Buying leasehold
This content applies to England only.
Housing laws vary between England and Scotland. Get advice relating to Scotland
If you are thinking of buying a leasehold property, you need to consider the extra ongoing expenses you will have. The details of the lease will need to be checked carefully as part of the legal preparation involved in buying.
Which properties are leasehold?
Most flat owners are leaseholders, even if they own a share of the freehold as well. This is the case whether the flat is in a purpose built block or a converted house. Some houses sold on the open market are also leasehold, but this is rare.
You will also be a leaseholder if you buy through a shared ownership scheme. However, you may be able to buy the freehold if the property is a house and you go on to buy the remaining shares.
What does being a leaseholder mean?
Leaseholders actually buy the lease to their home; not the property itself. The lease gives you the right to live in your home for a certain amount of time. Most new leases are granted for 99 years, but can be for as long as 999 years.
The time left on the lease will be reduced as the years go by and will eventually run out unless it is extended. A lease can be bought and sold at any time, but it may be difficult to find a buyer if there are less than 75 years left to run. It's usually possible to extend the lease, but this can be expensive.
What expenses do leaseholders have?
Leaseholders normally have to pay charges to the freeholder or a managing agent who looks after the property for her/him. Charges will vary from one property to another and can be expensive. As a leaseholder you may have to:
- pay ground rent for the land on which the property is built
- pay service charges for minor repairs, cleaning and maintenance
- pay a proportion of buildings insurance taken out by the freeholder
- contribute to a 'sinking fund' to cover the cost of major repairs.
What is the lease?
The lease is the legal contract between the freeholder and the leaseholder. It explains the rights and responsibilities you and the freeholder have. Every lease is different, so it's important to check what it says. They are usually written in legal jargon and need to be carefully examined by your solicitor to make sure there are no unreasonable conditions about how you use the property. Ask your solicitor to explain the conditions of the lease including:
- how much ground rent you will have to pay and when
- how service charges are calculated
- how repairs to the structure and shared areas of the building are arranged
- whether service charges and ground rent can be increased, and if so, how
- whether you will have to contribute to any expensive repairs that have already been carried out (such as replacing windows or repairing a lift)
- who has to arrange (and pay for) insuring the building
- whether you need permission to rent out your home or make alterations.
If there is a major problem with the lease, it should be sorted out before contracts are exchanged. This might mean that the seller has to sort out a dispute about repairs with other leaseholders and/or the freeholder. This might delay the sale, but is usually much easier than dealing with the problems after you move in.
