Leasehold Ownership – Take it or Lease it
What is a leasehold property?
If you buy a property that is leasehold you own the property (you are the leaseholder) but you do not own the building or the land it is built on. You are purchasing a lease from the freeholder (the person who owns the building and the land) for the right to live in that property for a set number of years.
Leases are usually long term – often 99 or 125 years but can be up to 999 years. The Lease is essentially a contract with the freeholder and details the legal rights and responsibilities of each party.
A short Lease, so a Lease with 80 years or less left on the term, may cause problems if you want to sell or mortgage your property.
Leasehold properties are often popular with first time buyers and people who are wishing to downsize. A leasehold property is usually a flat and can be cheaper to buy than a freehold property.
The points in favour of a leasehold property are:
- Maintenance of the communal areas is the responsibility of the freeholder (who will probably engage a management company to deal with maintaining the property and collecting the service charge). You are responsible for the interior of your property only and the information about this will be detailed in your lease.
- Buildings insurance is taken care of.
- Shared spaces eg gardens or car park are often also maintained.
- New legislation brought in means that ground rent is no longer permitted to be charged on new leases.
- You have a number of legal protections with regard to the service charge you pay and how the freeholder behaves. You can take legal action against a freeholder. When you own a freehold property, you do not have these rights, particularly in connection with any service charges you may have to pay, or if you have issues with your neighbours.
The downsides of a leasehold property are:
- You have to pay a service charge. Service charges can be expensive and they can increase if the freeholder has to carry out major refurbishment or when costs of services like gardening, window cleaning, carrying out fire checks, etc increases.
- There will be stipulations in the lease as to what you can and cannot do to your property. You may not be permitted to make improvements, keep a pet in the property or sublet it, or you may have to obtain the consent of the freeholder, and the freeholder can charge for providing consent.
- The Lease is essentially a fixed term contract, so you will only own your property for the length of time that the Lease term is. This means that the value of the property will diminish over time and you will have to pay to extend the Lease.
- It can be difficult to get maintenance/emergency works undertaken as quickly as you would like as they need to be organised by the freeholder or management company.
- Disputes with the freeholder about increasing service charges, not adhering to their maintenance obligations or preventing you making improvements to your property.
- The cost of obtaining the management pack which is needed in the conveyancing process and provides information about service charge in previous years, fire safety and asbestos report and other details about the property and costs involved with it. These can sometimes cost up to £500 and it is obligatory to have this document.
So the answer as to whether leasehold ownership is good or bad is that there are pros and cons and getting
appropriate advice is the best way forward.
For leasehold property advice, give one of our friendly conveyancing team a call on 01323 727 321 or visit hartreade.co.uk