Buying a leasehold property

Generally, when you buy a house in England and Wales, you acquire the freehold.

This means that you own it outright and it will be yours until you decide to sell it or until you die.  It is also your responsibility to maintain it and to insure it.  You can do pretty much what you want with it, subject to the usual planning limitations etc.

When you buy a flat however, you acquire a leasehold interest.  The freehold is owned by someone else - sometimes a private individual but more often than not, a limited company – and you will have a lease.  Leases are granted for a fixed term, usually somewhere between ninety nine years and one hundred and twenty five years, but some are nine hundred and ninety nine year leases.

Once you own the flat you will be the ‘Leaseholder’ (or Lessee or Tenant – depending on the terminology in your lease) and your lease will dictate exactly what you can and cannot do with the property.  It will also contain an obligation to pay rent to the freeholder (your ‘Landlord’) which can be anything from a peppercorn (which means no actual rent is paid at all) to several hundred pounds a year and a ‘service charge’. 

The service charge is your contribution towards the cost of maintaining common areas on the development (such as lawns, access roads and car parking) as well as the building and upkeep of shared amenities inside the building in which the flat is situated (such as the cleaning of staircases and the provision of lighting or a security alarm).  It will also often include your contribution towards the Landlord’s buildings insurance premium because the building itself will be insured by the Landlord, not you.  You, as the leaseholder, must arrange your contents insurance in the normal way.  Service charge is paid in advance but is often subject to adjustment later, once the actual expenditure for the year has been calculated by the Landlord, his accountant or the managing agent.

Things to bear in mind are:

• When the term of the lease ends, ownership of the flat reverts to the Landlord unless you have negotiated an extension beforehand.  It is therefore important to confirm as soon as possible the amount of years that the lease has left to run;
• You might struggle to get a mortgage if the number of years remaining on the Lease is fewer than sixty, however each mortgage lender has different requirements and will be able to confirm to you at the outset whether or not it is happy to lend on the property;
• The Landlord will often employ a managing agent to deal with the collection of rent and service charge on its behalf as well as to deal with any queries about maintenance so you may have little or no actual contact with your Landlord.  The fees charged by the managing agent will be incorporated into your service charge payment;
• Some Landlords may offer to sell the freehold to a specially created limited company set up and run by all the Tenants in the building or a group of leaseholders (subject to satisfying certain requirements) may purchase the freehold.  You will each have a share in the company and therefore a say in the day to day running of the development and maintenance of the building;
• Leases are complicated and often lengthy documents.  Your responsibilities and obligations will be governed by the terms of the Lease and you should check before you complete your purchase that you are able to comply with those terms.  Some leases do contain some surprising restrictions - for example prohibiting the owner from having pets, or playing loud music at certain times of the day or letting the flat;
• All alterations to the property are likely to require the written consent of the Landlord or its managing agent in addition to any approvals required from the Local Authority.  If the flat appears to have been altered since it was originally constructed, make sure that the appropriate consents are in place and tell your conveyancing solicitor.

The fact that you are buying a leasehold property should not put you off.  If the correct documentation is in place they are usually managed and run very effectively.

If you have any queries concerning the ownership of your property or in connection with a sale or purchase please contact Naomi Wilson at Astle Paterson by e-mail at nwilson@astlepaterson.co.uk or by telephone on 01283 531366.