The words ‘Leasehold Property’ have the power to stop a potential buyer in their tracks. Generally misunderstood and often feared, there’s a level of uncertainty which some people can’t accept and subsequently choose to avoid Leaseholds when searching for their new dream home.
Ownership of a leasehold property however is not just for those made of stronger stuff. As with many aspects of property purchase, forewarned is forearmed and with accurate knowledge about the ins and outs of the arrangement, it may still be a viable option for you.
What you really need to know about Leasehold
1. Leasehold vs Freehold
If your property is Freehold you own the building and the land it sits on whereas if it is Leasehold you essentially rent the property from the freeholder who owns the land until the lease expires (a specified period of anything between 99 and 999 years).
2. Service charge
The main on-going cost is the service charge, covering all activities relating to the upkeep of the building and any communal areas, including maintenance, repairs, management costs and insurance (and therefore higher for properties with added features such as leisure facilities etc.). You are wholly entitled to ask the freeholder for a summary of how your service charge is being and request paperwork such as receipts.
3. Ground rent
This is a relatively low annual fee paid to the Freeholder as a rent for the ground where the property sits, averaging around £319 per annum (as of June 2019). There have been cases where ground rent has increased substantially from one year to another (higher than the usual RPI-linked amount) but any proposed increases must be detailed in the leasehold document so check through this carefully before committing to purchase.
4. Essential details
As with any financial contract, it is essential that you understand exactly what you are signing up for. There may be clauses which restrict how you use your property and you need to understand exactly what these are to avoid breaching your side of the contract.
The minimum, key information you should have at hand is: -
• Number of years remaining on the lease
• Service charges and ground rent
• Additional fees which are or will become relevant (e.g. admin fees when selling)
• Restrictions or covenants relating to property use
• Responsibility for repairs
• Permissions required for any alterations
Research is key when it comes to buying a Leasehold property and it pays to do your homework before becoming emotionally attached. You may also want to explore the possibility of extending the lease -or even buying it outright - if either are options, for added security in the future.
At Arrow Conveyancing we always make sure that our buyers are armed with the facts they need to make an informed decision and avoid nasty surprises further down the line. If you’d like the reassurance of having a knowledgeable, trusted conveyancer working upon your behalf simply get in touch via www.arrowconveyancing.co.uk Our team have been here throughout the entirety of the pandemic, assisting clients, providing valuable advice and providing free quotations.
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The information contained in this article does not constitute financial advice or recommendation and should not be considered as such. Arrow conveyancing does not offer financial advice and is not regulated by the Financial Conduct Authority (FCA), the authors of this article are not financial advisors and are therefore not authorised to offer financial advice.