In England and Wales, owning a leasehold property is very common, but knowing exactly what it means can at times be tricky. I have found my dream property, but it is leasehold. Exactly what does that mean? Do not panic. In England and Wales, leasehold is one of the most popular ways of owning a maisonette/flat/apartment. Freehold is the other option, but unlike in freehold where you own the property outright, leasehold gives you exclusive ownership off the right to occupy the property for the length of the lease. It can run anywhere from 99 to 999 from when the lease is created.
‘Ground Rent’ is something I have heard being mentioned, but am I required to pay it?
Unfortunately, there’s simply no way around it. Ground rent refers to what is paid by shareholders to their landlord every year. It can be a small amount such as £10 or a substantial amount such as £200 annually. The ground rent may increase substantially over short periods in some cases. Your solicitor will advise you should this be the case, but it is generally advisable to enquire early on how much ground rent is, whether and when it changes, and the consequences of any increase.
If I buy leasehold flat, will the ‘service charges’ apply to me?
You will still need to set aside some funds for this. Service charges are your share of the cost associated with maintaining the building your apartment/maisonette is in. It is also used to cover the communal services and the communal areas. The charges are typically paid annually and in advance, but the amounts vary depending on the condition and age of the building.
I would like to buy leasehold flat, but how is the block maintained?
If you buy leasehold, you automatically become a leaseholder, and the lease sets pout your obligations and rights just like a tenancy agreement. The landlord who is typically a freeholder will also have their obligations and rights set out in the lease. The building that contains the flats will require both external and internal maintenance like any other building. It might also be having communal lifts or heating systems that may require maintenance. Such maintenance is usually the responsibility of the freeholder, but the cost is usually passed on to the leaseholders through the service charge. The freeholder typically employs managing agents to manage the building on their behalf.
How can I check on the fire risks in a building where I plan to buy leasehold flat?
If you read the building’s fire risk assessment – your solicitor should ask for a copy from whoever manages the building. In England and Wales, all blocks of flats must undergo fire safety risk assessments regularly.
After buying leasehold flat I’d like to make modifications, but will I be able to?
Some leases ban modifications altogether while others allow them as long as consent is obtained, while others are without restrictions. Prior to buying, you must check whether the lessor’s consent is required before you make modifications. You may consider composite front doors, however, you might have to first approach the managing agent that works on behalf of the landlord /lessor.
Will I be able to sublet a leasehold flat that I buy?
Sub-letting is not permitted in some leases while consent is required in some leases while others still are silent i.e. no restrictions on sub-letting are stipulated. Leases can vary, which is why you need to check with the lessor before you buy, whether your chosen flat has conditions or restrictions on sub-letting.
Can my leasehold expire?
Yes, just like any tenancy, leasehold has a start and finish. Ensure that you know the amount of time left before buying since it becomes harder to sell as it gets shorter. You will have a right to extend your lease of a flat after 2 years of ownership, but you will be required to pay the freeholder for this and the cost might be substantial, depending on the length left on the lease. In case the lease expires, you can still enjoy certain rights if you live in the property. However, if you continue living there you will probably be required to pay a market rent.