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Property Law Property Purchases and Sales

Buying a House Versus an Apartment-Which is the Best Buy?

 

buying a house ireland

Are you thinking about buying your first residential property?

Have you decided whether you prefer a house or apartment?

In this piece I will give you my opinion about which is the best buy. I am assuming, in this article, you wish to live in the house, and not buy the property as an investment property.

But first, why should you pay any attention to me?

Firstly, I bought my first property in 1986. It was a small shop unit in Dublin with a one bedroom apartment overhead. Since then I have bought sites, other retail businesses, a petrol station, a pub, sites with planning permission, sites without planning permission, apartments, and houses.

I have also built a small (8 units) block of apartments. So, I have had a pretty long and, for the most part (with the exception of the property crash a few years ago), successful relationship with buying and selling property.

Let’s take a look, shall we?

The first big difference between buying a house and apartment is the legal interest you will be acquiring. Buying a house will mean you are buying a freehold interest; buying an apartment will involve acquiring a long leasehold interest.

From a legal perspective, this is not a problem. The leasehold for the apartment will be a long lease with a very small, insignificant rent. I have written elsewhere on this site about the differences between buying an apartment and house from a legal perspective.

The Management Company

Where problems may arise, however, is in the whole area of the management company.

In an apartment development each apartment owner becomes a member of the management company which will be needed to be set up. This management company’s job will be to manage and maintain the common areas-for example stairs, lifts, roof, of the development-and will have to appoint a managing agent who will manage it on a day to day basis.

However, problems with management companies can be common enough and some apartment developments are not well maintained with an understandable frustration for apartment owners and occupiers. Property owners will then retain the annual management company service charge, thereby making matters worse because the management company has even less money to provide the services.

Management companies also have to prepare and file annual accounts and collect the management fees from the owner of each unit.

In addition, it may have to pursue the owners who won’t pay by way of debt collection procedures which will be time consuming, expensive, and leave a bad taste all around.

Another factor to consider is that many apartments were purchased by investors as investments and future pension pots. This means that a large percentage of occupiers in an apartment block are likely to be renters. If you have a young family this may be less attractive for you given the likely higher turnover of occupants, and the lack of social cohesion in the “neighbourhood”.

Physical Problems

There is also the problem of anti social behaviour and noise pollution in an apartment complex versus living in a terraced or end of terrace house.

A problem I have also encountered from my own personal experience is leaking from balconies, and even bathrooms, causing damage being to neighbouring units. These problems can be hard to sort out, expensive, and lead to bad feeling between neighbours.

In summary, the problems I have seen with apartment living are

  1. Poor management companies or agents
  2. Noise pollution and hassle
  3. Apartment units more likely to be owned by investors than owner occupiers.

The advantage of buying an apartment versue a house are

  1. They are, all things being equal, cheaper than a house
  2. They are lower maintenance, for example you will not have any garden to maintain.

Conclusion

My advice, and this is not legal advice but practical property advice from my own experience and observation since buying my first one in 1986, is that I would choose a house over an apartment if I could.

That is assuming that all things were equal, and we are comparing like with like-that is, a house and an apartment in the same area- I would choose a house, especially if I had a young family. If you are a retired person, then an apartment may well make more sense and you will not want to have to maintain a garden, access to public transport may be better etc.

Obviously you need to take into account your own personal circumstances-for example your family situation, your work circumstance, and budget-before choosing.

And my advice generally in relation to buying a property is to buy the worst property in the best area, rather than the best property in the worst area.

You can change many things about your property and make improvements over time, but you can never change its location.

Categories
Property Purchases and Sales

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

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?