So I’m trying to sort myself out on the house front. Specifically, I’m trying to sell my flat. I’ve lived here over 7 years. It’s not going to be as straight forward a process as I’d wanted, much of it for reasons too mired in minutiae to warrant excessive writing about. Basically, the lease needs to be renewed as it has fallen just below 75 years. This is something I always thought about doing but it is not cheap and involves lawyers, surveyors and dealing with the freeholder. The freeholder for our building is the freeholder from hell. Explaining to people how leasehold works in the UK isn’t particularly easy (even those of us with leasehold properties wouldn’t claim to be experts). Suffice to say that leasehold law dates from Medieval times. Basically – if your property is leasehold, you own a tenure on the property, rather than the property itself (which is owned by the freeholder). A large proportion of flats in the UK are like this. The (much better) alternative to this is ‘share of freehold’ when the leaseholders (flat owners) share the freehold itself. This means there is no ticking clock and no arsey freeholder to contend with. It is a much better, and fairer, system. Anyway, I’m already going into too much detail.
The flat has been valued at what I expected it to be and that is fine. But I’ve been told by two sources (and I knew this anyway) that the lease will need to be renewed from 73 to (typically) 125 years. This is likely to cost around £10,000. I knew it would cost somewhere around this figure and actually that’s OK (because the flat has gained in value by far more than that in the time I’ve owned it). It all depends on whether the freeholder (who is a sh*t) wants to play hardball or not. If he does, he may try to charge me more than £10k and if he does try that then I can appeal it by taking it to a special tribunal (known as an LVT). I don’t want to have to do this as it will take quite some time and, even though I should win, it can be a costly and tedious process (if I lost I would have to pay his legal fees). As you can probably infer, I’m not likely to buy leasehold again.
Anyway. Having had to swallow the bitter pill of the lease renewal, I did get some good news which is that the rental value of the flat is estimated at £950 – £1000 a month. This is double what the mortgage repayments are. When that evaluation had been done my first thoughts were ‘whoopee, I’m quids in’. But I then of course realised that I will have to pay tax on this as rental income is fully taxable. As I am already in the 40% tax bracket, the result is that the taxman will take 40% of the rental income. Having said that, a number of things are tax-deductible (having done my research). This includes the agency charge to find, reference and credit check tenants (around £800), the service charge (around £750), the ground rent (piddly at £35) AND the interest payments on the mortgage. Bear in mind I have a repayment mortgage so I don’t know what proportion of £500 per month is interest. I’ll have to ask my mortgage provider. So it’s not the end of the world, it’s just not the ‘money spinner’ I first thought it could be. Also, I have no real wish to be a landlord. I have friends that rent out their first properties (usually when they’ve moved in or bought again with partners) and for the most part it’s nothing but hard work. Stuff always goes wrong. Boilers break down, properties aren’t looked after, tenants leave and have to be replaced, agencies are useless and charge an arm and a leg for a crappy service, etc. Really not what I’d wanted to do. But if I do want to finally move (which I desperately do) then I don’t actually have much choice.
So the outcome is that I will now rent out the flat rather than sell it. It should rent reasonably fast as it’s in immaculate condition and the agent I met at the weekend already rents out a load in this building and said I won’t have a problem. Of course I’ll believe it when I see it. But the area is good, as is the flat (now), so there is no reason why it shouldn’t rent. I will then move to zone 1 where I’ll be renting. I need to be much nearer the centre for work as my hours are so long. Plus, I am paid a salary where I can do this and you’re only on this earth once I keep telling myself. I’m done with amorphous suburbia. Also, knowing that I will have money coming in (i.e. my own mortgage still being paid off) means I’ll feel less bad about shelling out on expensive rent in the centre. Over the course of the year (actually I plan to do this pretty much straight away) I will sort the lease renewal out and pray it is straightforward. My neighbour (and others I know) also want to do it so who knows, it might not be no so painful after all. But the freeholder is such a repellent barrow-boy, nothing will surprise me.
Waiting for the paperwork to come from the agent (I have another agent valuing the property next weekend) and then I’ll get the property put on the (rental) market, possibly as early as a week Saturday.
All seems like such hard work but what can you do? These things are hugely time consuming bureaucracy and paperwork wise and you have to just breathe deeply and see it through to completion.