When you purchase a house, you get freehold title to the property and this means you own it outright. But with apartments, it is usually a long leasehold, typically for 999 years, where the lease is the primary title to the property. The lease mechanism is used for apartments because it allows the developer/ management company owner to bind the purchasers to carry out or perform certain obligations as to use, upkeep or payment of service charge typically by way of covenants.
All of the purchasers in a block would contract to take a share in and effectively take over the management company in all the common areas of the complex such as the gardens, car park, corridors, roof and so on. The end result is that the purchasers will end up as individual owners of the apartments while the common areas will ultimately be owned by the management company which in itself is owned and controlled by the owners.
The management company is important because it is their responsibility to maintain the grounds, common areas etc of that apartment property and to insure the block against fire.
If considering purchasing an apartment, your solicitor can explain the lease and go through all the details of it. Some apartments will have rules in regarding to the keeping of family pets, noise, tidiness etc. There is considerably more documentation with apartments and duplexes than with houses.
Service Charges in Apartments
The Management company will specify a charge for running and maintaining the common areas shared with other apartment occupiers, this will include a share of insurance cover required in running and maintaining the apartments. The management company should also, more importantly, provide for a contingency fund (or a “sinking fund reserve “) in case substantial repairs have to be carried out to the roof, for example, some years down the line.
Before purchasing an apartment, it is especially important that you ask your solicitor to explain everything and preferably have a surveyor or architect check it out to avoid unpleasant financial or other surprises after the purchase has been completed.