Unfortunately, purchasing property is never as easy as 1,2,3. There are always difficulties that any property owner will have to overcome to get the desired end result. This is no exception when it comes to buying and managing a leasehold property. In this blog, we will answer all the relevant questions when it comes to you and your leasehold.
In England and Wales, most flats are leasehold properties. Whereas houses are usually freehold. It is rare to find a flat that is freehold and a house that is leasehold.
It is important to understand the main differences between freehold and leasehold, because both are different.
What is a leasehold?
When buying a property, it will either be known as a freehold or a leasehold. A freehold is when you solely own the property. Meaning you have to pay to maintain the property and so on.
Even though you will have bought the property, a leasehold basically means you still have a landlord. You may be paying for a mortgage and have the bills to show for it, but essentially you are leasing the property.
The freeholder (another word for the landlord) will own the property and the land it sits on. Additionally, the freeholder will receive ground rent from the leaseholder (which would be you) every month. So, even thought you will have a mortgage for the property, you will still have to pay rent.
What if the leashold expires?
If the leasehold of your property does expire, then the property will revert ‘back’ to being a freehold instead of a leasehold. This will therefore mean ownership of the land and building will go back to the freeholder.
For example, if you had another sixty years left on the lease of your property in 2019. By 2079, even though you may have paid your mortgage outright, the property’s ownership would revert to your landlord.
There are no legal rights you will have around this either. Be careful with leasehold properties that you are not ripped off by ground rent or any other hidden costs.
What should I consider before buying a leasehold?
Before taking any further steps on purchasing a leasehold property, carry out your own extensive research on the flat or house you are buying. Look to see how much the ground rent, annual service charges and insurances that will need to be paid when you move in.
A crucial part of your research into the property will be knowing how long is left on your lease. Of a property has less than seventy years left, you might struggle to sell the property in years to come or gain a mortgage on it now.
There is no doubt, those who are the leaseholder have more stress compared to those who are freeholders. Our top tip: if purchasing a leasehold, choose one with a long lease.
If you are wanting to purchase a leasehold, make sure to select one that has around 90-120 years left on the lease. Around this number is considered a ‘good’ length. Although some leases are as long as 999 years!