Buying Leasehold Property
Last updated on January 18th, 2024 at 03:40 pm
- What does leasehold mean?
- What sort of properties are sold as leasehold?
- How long should a lease be for?
- What charges will I pay on a leasehold property?
- Can I change, extend or end a lease on leasehold property?
- Can I buy the freehold on my leasehold property?
What does leasehold mean?
When you buy a leasehold property, you only own it for a certain period of time, after which ownership reverts to the landlord, or freeholder. The ownership period is fixed and set out in a legal agreement called a lease
What sort of properties are sold as leasehold?
Most flats are sold on a leasehold basis, as well as some houses such as those sold as part of a shared ownership scheme.
How long should a lease be for?
You should look for a property that will still have a long lease period left when you’re likely to sell it, as this improves the chances of the buyers getting a mortgage and will ensure the value of the property is not reduced. Most lenders will not lend on a property with less than 70 years remaining on the lease term.
A lease can be extended, but you will not only have to pay the premium for the extension but also, more than likely, the freeholder’s legal and survey costs in addition to your own.
If the property is a house, you could also enquire about buying the freehold.
What charges will I pay on a leasehold property?
Service charges
Service charges are usually only applicable on leasehold flats unless there are some common arrears within a development.
Landlords may charge for services such as repairs, buildings insurance and common area cleaning. Charges might also be made for gardening, central heating, lifts, lighting, and sometimes for improvements.
Service charges usually vary annually but some older leases include fixed charges which can’t be varied. They’re generally paid annually; sometimes in advance with a final charge at the end of the year when actual costs are known.
Landlords can charge a specific percentage or a ‘fair’ proportion of their costs. You can request details/documents supporting the charges.
Management (or agency management) fees can be charged.
You may have to pay legal fees for matters such as repossession costs or arrears collection.
The law relating to service charges is extremely complex and they’re the most contested element of leasehold property, so you need to make sure you’re happy with the lease before agreeing to it.
Contact our property experts for advice and guidance on leasehold service charges
Administration charges
These can include charges for approving alterations you may want to make and providing information/documents and costs relating to your non-payment or breach of the lease. The charges have to be reasonable and accompanied by a summary of your rights and obligations in relation to them.
You can apply to a leasehold valuation tribunal (the First-tier Tribunal) for a remedy if you disagree with them.
Ground rent
Your landlord will usually send out a formal written demand for ground rent and if you don’t pay, he can take legal action against you.
Ground rent can be back dated for a maximum of 6 years. You can be asked to pay all of that in one go.
Building insurance
If the property is a flat, your landlord will usually arrange buildings insurance (not contents) and charge you for it. He should give you a summary of the policy.
Reserve funds
You may have to contribute to a fund to cover unexpected repairs or maintenance. There are rules about how these funds are managed, and you won’t usually be able to get your contributions back if you move. These payments are usually included within the service charge.
You have the right to be consulted about charges under certain circumstances, for example if you’re asked to pay more than £250 for planned work or more than £100 a year for work/services lasting more than a year. You also have the right to dispute a variable charge in some circumstances.
Can I change, extend or end a lease on leasehold property?
You can ask the landlord to extend a lease and in some cases you have the right to extend the lease on a flat for 90 years or a house for 50 years. If the time remaining on a lease is short, you might want to do this before you sign any agreement in the first place.
If you want to make changes to (vary) a lease you’ll have to negotiate them with the landlord. If you can’t agree, you can apply to a tribunal if you live in a flat, but if you live in a house the tribunal will only be able to look at buildings insurance.
You can usually end a lease by giving a specific period of notice. Only in rare circumstances can a landlord end it and evict you and this needs formal written notice and a court’s permission.
As a tenant of a tenancy (which the lease is), you don’t necessarily have to move out of a property if the lease runs out unless you or the landlord want that to happen. The lease will simply continue on the same terms.
Can I buy the freehold on my leasehold property?
You can ask the landlord at any time if you can buy the freehold, and in certain circumstances, you may have the right to buy it. The law surrounding this is very complex and so we would need to discuss your individual requirements before advising you in this regard.
How can Graysons help?
Our property experts have years of experience in helping clients to purchase leasehold property and understand all of the intricacies of various leases. They’ll be able to help ensure that the lease meets your needs and carry out all of the procedures necessary to ensure that the purchase goes smoothly.
Graysons is accredited with the Law Society’s Conveyancing Quality standard, so you can rest assured that our expertise and quality of service is second to none.
What will Graysons charge?
Please click here for an instant quotation.
