Have you found your dream home but are put off by the mention of a leasehold? Or are you hoping to sell your property and are concerned that your lease will deter potential buyers?
Both of these worries stem from the same place: a concern that a leasehold property will obstruct or interfere with your future plans, which doesn’t have to be the case.
While leasehold properties have unique complexities, they are nothing that can’t be addressed and resolved. This article will provide advice and recommendations for buying or selling a leasehold property to help you achieve the best results.
What is a Leasehold Property?
With a leasehold property, you purchase the right to occupy the property for a fixed number of years, established in your lease. You do not own the land the property sits upon, as this belongs to the freeholder.
In the past, leasehold properties were mostly limited to flats. However, in recent years, new-build homes have been sold as leaseholds too.
As the freeholder takes care of insurance and communal areas, this arrangement works well for many residents. Yet, some tenants find themselves with landlords that charge extortionate ground rent, excessive maintenance fees and enforce restrictive rules.
We want to show that leasing a property is not always a dead-end trap, particularly if you’re well-informed about your rights as a leaseholder and employ professional legal support.
Advice for Buying a Leasehold Property
A leasehold should not put a barrier between you and your dream home. On the contrary, if the lease is clear of burdensome clauses and the management effectively oversees the building’s maintenance, a leasehold apartment is a safe investment choice and a great place to live.
That said, it’s crucial to understand the terms of your lease and your rights as a leaseholder before purchasing.
The Terms of the Leasehold
We recommend that you look closely at the following areas.
The length of the lease:
You must find out how long is left on the lease you are buying, especially if you’re purchasing an existing lease that has already started to decrease. A short lease (under 80 years) could affect your ability to get a mortgage.
Before you commit, it’s worth investigating whether you can extend your lease or purchase the freehold.
Fees and Service Charges:
One of the most offputting things about owning a leasehold property was the issue of exploitative ground rents. However, this issue has recently changed.
On 30 June 2022, the Leasehold Reform (Ground Rent) Act 2022 went into effect, eradicating ground rent on all new leases has now come into force. This reform means you shouldn’t be charged ground rent if you decide to buy a new leasehold property.
Discover more about these changes in our ‘What Changes are the Government Making to the Lease Extension Process?’ article.
There will likely still be service charges associated with maintaining the communal areas. The fee is usually fixed but can change year on year. Please ask your conveyancer or solicitor to explain all costs and find out if any upcoming plans require a contribution.
Service charges must be reasonable, fair and set out in your lease. A leaseholder can request a summary of how charges are calculated and spent and any supporting documentation. Your landlord must give you this information. It’s a criminal offence if they don’t, and you can dispute any unfair charges at a tribunal.
Other restrictions:
Check the terms of your lease for any limitations about what you can do on the property. There may be certain things that you need to ask the freeholder’s permission for, such as pet ownership and building permission. It’s worth considering these restrictions before you agree to purchase.
Lease Extension
Leasehold properties often have a poor reputation for being unstable because you own the property for a period that decreases over time.
However, you can extend your lease and increase the time you can occupy the property. A lease extension is great if you plan on selling your property in the future or want to add extra security to your home. You must have owned the property for at least two years to qualify for this procedure.
How to extend a lease on a leasehold property
If you want to go ahead with a lease extension, you are in safe hands with The Lease Extension Company. We combine our expertise with leading specialist surveyors and solicitors to deliver the best possible results for our clients at one fixed-fee cost.
Discover the entire process of what we do, or look to our case studies to learn more about the lease extension process, the costs involved, and the outcomes we have helped our previous clients achieve.
Leaseholder Rights
Last but not least, we recommend researching your leaseholder rights. You are partially at the mercy of your freeholder. In fact, as a leaseholder, you have the right to the following:
- Receive information about service charges or insurance
- Know the freeholder’s name and address
- Be consulted about specific maintenance and running costs
- Challenge certain charges
Leaseholders also have the power to band together and dispute issues or seek legal advice. For example, you can seek permission for the ‘Right to Manage’ or work with your neighbours to purchase your building’s freehold.
Leaseholders’ rights should continue to advance as a result of the government’s recent reforms and those that are anticipated.
Advice for Selling a Leasehold Property
On the flip side, many feel apprehensive about selling their leasehold property.
Is it hard to sell a leasehold property?
There’s an assumption that selling a leasehold property is more challenging than a regular property. But, realistically, if you have all your ducks in a row, the only significant differences are more paperwork and preparation. We also suggest seeking legal support from a solicitor or conveyancer.
Should you extend your lease?
If your lease is nearing the 80-year mark, you should think about extending your lease, especially if you’re planning to put the property on the market soon.
Banks are less likely to lend money when a lease drops below 80 years, so extending it will attract more buyers and likely add value to your property.
The LEC can help you arrange a lease extension to protect and maximise your property’s value at a simple, fixed-fee cost. To find out more, arrange a no-obligation consultation with one of our experts. You can reach us via our online contact form, by calling 0800 098 2770 or by emailing [email protected].
Prepare Leasehold Information
When selling a leasehold property, you should provide details of your lease for the next buyer that specify the leaseholders’ rights and responsibilities.
You should also complete a Leasehold Information Pack, also known as a Leasehold Management Pack or TA7 form. Your solicitor or conveyancer can fill out this form, which asks for information about the following:
- The length of the lease
- Service charges and maintenance fees
- Plans for building work in the future
- Insurance policy details
- Management company details
- Safety information and surveys
We advise buyers to scrutinise this information before committing to an offer, so it’s worth having it ready and prepared.
Hopefully, this information has reassured you that buying or selling a leasehold property is manageable and achievable.
Nevertheless, our team of professionals is on hand to help you navigate the complexities of property management and law.
Save time, money and stress by booking an appointment with one of our lease extension specialists. Simply fill out our online contact form, call 0800 098 2770 or email [email protected] and discover how we can help.
