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Leasehold property buyers guide

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

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Commercial property evictions: ban may be extended

Commercial property evictions – is a further extension on the way?

Businesses struggling to survive these turbulent times, may be thrown another lifeline by the government.

Tenants of commercial property, such as restaurants and shops have benefited from an eviction ban since April, making it illegal for them to be evicted for not paying rent. That ban is due to come to an end on 30 September.

However, the government is reported to be planning to extend the ban until the end of the year, giving tenants a few more months protection.

As the high street struggles to recover, the government is coming under increasing pressure to offer businesses more support, or risk surging unemployment figures as businesses fold.

Businesses in towns and city centres have not seen the much-needed increase in footfall since the lockdown lifted; people have been reluctant to return to their high street shops or office desks.

The extension will come as a welcome relief to tenants but will be a hard blow for some landlords, many of whom are facing financial difficulty themselves after seeing a huge fall in rent revenue.

It also has the potential to impact investors who will be less likely to want to pour their cash into the UK property market.

There are also concerns that many businesses who have the finances available to pay their rent have been wrongly using the scheme to avoid paying.

Sarah Naylor, partner and head of commercial and property, commented: “Some landlords were able to agree rent holiday’s with their tenants, but many other tenants face the prospect of having to repay all the outstanding rent when the ban comes to an end. I would urge landlords and tenants to try to find workable solutions.

“Whether you are a landlord or a tenant, if you need legal support either with your business operations, staffing issues or repayment terms, it is crucial that you act quickly.”

According to the Financial Times, the ban could come within the next few days, just in time for the next quarter rent bill which falls due at the end of September.

If you are affected by the commercial property evictions ban and would like to arrange an appointment with our business or employment experts, please call 01302 320621 or email info@athertongodfrey.co.uk 

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Leasehold property: on the road to reform

Leasehold property has gained much publicity and for several years, the government has been promising an overhaul of the leasehold practice.

Last year, the government announced it intended to ban the sale of new leasehold houses and cut ground rents on new apartment leases to zero.

It is now under increasing pressure to go even further in dealing with the issue as millions of leaseholders’ struggle with onerous ground rents, unfair service charges and exploitative informal leases that offer no legal protection.

Following a two-year investigation, The Law Commission has now made a series of recommendations to government that if implemented will transform the leasehold property market.

Proposals include replacing leasehold with “commonhold” and increasing lease extensions to 990 years instead of the current 50 or 90 years offered by landlords.

Commonhold is not a new concept but is not widely offered. Under commonhold owners buy a share of the freehold to their property in addition to buying the leasehold title, thereby increasing the value of their own property and removing ground rent charges. Owners can form self-management groups which gives them more control over repair and maintenance costs.

Currently, extending the lease leaves the owner with the landlord’s legal costs as well as their own. Under the new government proposals landlords would no longer be able to pass on their legal costs.

Sarah Naylor, partner and head of commercial and property, commented: “The problem has arisen because many people buying new build homes from housebuilders and developers have not been fully informed about what leasehold means for an owner. Because of this, many owners have ended up in financial difficulty or with properties that they cannot sell on.

“Setting a new statutory limit and capping the level of fees will come as a welcome relief to many leaseholders.”

The Law Commission recognise that there is likely to be opposition from developers. It says that there will need to be strict intervention by government – possibly going as far as giving developers no choice in the matter.

Whether the government opts to introduce the commonhold model as compulsory, optional or offer incentives to developers remains to be seen.

Should government opt to retain the leasehold model, the Commission has said that buying the freehold must be made significantly cheaper and ground rent charges should be removed.

Earlier this year the Competitions and Marketing Authority said it had found ‘serious issues’ with leasehold properties and would launch enforcement proceedings against those responsible.

Housing minister, Luke Hall said: “We will carefully consider the Commission’s recommendations, which are a significant milestone in our reform programme as we create a better deal for homeowners.”

Do you need expert property advice? Email info@athertongodfrey.co.uk or call us on 01302 320621

 

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Commercial property specialist joins firm

Atherton Godfrey has appointed an additional commercial property solicitor to its commercial property department.

Phil Taylor joins the firm from Birmingham City Council where he has worked for the past 11 years, handling a wide range of property matters relating to the council’s extensive land ownership and commercial property portfolio.

He has experience of drafting and negotiating leases of shops, office and community properties, drafting and negotiating licences for subletting, and deeds of variation. He has also been involved in the property due diligence and negotiation of a loan and debenture for the secured lending on a multi-million pound redevelopment project.

Phil also has experience of freehold disposals and the drafting of leases linked to the granting of contracts for the delivery of services across multiple sites.

In addition, Phil can provide conveyancing services for property auctions and can draw on his experience of investigating unregistered titles involving bundles of title deeds covering large parcels of land.

Sarah Naylor, partner and head of the firms commercial property department, commented: “We are delighted to welcome  Phil to the firm. He brings with him a wealth of valuable skills and experience that will further strengthen our commercial property offering.

Phil added: “I am looking forward to being a part of the firms’ ongoing growth and development. “