The two most common ways to own a property are freehold or leasehold. The freeholder of a property owns it outright, including the land it is built on. With a leasehold purchase you will have a legal agreement (a ‘lease’) with the freeholder under which you will own the property for a set period of time (the term).
What should you know when buying leasehold?
- Lease term
Historically, many leases were granted for 99 or 125 years, but currently leases are normally longer. If the lease has a term remaining of less than 80 years, you may struggle to get a mortgage. Once you have owned a leasehold property for more than two years, you will normally have the right to extend the lease by an additional 90 years. If the remaining lease term falls below 80 years, you still have the right to extend, but the price due to the freeholder will be higher.
- Ground rent
An annual ground rent may be payable. This can increase depending on the wording of the lease. If the rent is over £250 per year this may need to be reported to your mortgage lender including any rent increase provisions.
- Service charge
You will need to pay a share of the costs of maintaining and insuring the building plus the communal areas, including heating and lighting. The amount will vary annually.
- Other charges
The landlord and/or managing agent will also charge various fees in connection with your purchase. Your conveyancer will supply further details.
- Restrictive covenants
The lease will include various restrictions and obligations. Your conveyancer will send you a copy of the lease and will highlight any unusual clauses. You will need to read the lease carefully and let your conveyancer know if any of the restrictions and obligations will affect your enjoyment of the flat.
Buying a leasehold flat requires careful consideration. It is always advisable to discuss a leasehold purchase with an experienced conveyancer. Remember to budget for the ‘extra’ leasehold costs accordingly.
Speak to the conveyancing team on 0113 320 5000 or email conveyancing@winstonsolicitors.co.uk
