Leasehold properties have been in the news a fair bit of late, with the government announcing a new consultation to look at how to address the problems caused by unfair leasehold practices.
As someone looking to get on the housing ladder, this can all be a little confusing – and make leasehold properties sound very unappealing. We’ve put together this brief overview of leasehold vs freehold properties, and will explain what the latest government consultation is all about.
What’s a leasehold property?
When you buy a leasehold property, you’re buying the building but not the land on which it stands. In England, flats are more likely to be leasehold properties than houses are. However, there can be exceptions.
As a leaseholder, you’ll have a lease agreement with the freeholder – the owner of the land. This allows you to own your property for a specified period of time. You will usually have to pay to extend the length of your lease, and will often have to pay ground rent each year to the freeholder as well.
Your lease may also include certain conditions relating to the alterations you can make to your property. It will typically also specify how much you’ll be expected to contribute to the overall upkeep of the building, something that’s particularly important in blocks of flats.
What’s a freehold property?
If you buy a freehold property, you’re buying the land and the building. You won’t have to pay ground rent, and you won’t have a lease that can expire either. Most houses in the UK are sold on a freehold basis.
That’s not to say you won’t have to splash out for property maintenance, but you will be in complete control of the maintenance of your home and how much you spend on it.
Can you buy the freehold of a leasehold property?
You have the right to ask the freeholder to sell you the freehold at any time. If you own a flat, you’ll only be able to purchase a share of the freehold for the building. If the freehold is being sold by the current landlord, they are legally obliged to offer it to the leaseholders first.
How long do leases last?
The length of time left on a lease is important if you’re thinking of buying this kind of property. Most leasehold homes have an initial lease of 125 years, and this can be extended by 99 years by negotiating with the freeholder.
Which? points out that you generally need at least 80 years left on a lease for most mortgage companies to lend to you. If that’s not the case, you should speak to the existing owner to ask them to arrange for a lease extension before you go ahead with the purchase.
Should I wait for the government consultation before buying a leasehold property?
There has been much criticism over the way in which leasehold properties are managed in recent years, which is what has prompted the government to look into the practice. If you’re ready to get on the housing ladder, make sure you thoroughly read any leasehold agreement before you commit to a purchase.
Speak to your conveyancing solicitors in Surrey to get advice if you’re not sure about any of the terms of the lease, or how much you may have to pay to extend it in the future.
Although the government has signalled its intent to ban leasehold agreements on new homes, it’s less clear what they will do for existing leasehold properties. The Independent also pointed out that this is the second consultation launched on the subject, with the government previously consulting on a very similar issue in 2017.
Rather than putting your plans to buy on hold completely, it may be better to seek advice based on your circumstances and which property you’re hoping to buy from local solicitors.