A leasehold property lets you own a property for a fixed term without breaking the bank and the commitment of owning land. Since you are buying only the property and the land remains with the owner, it can be a worthy investment as long as you have a well-written and reasonable lease and property management arrangement.
This type of property lets you own the building, which means you have the freedom to customise your property according to your needs, preferences, and lifestyle. However, this arrangement’s drawback is it can get complicated when it comes to legal concerns.
Buying a leasehold property requires you to make a well-informed decision as it involves your precious time and hard-earned money. If you are considering investing in it for the first time, then this guide is for you. We summed up some of the most important information you need to know before buying.
What is Leasehold?
Leasehold refers to when you buy a building, but the land where it stands remains the property of the original owner. Simply put, you are renting the land from your freeholder or the landlord.
This type of arrangement is a long-term rental agreement that is used for a fixed period that usually lasts between 99 and 999 years. The lease will ultimately expire if it is not extended, which reverts the right to use the property back to the owner.
Freehold vs Leasehold: What Makes Them Different?
Having a freehold property means you own the building outright, including the land where it was built. This option is ideal for you if you don’t want to worry about the lease running out and you have the budget to maintain the condition of your property and land.
On the other hand, a leasehold lets you own the property for the length of your lease agreement with the landowner. You have the right to use the building, but only until the lease expires or is extended.
Why Should I Consider Buying a Leasehold Property?
Investing in a leasehold property is a perfect option for you if you want to get into the property market without burning a hole in your pocket. Usually, this type of arrangement is more affordable than freehold.
You can enjoy the convenience of having your freeholder or managing agent maintain your property’s communal area and gardens. They are also responsible for taking care of your building insurance, and the cost of the policy will be shared by your fellow leaseholders.
What Should I Consider before Making an Offer?
As a leaseholder, you are required to pay ground rent to your landlord. This annual rent is an amount paid to rent the land that your property occupies. The amount and the mode and frequency of payment will be prespecified in the lease.
Typically, the ground rent is priced at around £100 a year, but it may be substantially higher depending on your agreement with the landowner. The lease can be reviewed periodically, which means your rent can be doubled every several years.
When you encounter a spiralling ground rent, you must partner with your conveyancing solicitor to guide you throughout the entire process and analyse this clause in detail. With our expert assistance, you will receive up to five fixed fee conveyancing quotes directly from conveyancing solicitors or licensed conveyancers based in England, Wales, Northern Ireland, or Scotland.
Service charges are the fees charged usually every year by your landlord to cover the cost for the regular repair, maintenance, and improvements of the property, grounds, and communal areas. They can also be used to pay for major projects in the future, such as landscaping or a new roof.
Administration fees are the amount payable to your landlord for any services that are provided directly to your property but are not covered by the service charges. They can be charged for applications for granting of approvals under your lease, such as consent for making property improvements, selling or transferring the leasehold property, keeping pets, or sub-letting. These details should be indicated in the lease.
I Decided to Buy a Leasehold Property. What Should I Do Next?
Being a new leasehold property owner means you will have to wait two years before you can start the formal process of extending your lease. Therefore, you may have to pay marriage value when you extend your lease if the property you are buying only has 82 years to run.
Fortunately, you can bypass having to wait two years before starting the process yourself, and it requires the expertise of a trusted conveyancing solicitor. You can ask your seller to serve you a formal “Section 42 Notice” to start the lease extension process.
When you are buying a leasehold property, you can compare conveyancing quotes and prices easily and instantly with help from our fully licensed and regulated conveyancing professionals. Our conveyancing fees comparison calculator lets you find the right solicitor who fits your needs in terms of location, budget, and lender panel requirements.
At present, there is now a trend for developers to sell new build houses as leasehold. However, many choose to stay away from this type of arrangement since it was made for the developer’s financial benefit, and there is no valid reason for them to retain the freehold of a house. For further details, you can reach out to us and we can connect you with a reliable conveyancing solicitor.
A leasehold property can be a secure investment with a reasonable lease agreement. Buying this type of property can be challenging, especially for first-time buyers like you. To prevent making costly mistakes and ease your mind knowing a professional handles your property purchase, don’t hesitate to ask us for help.
Ensure a hassle-free property sale, purchase, or remortgage process by working with us. We connect our clients in the UK with conveyancing solicitors in London and offer instant online residential conveyancing quotations. Contact us to request a quote!