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Buying a Leasehold House

Reasons to choose Wilson Browne

When you set out to buy a property you’re looking for many things.

Location, space, a good price, decent schools, transport links – the list can be endless. Not many of us put “tenure” on the list though. And we should.

There are big differences between freehold property (where you own the building and the land it sits on) and leasehold property (where you are simply buying the right to live in the property for a period of time).

The terms on which a leasehold property is transferred could make a significant difference to the way you can live in your property once you have bought it. They can also affect how much you are actually paying for the property.

Key things to look at if your dream property turns out to be a leasehold are as follows:

The Term

Leaseholds in England are typically granted for a period of between 99 and 999 years. Many will have started off at 125 years when they were first granted. This is the period of time that you are allowed to live in the property for.

When a leasehold is sold, however, only the remaining years in the lease are sold.

It is vital to check how long is left on the lease before you buy.

It is possible to ask for additional time to be added to the lease (a lease extension) but you need to have owned the property for 2 years before you can make that request. This process is typically more expensive once there is less than 80 years left on a lease so do the maths: if you are buying a lease that will have 80 years or less left to run before you can extend it consider talking to the current owner of the lease about extending the term before they sell.

The longer left on a lease the more value the property will have but buying “cheap” when a lease has not long left to run may not be the bargain you think so if you might need to extend the lease it’s worth asking an expert to value how much that could cost.

Rent and Charges

Many leases require the owner to pay ground rent. In addition to your mortgage repayments you will probably need to pay these charges so it is vital to check how much they are, who decides the amount and when and how they can be increased.

Following reports in the press during the last couple of years many people will be aware that some rent increases can go up dramatically (even doubling every few years), making a property uneconomic to live in, particularly if you have stretched yourself financially to make the purchase in the first place.

Service charges may also apply – particularly if you are buying a flat – as they help towards the maintenance of the building as a whole and the “common parts” such as lobbies and stairwells that everyone has to use.

Find out who manages the property on a daily basis, who is responsible for maintenance and who sets the service charges. If possible, find out whether there is a maintenance fund built up for any large-scale works eg. painting the building. Leaseholders might be asked to contribute to major works to the building so look at the whole, not just the flat that you are buying, and consider if the premises have been well maintained.

Information about the service charges and how much they have gone up (or down) over the years could be informative so don’t rule out asking other owners in the building about them.

Asking your conveyancer to check the ground rent and other charges both now and in the future will help you to work out it you can afford to run the property once you buy it.

Changes

Many of us will have bought and property that isn’t quite right for our needs but could be altered to be just perfect. With leasehold property you may need the consent of the freeholder – the actual owner of the property – in order to make alterations.

Knowing this in advance is essential – if you plan to knock two bedrooms into one or add a third and you find you can’t do that without permission, that could mean you are buying a property that just won’t work for you.

The lease will define what steps the leaseholder can take and when permission is needed. If you know of alterations at the outset you could ask for permission before buying, that way you will know that you can make the property work for you. Be careful though – predicting the future is a tough gig and if a freeholder’s permission is needed for any alterations then you may find that if your circumstances change you can’t do what you want to.

Buying property is exciting but when it comes to any big purchase it’s always important to make sure you are getting what you think you are getting.

Ask your conveyancer to look at all of the issues and be prepared to dig deeper to make sure that, if you are buying a leasehold property, you know what it will cost you now and what it will cost you going forward.