One significant decision you’ll make when purchasing a home is whether to purchase a freehold or leasehold property. Freehold means you’ll own the property and land outright, whereas leasehold means you’ll ‘lease’ the property from a freeholder.
It’s imperative that you understand what’s involved with a leasehold property before your purchase. Don't make the same mistake as almost half of people who purchase a leasehold property without knowing.
It’s imperative that you understand what’s involved with a leasehold property before your purchase. Don't make the same mistake as almost half of people who purchase a leasehold property without knowing.
Essential information about leasehold properties
Owning a leasehold property gives you the right to use, buy and sell the property, however you don't own the property itself. A leaseholder is required to pay fees such as a service charge and ground rent.
Predominately, flats are leasehold and owned by a developer or business. Although, there is a rise in the number of leasehold help-to-buy properties.
The shorter the lease, the less value the property is worth. When the lease runs out, the property will be returned to the freeholder.
A lease of fewer than 80 years can become problematic for a leaseholder as the property value will decline. This will make the property harder to sell in the future and mortgage lenders may be reluctant to lend for a property with a short lease.
If you find yourself with a short lease there is a series of Government acts that provide protection against short leases. For example, if you qualify for the Section 42 Notice, you can send a formal notice to a freeholder, requesting to extend the lease at a premium.
Predominately, flats are leasehold and owned by a developer or business. Although, there is a rise in the number of leasehold help-to-buy properties.
The shorter the lease, the less value the property is worth. When the lease runs out, the property will be returned to the freeholder.
A lease of fewer than 80 years can become problematic for a leaseholder as the property value will decline. This will make the property harder to sell in the future and mortgage lenders may be reluctant to lend for a property with a short lease.
If you find yourself with a short lease there is a series of Government acts that provide protection against short leases. For example, if you qualify for the Section 42 Notice, you can send a formal notice to a freeholder, requesting to extend the lease at a premium.
Benefits of leasehold
There are many benefits to purchasing a leasehold property, including:
- Any issues regarding neighbours can be raised directly with the freeholder or resident owned 'Right to Manage' (RTM) company
- All communal areas are maintained and looked after, giving you peace of mind
- Building insurance is provided, usually as part of your service charge
Disadvantages of leasehold
Considerations to bear in mind when buying a leasehold property include:
- You must obtain permission from the freeholder or RTM before making significant changes to your property
- Leasehold properties can be more challenging to sell – recent research shows that a third of people trying to sell their home found it more difficult because the property was leasehold
- Over time, your ground rent may rise or even in some cases become unaffordable
Guidance and advice are always recommended prior to committing to leasehold property. The complexity of the agreement means extensive research is vital.
Have a question about leasehold properties or need to extend your lease? Contact us.
Have a question about leasehold properties or need to extend your lease? Contact us.