never buy the apt?

Completely bizaar the vendor is not addressing this though, as the place cannot be sold until it is resolved.

RickyG · 09-11-2015 10:19pm

pwurple wrote: »

There needs to be a management company in place for insurance and other regulations. An apartment owner owns the inner shell.

I own an apartment in a block where the management company dissolved. We (the owners) had to set up our own management company to replace it. it can be done quite quickly and it's not particularly expensive to do, talk to your solicitor. You already have a solicitor for the conveyancy, discuss with them.

It could be complicated to do while you are not an owner? Legal advice really is required for this situation. What happens if you create a management company, become a director of it, and then never buy the apt?

Completely bizaar the vendor is not addressing this though, as the place cannot be sold until it is resolved.

I think the issue the vendors have is they don't see it as an apartment block as there's only 2 outlets.plus they bought during the boom and now trying to sell at a third of the price.so not keen on more expense and hassle.they bought a joint insurance policy for the purpose of selling and now that's no use either.

pwurple · 09-11-2015 11:05pm

RickyG wrote: »

I think the issue the vendors have is they don't see it as an apartment block as there's only 2 outlets.plus they bought during the boom and now trying to sell at a third of the price.so not keen on more expense and hassle.they bought a joint insurance policy for the purpose of selling and now that's no use either.

More of a duplex then.. What did your solicitor say about it? Or theirs?

It can probably be resolved, but will need all parties to get lined up.

RickyG · 10-11-2015 8:28pm

pwurple wrote: »

More of a duplex then.. What did your solicitor say about it? Or theirs?

It can probably be resolved, but will need all parties to get lined up.

My solicitor totally negative about the purchase from the get go while vendors solicitor urged them to get a joint insurance policy for purpose of the sale etc.even my mortgage advisor shocked bank refuse to release the funds..I might try another bank but thought of starting again has me allergic..

Del2005 · 10-11-2015 8:55pm

RickyG wrote: »

My solicitor totally negative about the purchase from the get go while vendors solicitor urged them to get a joint insurance policy for purpose of the sale etc.even my mortgage advisor shocked bank refuse to release the funds..I might try another bank but thought of starting again has me allergic..

What's the insurance status of the 4 properties attached?

Was the complex originally set up with a Management company and it went bust? If it was I can't see how you can insure something you don't own, all you get when you buy in a complex owned by a management company is the air inside the 4 walls, even the balcony and back garden aren't yours you just get exclusive use.

RickyG · 11-11-2015 12:02am

Del2005 wrote: »

What's the insurance status of the 4 properties attached?

Was the complex originally set up with a Management company and it went bust? If it was I can't see how you can insure something you don't own, all you get when you buy in a complex owned by a management company is the air inside the 4 walls, even the balcony and back garden aren't yours you just get exclusive use.

You mean the houses either side?I'd imagine they have their own insurance..I've no idea if there was ever a management co..does every estate have a management company?

riclad · 11-11-2015 12:15am

95 per cent of estates don,t have management companys,
when you buy a house, you buy the site and the garden.
Apartments need management companys to do repairs and insure the whole
building ,and maintain common area,s hallways ,doors ,gates ,
car parks ,etc
There,s a few housing estates ,that have a management company ,
but its very rare .
Most people with buy house and get house insurance and pay property tax.
The council is responsible for the roads, drain,s street lighting in the estate,
management companys get paid service charge to do repairs ,and have a fund in cause there s a major repair to carry out ,eg new gates ,front doors to the building.lifts to be fixed.

RickyG · 11-11-2015 12:23am

riclad wrote: »

95 per cent of estates don,t have management companys,
when you buy a house, you buy the site and the garden.
Apartments need management companys to do repairs and insure the whole
building ,and maintain common area,s hallways ,doors ,gates ,
car parks ,etc
There,s a few housing estates ,that have a management company ,
but its very rare .
Most people with buy house and get house insurance and pay property tax.
The council is responsible for the roads, drain,s street lighting in the estate,
management companys get paid service charge to do repairs ,and have a fund in cause there s a major repair to carry out ,eg new gates ,front doors to the building.lifts to be fixed.

That's what I thought.and these two apartments have no common areas . separate front doors,hallways etc.garden is belonging to the bottom floor and balcony to the top so a management company doesn't apply as such.or does it?

RickyG · 11-11-2015 12:26am

riclad wrote: »

95 per cent of estates don,t have management companys,
when you buy a house, you buy the site and the garden.
Apartments need management companys to do repairs and insure the whole
building ,and maintain common area,s hallways ,doors ,gates ,
car parks ,etc
There,s a few housing estates ,that have a management company ,
but its very rare .
Most people with buy house and get house insurance and pay property tax.
The council is responsible for the roads, drain,s street lighting in the estate,
management companys get paid service charge to do repairs ,and have a fund in cause there s a major repair to carry out ,eg new gates ,front doors to the building.lifts to be fixed.

That's what I thought.and these two apartments have separate doors,hallways etc.garden is belonging to the bottom floor and balcony to the top so a management company not really needed.or is it ?

jd · 11-11-2015 12:27am

RickyG wrote:

You mean the houses either side?I'd imagine they have their own insurance..I've no idea if there was ever a management co..does every estate have a management company?

But are the houses on each side in one unit?

RickyG · 11-11-2015 12:31am

jd wrote: »

But are the houses on each side in one unit?

Yes houses on each side proper 3 bed houses..The place I'm interested in a house 2 but divided into 2 apartments.

April 73 · 11-11-2015 7:40am

Has the bank explained exactly what their issue is with the property? I know you mentioned lack of a management company, but a management company doesn't really apply to a single property divided into two on a development which does not require an overall management company. Is it insurance, confusion over the title, or questions over who is responsible for what part of the building? Have you managed a face-to-face talk with anyone in the bank? Have you tried a broker who might be able to advise on which bank might be more likely to deal with this kind of property?

This type of idea - where a single property is divided into self-contained units is more common in cities in the UK. I wonder how mortgages are issued on these properties over there?

Have you asked the owner of the other apartment which bank they used if they needed a mortgage? It might be worth approaching the same bank?

Del2005 · 11-11-2015 4:37pm

RickyG wrote: »

You mean the houses either side?I'd imagine they have their own insurance..I've no idea if there was ever a management co..does every estate have a management company?

Sorry I thought the whole block was done like the one that you are interested in.
Have you checked the planning status of the conversion?

To be honest even if you get a mortgage it could become a nightmare. What happens if the apartment upstairs sewage pipes get blocked, what happens if the upstairs balcony leaks into your home or who repairs roof issues? This is possibly why the bank said no.

Paddy3 · 11-11-2015 5:37pm

RickyG wrote: »

That's what I thought.and these two apartments have no common areas . separate front doors,hallways etc.garden is belonging to the bottom floor and balcony to the top so a management company doesn't apply as such.or does it?

The building itself is a common area. Some entity has to own the building.

riclad · 11-11-2015 6:45pm

When you buy an apartment you are buying part of a building,
so there,s usually a management company to take care of maintenance .
Problems can appear on the walls ,roof, eg roof leak,
which can effect 1 or more of the owners in the building .
IF you buy the apartment ,can you even assume you own the garden ,
it might be owned by the original owner of the builder .
Even after you buy the apartment .

RickyG · 29-11-2015 2:52pm

April 73 wrote: »

Has the bank explained exactly what their issue is with the property? I know you mentioned lack of a management company, but a management company doesn't really apply to a single property divided into two on a development which does not require an overall management company. Is it insurance, confusion over the title, or questions over who is responsible for what part of the building? Have you managed a face-to-face talk with anyone in the bank? Have you tried a broker who might be able to advise on which bank might be more likely to deal with this kind of property?

This type of idea - where a single property is divided into self-contained units is more common in cities in the UK. I wonder how mortgages are issued on these properties over there?

Have you asked the owner of the other apartment which bank they used if they needed a mortgage? It might be worth approaching the same bank?

Well I've found another lender that doesn't have any real issue with lack of management company.just have to wait and see the conditions on mortgage offer letter now and proceed from there.if this fails I'm done with it tho.

April 73 · 29-11-2015 3:48pm

Well done for persevering. Hope it works out. If you go ahead make sure it's very clear which owner is responsible for what, including the exterior, drains, roof etc.
Keep us updated?

RickyG · 29-11-2015 3:57pm

April 73 wrote: »

Well done for persevering. Hope it works out. If you go ahead make sure it's very clear which owner is responsible for what, including the exterior, drains, roof etc.
Keep us updated?

Well I'm nothing if not stubborn.thanks for the advice..just want it sorted one way or the other now. Tis a long running saga but even if it doesn't work out others will hopefully benefit from all the good advice and tips if they ever come across same situation.cheers...

jd · 29-11-2015 6:15pm

You are probably buying a long leasehold, seeing as there are just the two units. Make sure your solicitor confirms that there are no lacunae regarding the rights and responsibilities of the parties involved.

RickyG · 14-03-2016 9:39pm

Well after all this time and plenty of ups and downs I'm finally expecting my key tomorrow.its been one long slog but hopefully worth it in the end.lot of painting etc ahead but least I'm done with renting at last....

April 73 · 14-03-2016 9:41pm

RickyG wrote: »

Well after all this time and plenty of ups and downs I'm finally expecting my key tomorrow.its been one long slog but hopefully worth it in the end.lot of painting etc ahead but least I'm done with renting at last....

Good news. Glad to hear it worked out in the end. Happy home-owning & painting to you!

Buying an apartment without any management company in place.

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