It’s estimated that there are around 4.3 million leasehold homes in England, both flats (67%) and houses (33%). However, it often isn’t considered that as a leasehold buyer, you will have different rights and obligations to those who purchase a freehold property.
Buying a leasehold property essentially means you have a long tenancy. You are being given the right to occupy the property for a number of years (often 99 or 125 years) subject to paying the landlord an annual ground rent and service charge (for maintenance of the common areas). On the other hand, purchasing a freehold property makes you the owner of the building and the land it stands on.
It’s most common for flats to be sold as leasehold, although in more recent times developers have been selling houses on a leasehold basis. They’re seen as a good revenue stream with high ground rents included in the lease, which in some cases may double every so often. Developers have then subsequently sold off the freehold to speculators.
Retirement flats are also frequently sold on a leasehold basis, and will include the provision of additional services specifically for elderly people (e.g. personal care and emergency assistance). Careful consideration should be given to the terms of the lease, not forgetting to check if any ‘exit’ or ‘transfer’ fees are payable on resale.
You have rights to extend your lease and buy the freehold in certain instances, giving you enhanced control over what you pay out in service charges and protect the value of your property. These options can throw up a variety of questions and have a cost implication.
The Law Commission is currently reviewing these options to simplify the process, which is welcome. However, any parliamentary reform may be held up with Brexit on the horizon.
Living in a leasehold property is of course acceptable provided you appreciate your rights and obligations. If you are unsure always seek legal advice.