All properties in the UK are either owned on a freehold or leasehold basis. Find out how owning a leasehold property affects the conveyancing process.
If you own your property on a freehold basis, this means that the property itself and the land it stands on are yours to enjoy, enhance or alter as you please (subject to planning permission and building regulations, of course).
If you own a leasehold property, you have a right to occupy the land or property with certain conditions in place, but it’s technically owned by the freeholder. There will usually be restrictions on certain aspects such as building alterations, owning pets and sub-letting.
The conveyancing process often takes longer and can be more costly for leasehold properties as there are more checks to be made and details to review.
Your conveyancer will read your lease in full and discuss any important issues with you, but it's advisable that you read it thoroughly as well and talk through any concerns to avoid any nasty surprises after you move in.
How long is left on the lease?
A new lease is usually created for a period of 99 or 125 years (though can be as long as 999 years), but when you buy your home the lease may have fewer years remaining on it.
When buying a leasehold property, it’s essential to check how many years remain on the lease. The shorter the lease, the less the property will be worth, and when it drops below 80 years the decline in value will be rapid.
The fewer the years remaining on the lease, the more the landlord will be able to charge as a premium to extend it.
If you find that the lease on the property you’re buying has fewer than 80 years remaining on it, it’s best to ask your seller to extend it before you exchange.
You can request to extend it yourself once you’ve moved in, but you’ll need to wait for two years before you have the automatic right to do so, and there are extra conveyancing costs to pay.
Find out more about extending a lease.
What service charges will you have to pay?
With leasehold properties, the freeholder is usually responsible for the upkeep of the common areas, such as the hall and staircase, exterior walls, roof and drains – though this is often taken care of by a management company.
As a leaseholder, you’ll usually be required to contribute towards the costs for this in the form of a service charge.
You’ll also pay a share of the property insurance and an annual ground rent, and you might be asked to pay into a sinking fund, which helps cover unexpected maintenance work needed in the future.
The amount you’ll pay will depend on the type and size of the property, and where it’s located.
Make sure you read the lease fully and discuss costs with your conveyancer so you know what you’re agreeing to before you commit.
Are you buying a ‘share of freehold’?
Some leasehold properties will be sold with a ‘share of freehold’, which means that as well as the lease, you’ll get a shared ownership in the freehold.
Owning a property with share of freehold means you won’t usually have to pay to extend the lease and will have greater control over the maintenance of the building.
If you’re buying a property with share of freehold, your conveyancer will have to request certain information from the management company, and their speed in responding will impact the overall speed of the purchase.
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