Equity release is a way that homeowners can tap into their property wealth, but a great deal of consideration needs to be taken first. more…
A simple guide to buying leasehold
If you’re thinking of buying a flat, it’s almost certain that you’ll be taking on a leasehold property. But what exactly does that mean and how does it differ from buying freehold?
In this simple guide to buying leasehold, we take a look at some of the key factors to consider when buying a leasehold home.
So what does leasehold actually mean? Leasehold means that you own the property, but the land upon which the property is built is owned by the freeholder. This gives you the right to occupy the property for as long as the lease is valid.
Freehold, on the other hand, means that you own the property AND the land upon which the property stands.
In general, most houses in the UK are freehold and most flats are leasehold.
What does it mean to be a leaseholder?
It means that you own, and are responsible for, the maintenance of everything within the property’s four walls. This includes floorboards and plasterwork, but normally excludes the exterior or structural walls.
What is a lease?
It’s a contract between the leaseholder and the building landlord that gives you conditional ownership for a fixed period of time.
The lease is a legal document and outlines the rights, responsibilities and obligations of both the leaseholder and the landlord. It also details the services that you can expect the landlord to fulfil.
As part of your contractual rights, you would normally expect the landlord to manage, maintain and repair the building structure, common areas – such as staircases and hallways – and exterior grounds.
On the flipside, the lease will also outline your obligations as a tenant, and may include keeping the flat in good order, behaving in a ‘neighbourly’ fashion and not doing certain things – such as keep pets, for example – without obtaining the prior consent of the landlord.
What should I be aware of when buying a leasehold flat?
The thrill and excitement of buying and moving into your flat can be dampened by the need to pay inflated or hefty service charges for maintenance of communal areas.
Service charges are payable by the leaseholder to the landlord for the services they provide and can range from a few hundred pounds to thousands of pounds on an annual basis.
Whilst it will vary between leases, the service charge would normally cover maintenance and repairs, building insurance and cleaning of common areas. There will also be a charge for managing the building, and this is normally performed by the landlord or an external company.
You may also be required to pay into a reserve or ‘sinking’ fund each year to cover any major repairs, such drainage works or replacing the roof.
What services the landlord will perform and how the service will be split between individual leaseholders is set out and agreed in the lease. Service charges are variable; you need to be aware that they can change each year and the only stipulation is that they are considered to be ‘reasonable’.
What about ground rent?
Leasehold is a tenancy; therefore it’s also subject to payment of rent. This is often a nominal amount, but is also a requirement of the lease and must be paid on the due date.
Leasehold: a sound investment?
Many people would urge caution when buying leasehold property, but provided that there’s a well-written lease and the building is properly managed, there’s no reason why a leasehold flat shouldn’t provide the basis of a good home AND a secure long-term investment.
The important thing is to ensure that the lease protects your own interests. No two leases are ever the same so it’s important that you seek legal advice to clarify your rights and responsibilities as the leaseholder.
For a free quote, complete our short form. Our charges are transparent and we quote for all fees and disbursements up front, meaning that you’ll understand the full extent of your conveyancing charges from the very start.
You can also visit our downloads page for more advice and information about the conveyancing process.
Buying or selling your home? Get an estimate now.
Use the form below to request an estimate and one of our conveyancing experts will be in touch.