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All About the Leasehold

  • 7 years ago

Around 95% of new properties in London and 43% in the rest of England and Wales are leasehold properties. Most people buy these properties without thinking about what leasehold actually means, so here’s the 101 on being leasehold.

How long can a lease be?

Originally, leaseholds were between 90 and 125 years long, but these days 999 years is more common. Leases do count down with each year, so some older properties may be available with only a few years left and you do need to remember that you don’t own a leasehold property outright, so this can be a problem when it comes to getting a mortgage. Some lenders need there to be at least 55 years left on the lease, while others are even stricter.

There may be service charges

It doesn’t matter whether your leasehold property is a flat in a block or a house in a leasehold terrace, there will be a freeholder who owns the land and the buildings. This owner is responsible for maintaining and repairing communal areas and gardens, so you’ll need to pay service charges, which usually include ground rent and insurance.

If your house is leasehold

Some newer-build houses are leasehold rather than freehold and this means that your service charges may be more complicated, as may your mortgage be. Lenders tend to include service charges and ground rents in your affordability assessments and if your charges are high, your maximum mortgage may be reduced.

Ground rent

Very often, if this is separate from your service charges, it’ll be a small, nominal amount, but do check the clauses carefully as some unscrupulous freeholders may try to squeeze more money out of you here.

Sinking funds

Some maintenance works are expensive – a new roof, or double glazing throughout the building, for example. Landlords often ask leaseholders to pay into a collective fund to cover these works.

Sharing the freehold

Since 2004, leaseholders have been able to pool resources to buy the freehold and share ownership; they often appoint a management committee and look after the buildings themselves. This increases the value of the properties.

If you buy the freehold

By buying the freehold, you’re transferring the lease into your name. The freeholder must be informed and the original lessees’ names will still be on the lease. However, your solicitor will notify the Land Registry of the change.

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