Hey guys! This will be a very personal post, so if you’re only interested in travel and travel tips, you can go ahead and skip it. Because here, I will tell you about our experience almost buying a flat in London and then refusing to sign the contract last moment. Many things went wrong and we lost some money, but we also got some invaluable knowledge, that helped us to gain a lot of knowledge and potentially avoid losing thousands in the future. This won’t be a guide to buying a new build or help to buy in London, however, I’ll try to tell you a bit about all these fancy new builds in London and what’s actually wrong with them. Maybe it’s not a big deal for you, but it’s for you to decide. I will just tell our story and our experience of buying a flat (almost) with help to buy in London.
This post's overview:
- 1 Why did we want to buy a flat in London? What were our long-term plans?
- 2 Choosing a flat in London: new builds with help to buy in London
- 3 So what will happen next?
Why did we want to buy a flat in London? What were our long-term plans?
Okay, so let’s start from the very beginning. Why did we want to buy a flat in London and what were our long-term plans?
As you probably know, we are currently living and working full-time in London. We are renting a 2-bedroom flat in zone 3 in the North of London, in a very nice neighbourhood called East Finchley (read my guide to living in East Finchley here).
We are planning to stay in London for at least 4-5 years and we calculated, that in 5 years, we will pay over £100,000 in rent. That is A HUGE amount of money. For this money, you can actually already buy a small flat in Edinburgh, Scotland or a new 3-bedroom property in a great new development in St. Petersburg, Russia. We will pay it to a random landlord, while we could be paying our mortgage and investing in our own property.
We also travel a lot and tend to use all our holiday allowance and in addition, even take some remote weeks. We were planning to rent our property on Airbnb while we’re on vacay to get extra money and pay it towards our mortgage.
Choosing a flat in London: new builds with help to buy in London
Our deposit is not huge, around £50K and we keep saving to make it even bigger. However, with this deposit, we could only buy a property with a Help to Buy scheme from the government, as they allow to have only 5% or 10% deposit and help you with a low-interest loan worth up to 40% of the property. If you want to read more about help to buy in London, you can read this.
We were looking at 2-bedroom flats worth 500,000 or less and there were 2 developments in Walthamstow and Blackhorse Road that fit our budget and we actually liked the location and the flats. So we decided to proceed with the flat for £450,000 from Eclipse with Tailor Wimpey. We reserved the flat and started gathering all the documents. We were super excited because the moving date would be in 1.5 months and we thought, that in 1.5. months, we will have our own flat in London.
The cons of leasehold. Why we said no to Taylor Wimpey
Once we started the process of buying a flat and spend ages gathering all the documents, we got a note from our solicitors. They warned us about potential ground rent problems that could lead to us not being able to sell this flat in the future. That was one of the many red lights that came with the Eclipse Development built by Tailor Wimpey.
Basically, our initial ground rent was £400 per year on a 125-year leasehold. It was fixed for 10 years, but in 29 years, it would exceed £1000. In 29 years, it would fall under the 1989 Housing Act and be considered an AST – Assured Shorthold Tenancy. That’s right, the flat that we would pay £450,000 for would be regulated by the same law that regulates our 1-year tenancy in the flat in East Finchley.
According to the Housing Act of 1989, we could lose our property, if the developer proves that our flat is his only and principal home or if he has a need to demolish this property. There are so many other closes, so you can read this Housing Act here, to be aware of what you’re getting into.
We asked out a solicitor to reach out to Tailor Wimpey to cap the ground rent by £999, but since they sold the freehold to a 3rd party investment company, whose main goal is getting profit, they said no.
You can’t Airbnb your flat in London if you’re buying a new-build with leasehold
Another problem that came up is that in our contract, it was prohibited to Airbnb our flat. Ever. At all. Apparently, it’s a fairly standard contract for all the new builds in London (on leasehold), so nope, you can Airbnb your flat. Even if you want to rent your entire flat long-term, you need to obtain permission from the freeholder and pay over £100 EACH TIME.
Also, you can’t attach plants to your balcony – they would lead to the breach of the contract and you will lose your flat, for which you paid £450,000, £700,000 or even a million pounds. But you will still need to pay the rest of your mortgage, so you’ll be a homeless bankrupted person.
And, finally, if you won’t pay your ground rent within 21 days (and watch out for it, some developers like Tailor Wimpey are famous for their doubling ground rents), the freeholder can take you to court and legally take your flat.
After carefully reviewing the contract, we realised that we have the same rights as we do in our rental flat and basically, we would pay £450,000 to rent a property in London for 125 years or 29, if the developer decided to kick you out and we won’t have many rights. And, in addition, we would need to pay a £1400-a-year service charge which is like the 13th rent.
We refused to sign this contract
We instructed our solicitor to reach out to Tailor Wimpey and ask them to amend the clauses we found ridiculous, however, they said no. That’s why we refused to sign the contract and basically said no to the flat. We still had to pay £1500 for the solicitors, as they had the cancellation clause, which we didn’t know beforehand, so we ended up losing money.
Tip: don’t pick the solicitor suggested by the seller/developer and ALWAYS check the cancellation charges. Don’t use MW Solicitors if you, not 100% sure that you will get the property, otherwise, you will lose a lot of money for nothing.
So what will happen next?
We started reading a lot about the pros and cons of leasehold and realised that pretty much most of the new builds in London have similar ridiculous contracts. That’s why we will be looking for older flats that are a share of freehold or at some freehold houses. Of course, we don’t expect to find a house in the next 6 months, but we hope to find something within a year.
I hope you found this post about almost buying a flat in London useful. I hope you understand a bit more about the problems of new build flats in London and about leasehold and help to buy properties in London. For us buying a new build in London with Help to Buy now is getting into the leasehold nightmare. And what do you think?