A Guide for Homeowners: Associated costs of buying a Flat
If you’re considering buying a flat in Edinburgh, whether as an owner or a landlord, it’s important to take into account not just the cost of the property itself, but also any associated costs that come with living in a tenement block, in a new build or a housing development that has a property factor.
The additional costs you should consider are:
1. Factor Fees: If you’re buying a flat in a tenement block or a new build that has a property factor, you’ll be required to pay factor fees. You’ll find these will vary depending on where the flat is, as that is generally how most factors price their management fees (AboveBoard Homes have a fixed price for flats). It’s also worth asking who the factor is and doing your research on them.
The factor is responsible for the upkeep and maintenance of communal areas. The cost can vary depending on what communal areas you have, the number of flats in the block, and the level of services provided by the factor. These costs can include:
2. Insurance: You will be required to have buildings insurance which may be an overall block insurance policy opposed to each flat having their own. There are actually many benefits to block insurance. You may also need Engineering Insurance if there is machinery in the block (e.g., a lift). If a factor is in place, they would arrange these policies for you. As a homeowner, you’ll be responsible for paying a portion of these insurance fees. If there isn’t a factor, you would need to arrange your own buildings insurance, but be sure that it covers communal areas as well.
3. Repairs and Upgrades: From time to time, communal areas may need repairs (door entry system, roofing) or upgrades (paintworks). As a homeowner, you’ll be responsible for paying a portion of the cost of these repairs and upgrades. There will also be cyclical works in place such as regular gutter cleaning which may be a prerequisite of your block insurance.
4. Contingency Fund: You may be required to pay a small amount into a contingency fund (sinking fund) to put towards bigger repairs such as roof repairs and cyclical paintworks. These payments are non-refundable and are held as an asset against the property. This will only be a requirement if stated in your deeds. The sum should be agreed between yourselves and your factor and will be held in a separate development savings account.
5. Floating Fund: Another charge your property factor may request is a Floating Fund charge – this is not to be confused with the Contingency Fund. A Float is requested at time of appointment or when you move into your flat. Most property factors bill customers quarterly in arrears and therefore need funds available in the development account to pay contractors for ongoing maintenance and repairs. This ensures your development account remains “in funds” at all times, and avoids contractors having to wait potentially weeks for payment. The Floating Fund is a refundable sum at time of sale or when the property factor services are terminated and will act as a credit on your final bill.
Depending on the type of property you move into, your apportionment may be noted in the deeds. If the deeds are “silent”, then owners refer to the Tenements Management Scheme (TMS) for guidance to ensure all owners are paying the right share. Generally, you’ll find all stair flats are responsible for any works within the stair (main door entry system, cleaning, painting), with all other flats also responsible for groundworks, roof works and any other work to the external fabric of the building.
Not all tenements have property factors as there is no legal requirement in Edinburgh to do so (any requirement for a factor will be stated in the deeds), so you may find you don’t have to pay for their monthly management fees. However, if one is not in place, the owners have to arrange communal maintenance and repairs themselves. This does work well for some blocks, but sometimes not so well for others. If there are absent landlords for example, it can sometimes be hard to track them down to collect monies owed for repairs, which is why many tenement blocks choose to appoint a factor to take on that responsibility.
It is always worth asking your solicitor to find out what the average monthly fees are, what works have been carried out recently, any ongoing works, what works are planned and what funds are in the contingency fund (if there is one). This is something AboveBoard Homes provides owners who are selling their property, and helps with discussions with potential buyers.
In conclusion, if you’re considering buying a flat in Edinburgh, it’s important to take into account these additional costs so you can make an informed decision. While these costs can be significant, they can also provide peace of mind and a sense of community by ensuring the communal areas are well-maintained and secure.
This simple infographic guide will help you to change factor.