Why Buying an Apartment is Different From Buying a House-the Legal Issues

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buying-an-apartment

There are 3 main differences between buying a house and buying an apartment in Ireland.

  1. the title to an apartment is always leasehold unlike the freehold title of a house.

  2. an apartment will involve common areas as it will be part of a building scheme.

  3. an apartment will involve a management company to manage the common areas eg stairs, entrance etc.

A lease is always required for an apartment because it allows the entering into mutual covenants by the apartment owners and the management company. For example the apartment owners will covenant to pay the management company fee and agree to restrictions for harmonious communal living with their neighbours and the management company will covenant to maintain the common areas.

These covenants and conditions can be enforced on later owners of the apartments.Prior to the enactment of the Land and Conveyancing Law Reform Act, 2009 there was a difficulty in enforcing covenants against later purchasers of freehold land. this is no longer the case with the passing of the Land and Conveyancing Law Reform Act, 2009.

Parties to the Lease

There are generally 3 parties to the lease:

  1. the lessor (developer/builder)

  2. the lessee (apartment owner)

  3. the management company.

A fourth party could be a lender who has a charge over the land.

The Apartment Property

The lease of an apartment will demise/transfer a cube of space including the surfaces of floors, ceilings and walls but excluding all structural parts. It may also include a balcony, patio or car parking space but these are more commonly excluded with an exclusive licence granted to the apartment purchaser.

This allows the management company and lessor to retain control of these areas and the management company is responsible for maintenance and repairs.

The lease for the apartment will contain a provision for a nominal rent with a provision for a rent review. This prevents the apartment owner from buying out the ground rent which would end the lease and break up the relationship between lessor and lessee.

The Lease Covenants

There are 3 main covenants in an apartment lease:

  1. a covenant by the lessee to perform certain obligations, the most important of which are to pay the service charge and comply with the rules and regulations of the management company;

  2. a covenant by the lessor to provide certain services, the most important of which is to maintain the apartment building and the common areas which includes insuring the building against the usual risks and public liability insurance in respect of the common areas, maintain proper books of account, and take steps to enforce performance of the lessees’ obligations under the leases;

  3. a covenant by the management company to provide the same services once the management company agreement has been completed and the common areas transferred over to it.

The Management Scheme and Management Company

A scheme for the management of the common areas will be put in place which will be implemented by a management company specifically set up for this purpose.

What typically happens is the developer sets up the management company and signs a contract with the management company for the transfer of the common areas to the company. Each apartment owner then becomes a member of the management company as he/she purchases an apartment.

Once all the apartments have been sold the developer transfers the common areas to the management company which is ultimately controlled by the apartment owners.

Purchasing a Second Hand Apartment

As an apartment purchaser is only purchasing a “cube of space” she needs to be certain that she has access to the apartment and other appropriate “easements” from the lessor or management company.

A surveyor carrying out a survey for the purchase of an apartment should also check out the entire building because the new apartment owner will be contributing with her service charge to a fund for the repair and maintenance of the common areas.

If you are thinking about purchasing an apartment we would be happy to give you a competitive quotation to ensure a smooth, hassle free purchase.

Takeaway

Although from a legal perspective there is a significant difference between buying a house and an apartment the standard advice still applies as follows:

  1. get a structural survey carried out
  2. if you are buying second hand the concept of “caveat emptor” (let the buyer beware) applies-this means you are buying the property in the physical condition you find it
  3. take a look at the common areas and the areas which are the responsibility of the management company-are they doing a good job? have you spoken to neighbours to make enquiries?