Landlord blog: Leasehold - Lay it on me!
With over 1.43 million leasehold properties in the UK, there’s a good chance a landlord will purchase one at some point. However buying and owning a leasehold property can come with a few additional complications. Rob Denman explains all:
“When you purchase a leasehold property you are in fact buying the right to live there (or rent it out) for a set number of years rather than owning it outright. In other words a leasehold property is a long term rental.
“As a result the leaseholder – or tenant as they are commonly referred (which gets pretty confusing when the tenant is also a landlord renting to a tenant so I’ll stick with leaseholder) – is required to pay a ground rent the freeholder, details of which will be outlined in the lease.
“So with explanations done, let’s talk about buying a leasehold property.
“First of all, have realistic expectations of how long it will take. It often takes longer to purchase a leasehold property. Your conveyancer will need to read through the terms of the lease and bring any particularly onerous conditions to your attention. If you are buying the property to let, you will need to usually have to get consent.
“Conveyancers also have to ensure all paperwork surrounding your financial liabilities are received and understood. This can include how much ground rent and/or service charge is payable as well as any additional financial requirements you may have, for building repairs for example. This information can be very difficult to locate but is essential for all transactions to ensure you don’t encounter any nasty shocks downstream.
“So once you’ve bought the property there are things that you must do and things the freeholder must do. You cannot carry out any alterations on the property without the consent of the freeholder and likewise, they cannot carry out major works on the building without first consulting you.
“A leaseholder also has the right to extend the lease or buy the freehold at any point. In fact if you own a leasehold property for a considerable length of time it’s very likely you’ll need to extend your lease as the length left on the lease can have a direct impact on a property’s value. If there isn’t long left on the lease, lenders are often reluctant or unwilling to lend on it, in essence leaving the owner only able to sell to a cash buyer. Because there is loads of them around!
“If you own a leasehold house, you can individually buy the freehold. However if the leasehold property is a flat, you will need to purchase the freehold collectively with the other flat owners.
“It is important to bear in mind that by buying the freehold all flat owners become liable to arrange insurance, repairs and carry out all of the activities previously dealt with by the landlord. You can however extend the lease on a flat on an individual basis. This will add 90 years to the existing lease.”
If you would like more information about leasehold property, you can download Your Guide to Leasehold Property, Lease Extension and Enfranchisement. Alternatively if you are planning to extend a lease or buy the freehold of a property, contact us today.
Rob Denman is a solicitor and Head of GW LET (Landlord Empowerment Team), specialising in such landlord legal issues as rent arrears, tenant eviction and tenancy deposit disputes. In his spare time Rob enjoys watching football and running and has recently successfully completed his second half marathon.
Content correct at time of publication