In England and Wales, it is very common to own a leasehold property. It can be a bit problematic to understand what this means.
I found my dream home. However, it is a leasehold. What does this mean?
Be calm! Leasehold is a popular way of owning an apartment/maisonette/flat in Wales and England. The alternative is freehold ownership which means you own the property outright. Leasehold temporarily provides you with total, undivided rights to occupy a certain property over a set lease period. The length of the agreement can range from 99 to 999 years.
Can I make alterations to a leasehold flat after I have purchased it?
It depends on the lease agreement. Some prohibit any form of alterations while others require you to obtain permission. Also, some have no restrictions. For example some may allow general decorating but not allow internal walls to be moved. Other landlords welcome positive alterations and additions to the property; lantern roofs, for example, allow loads of natural light, and if done properly many landlords would not object. Before entering into a lease agreement confirm whether you need consent from the lessor to make any changes to your flat. You might have to talk to the managing agent supervising the property on behalf of the landlord/lessor.
What is ‘ground rent’ and will I have to pay for it?
Regrettably, ground rent cannot be avoided. This is the payment that a leaseholder makes annually to their landlord. The amount varies, it can be large (£200) or a small amount of just £10. It at times happens that the ground rent grows significantly over short periods. Your solicitor will counsel you if there are chances of this happening. However, it is crucial to enquire on the amount of ground rent charged, whether it fluctuates and the repercussions of any increase.
If I buy a leasehold flat do I have to pay ‘service charges’?
This will apply and you need to budget for it. Service charges are fees charged as your portion of the cost of maintaining the building where your maisonette/flat/apartment is located. Also, it is used in settling bills related to communal services and areas. Service charges are paid in advance once a year. The amount differs from building to building and is based on factors such as condition and cost.
I’m considering the purchase of a leasehold flat, how is the maintenance of the block handled?
On purchasing a leasehold you turn into a leaseholder. Just like in a tenancy the lease spells out your duties as well as rights. The lease also stipulates the rights and obligations of the landlord who is normally a freeholder.
The building containing your apartment or flat will require external and internal maintenance just like any other building does. Also, it may have common facilities such as lifts and communal heating that require maintenance. The freeholder shoulders the costs of such maintenance but it is recovered from the leaseholders through the service charge. Most of the time the freeholder contracts managing agents to oversee the running of the building for them.
How do I assess fire risks in a block where I intend to purchase a leasehold flat?
Your solicitor should request a copy of the building’s fire risk assessment. From this document, you can get the necessary information. It is a rule in Wales and England that all buildings conduct a routine fire safety risk review.
After buying my leasehold flat, am I allowed to sub-let?
The right to sub-let depends on the lease. Some are silent with no explicit provisions against subletting, some require consent and others restrict any form of subletting. Since lease agreements vary it is crucial to check with your lessor/landlord (usually the freeholder) to confirm the terms on subletting.
Can my leasehold expire?
Yes. Any lease has a commencement and expiry date similar to a tenancy. Before buying, get the facts on the time left before expiry as it becomes a challenge to sell as expiry nears. You have the right to prolong the lease on your apartment after owning it for two years. However, you are obligated to compensate the freeholder and the cost can be huge based on the outstanding lease period. On the expiry of your lease, you are guaranteed certain rights if you stay on the property. However, if you stay your rent will subject to a market-rates.