Leasehold property buyers need to be aware of several things if they want to ensure a worry free purchase.
In England, there are two main ways of owning property:
Freehold – where you own the property and the land it stands on.
Leasehold – where you own the right to live in the property for a period of time, as set out in the lease.
How do I know if its freehold or leasehold?
It is essential to establish the legal title before making an offer or commitment to buy. If buying a new build, the developer should be upfront about whether the property is freehold or leasehold. With an older property, you can either ask the estate agent or check the land registry website.
Most flats are owned on a leasehold basis, where the landlord retains the freehold title to the whole building. Each leaseholder will be obliged to contribute to the cost of maintaining, insuring, and managing the building. The exact costs and terms will be set out in the lease.
What to look for in the lease
The first area to check is the terms and conditions concerning the ground rent. Some freeholders do not charge a fair ground rent, or a will charge a low amount initially but then increase it quite rapidly over the length of the lease. Also check the charges for renewing or extending the lease as these can vary considerably.
Often, the freeholder will charge for granting permission to make alterations to the property. On other occasions, the freeholder may impose an unreasonable charge for transferring the freehold title to the leaseholder.
Make sure the lease has a long time to run and that you have a legal right to renew the lease, and at a reasonable cost. It’s these additional costs that can have serious implications, particularly for first-time buyers who may already be on a tight budget.
Selling the property on
As long as the ground rent is minimal, owning your home on a long lease will not really be any different to owning the freehold. Leasehold flats can be bought and sold in the same way as freehold properties. However, the length of time left on the lease will affect the value of the property.
If you already own a leasehold property and were not advised about ground rent fees or the full terms of the lease by the firm of solicitors that dealt with your purchase, you can make a complaint to the firm.
If you would like more information about owing leasehold property you can download our Guide to Buying Leasehold Property