First time buyers - what is leasehold property?
If you’re thinking of buying a flat, it’s almost certain that you’ll be taking on a leasehold property. But what exactly does that mean and how does it differ from buying freehold?
Leasehold means that you own the property but the land upon which the property is built is owned by the freeholder. This gives you the right to occupy the property for as long as the lease is valid. If you own a freehold you own the property and the land upon which the property stands. In general, most houses in England and Wales are freehold and most flats are leasehold.
A lease is a contract between the leaseholder and the landlord that gives you ownership for a fixed period of time. The lease is a legal document and outlines the rights, responsibilities and obligations of both the leaseholder and the landlord. It also details the services that you can expect the landlord to fulfil. The landlord will, in most instances, manage, maintain and repair the building structure, common areas and exterior grounds.
The lease will set out your obligations as a leaseholder, and will usually include keeping the flat in good order, not causing a nuisance to any neighbouring owners and not doing certain things – such as keep pets, for example – without obtaining the prior consent of the landlord.
If you buy a leasehold flat as opposed to a freehold house the two things you will need to budget for are ground rent and service charges.
Service charges are payable by the leaseholder to the landlord for the services they provide and can range anywhere from a few hundred pounds to thousands of pounds on an annual basis. Whilst it will vary between leases, the service charge would normally cover maintenance and repairs, building insurance and cleaning of common areas. There will also be a charge for managing the building, and this is normally performed by the landlord or a management company.
Leasehold is a tenancy; therefore it’s also subject to payment of rent, which is known as ground rent. This is often only a small amount but is also a requirement of the lease and must be paid on the due date.
Your lawyer will advise you on all these issues. If you’d like to continue reading see our article giving the answers to the seven questions we are most often asked about leasehold properties.
We have residential property specialists at six offices across East Kent who will also happily deal with your questions.