In principle, buying a home is always a good solution. But it involves a huge amount of different terms, concepts and even jargon. Since a home is usually quite a big investment, it’s not a good idea to do it if you don’t really know what you’re talking about.

I myself have been involved in the housing trade and I have found that there are a few basic terms you need to understand before you get too excited.

Sale price, purchase price, debt-free price?

All are real prices, so none of them are wrong. Their meaning differs from each other. If the shares you buy are subject to a corporate loan, you only pay the seller the sale price and condominiumthe debt portion at the specified time. But let’s get to the point with this stopping example:

realtorI got a call from a client who had found a new property for sale and was about to buy an apartment virtually over the phone, when “it only costs a little over 80k€ and it’s brand new!”. The enthusiasm quickly waned when I explained that it was the sale price, which is the same thing as the purchase price. It is the price that you pay to get the shares that entitle you to own the apartment in question. So in reality, it’s not even the apartments that are being bought, but only the shares in the housing companyin question. Shares which are also subject to the corresponding share of the construction loan. Which in this case was about 170k€. Even after this, there will still be payments to be made, because nowadays very often the plot share is separated into its own consumption. In this example, if the buyer had also wanted to acquire his share of the plot, the bill would have been about €60k higher. So in this case, the total price of the property without debt was about 320k€. A little more than the €80k that caused the excitement.

Let’s stick to the same example: as I said, you could have “got hold” of the apartment at that purchase price and leave the company loan and land plot contributions to be paid monthly in the form of contributions. Then the monthly budget would be squeezed by the monthly mortgage maintenance fee, which is also payable even if you bought the property debt-free. This contribution – as the name suggests – is used to pay for the maintenance and running costs of the company. In addition, there would have been a finance charge to cover the company’s own share of the loan servicing and repayment costs. And a further charge on the land, according to the same formula. Thus, the monthly housing costs, excluding the cost of managing the mortgage, would have been about one and a half grand. Then no deal was done.

In addition to the actual fees, condominiums charge other smaller fees, such as a water fee and, for example, a telecoms fee. These are usually unavoidable. Other possible charges include car park or sauna fees, which can be avoided if you do not use the company sauna or manage a car park.

Housing associations charge their tenants a monthly maintenance fee to cover the ongoing maintenance costs of the association. In addition to this, the company may have a loan, either for the construction period or for a maintenance/renovation project. This is paid in accordance with the articles of association, in practice according to the number of square metres or shares, also on a monthly basis under the name of the finance charge. If you wish, you can also pay off your share of the loan in one lump sum on dates determined by the board, after which you are of course no longer obliged to pay the monthly finance charge.

PTS? Maintenance needs assessment?

The maintenance of a property requires its upkeep and up-to-date management. In practice, all parts of a building will eventually reach the end of their useful life and need to be replaced or at least renovated. A responsible housing company will ensure that the property does not fall into repair debt.

In colloquial language, maintenance needs assessment and PTS (Long-Term Target Plan) are often referred to as synonyms. However, they are not. A MTS is a free-form list of maintenance activities for a property for the next five years, and is a legal requirement. It lists not only the measures to be taken, but also the planned dates.

A PTS, on the other hand, is a long-term plan covering a ten-year period, which takes a view not only on measures and timing but also on costs, and is based on a condition assessment. A PTS is not mandatory.

Both are “rolling”, meaning that they must cover the next five to ten years. Ideally, condominium will carefully maintain the PTS and update the statutory maintenance plan accordingly, preferably with updated cost estimates.

A redemption clause is still in use, especially in some older condominiums, and the existence of such a clause can be seen at least in the articles of association. The licensed realtorhandling the sale must also disclose such a clause. Frankly, it is a diabolical invention and it is difficult to find a proper justification for it in today’s world. It allows the person specified in the redemption clause to redeem the home you have bought right under your nose, when the ownership of the share in the residential property is transferred to another owner other than the company, even if the transaction itself has been carried out in accordance with all the rules of art. In most cases, the articles of association give the right of redemption to the existing shareholders of the company. In this case, the existing shareholders of condominiumhave the right to redeem the sold share for themselves within a certain period of time after the sale. The “middleman” then pays the fair price for the shares, which is usually the same amount as the price at which the transaction was completed. The redemption period is typically one month from the moment the ownership of the shares is registered to the new owner. It is important to bear this in mind when buying a property and, if possible, to prepare for redemption. In other words, you should not start renovations or even move in until it is clear that the right of redemption will not be exercised.

Terminology of new and old

New buildings have their own terms and old buildings have their own terms. If you’re getting into a brand new home that’s said to be an RS property, it doesn’t mean it’s any sportier or more powerful, as the RS tag often means in cars. In housing, RS stands for “Recommended by the MFIs“, which in turn indicates that the developer, builder and founding shareholder are bound by a number of different obligations defined by law. Such as the construction, post-construction and performance guarantees that the homebuyer is required to provide as security. In contrast, older condominiumoften have a redemption clause specified in the articles of association. It sounds downright scary, but under such a clause no one can come ringing the doorbell and tell you they are now redeeming your home. The redemption clause defines when it can be used. For example, if you are selling your home and the redemption clause specifies a right of redemption to the company or another shareholder within a certain time period, then someone specified in the clause can redeem the home that was sold at the same agreed price right under the nose of the first buyer.

So to sum up: buy a home, but only after you understand all the details of the project. And if you don’t understand something, ask someone who really does. Inevitably, that cousin of your uncle’s godfather, who always appears to know everything, may not be the best adviser.