Purchasing an Apartment – Points to Consider

September 24, 2015

With an increased number of apartment developments in Northern Ireland over recent years many purchasers find that apartment living suits their lifestyle. There are however a number of issues to consider prior to the purchase of a property within an apartment scheme.

  1. Ownership

Purchasing a stand alone house generally means you purchase the entire structure of a dwelling and therefore take on responsibility for both the exterior and interior. When you purchase an apartment within a development scheme, it is normal for only the interior of the individual apartment to be demised to a purchaser. Purchasers will then share in the benefit of common areas, amenities and services with other apartment owners. These common areas and shared facilities may include some of the following:-

  • Stairwells and corridors
  • Lifts
  • The roof and external structure of the apartment development
  • Car parking areas
  • Gardens and common space areas
  • Footpaths and access ways within the apartment development
  • Sewage and drainage
  • Electricity and heating supply

It is important to know exactly what you will own outright and what you will have a shared interest in. Therefore it is initially important that prior to purchasing an apartment, you have a clear copy of the map or plan of the apartment that you will own and also a map showing clearly the areas that are deemed to be shared with other owners.

2. Management Companies 

The responsibility for the upkeep, maintenance and insurance of the common areas, amenities and services is a shared responsibility with all owners within the apartment development. In most situations a management company is set up to deal with the overall responsibility in this regard in return for the individual apartment owners contributing to the maintenance by way of a service charge. Generally the responsibilities of a management company are as follows:-

  • Insurance of the overall building
  • Maintenance of all common areas, quite often via the appointment of a Managing Agent
  • Relevant administration in line Companies legislation
  • Organisation of regular meetings of the shareholders of the management company

In most cases, all purchasers within apartment developments will become members of the management company and therefore have the ability to call upon the management company to carry out their obligations as detailed in the Lease. All shareholders have the right to attend Annual General Meetings of the management company and have a right to information in respect of the collection of service charge and evidence of what it is being used for. In respect of the management company, it is important to have confirmation prior to purchasing an apartment that 2 the management company has been properly established and is carrying out its obligations correctly. The following should be provided prior to purchasing an apartment:-

  • Copies of the minutes of the latest meeting
  • A copy of the latest available accounts
  • Details of the current annual service charge together with any details of any planned future expenditure
  • A copy of the most recent block buildings insurance
  • Confirmation as to whether the management company has appointed a managing agent to carry out any particular services or obligations within the Lease

The management company will be obliged to carry out its obligations in return for payment of the service charge from the individual apartment owners.

3. Service Charge 

A service charge is a fee paid (usually annually) by individual owners as a contribution towards the maintenance upkeep and insurance of the common areas and services within an apartment development. It is important that the following information is available in respect of service charges prior to purchase:-

  • How much is the annual service charge?
  • How is it paid – monthly/annually?
  • Is payment to be made by direct debit, standing order or by cheque on a regular basis?
  • What exactly is included within the service charge?
  • If you are purchasing from a previous owner, obtain confirmation that the service charge has been paid up to date.
  • Obtain information in respect of any proposed increase in expenditure over the incoming year.
  • Is there a sinking fund? A sinking fund is a term for the proportion of collected service charge monies which are set aside to cover significant or large items and expenditure (for example repair of roof or resurfacing car parks). If a sinking fund is not in place and large scale works are required, then it would be the case that the current apartment owners at the relevant time would have to come to an agreement to pay for the works themselves. This can be a significant burden at any given time and it is very difficult to come to an agreement, especially in a large scale development. It is important to check if a sinking fund is provided for in the Lease documentation.

4. Leasehold Covenants

The Lease under which an apartment is held generally contains a long list of covenants and rules or restrictions in respect of the development. The purpose of these covenants is to ensure uniformity throughout the development. All owners of apartments within the development will be subject to the same covenants and regulations. It is extremely important however that you check the nature of these covenants and regulations prior to agreeing to purchase an apartment as there be something which will have a significant effect on your intended use or enjoyment of the property. In most cases, developers will not agree to vary the covenants contained within the Lease for the reason that all owners are to be bound by the same covenants. However if there is something that you feel is extremely significant, you should raise this with your solicitor at an early stage. 3 The above are some of the more general matters that arise in the purchase of apartments and is not intended to be an exhaustive list. For more information, please speak to a member of our Property department.

Please note; the content of this article is for information purposes only and further advice should be sought from a professional legal advisor before any action is taken.