In the UK many properties are sold on leasehold basis and if you are planning to buy a leasehold property then it’s imperative that you understand what it actually means.
What is a leasehold property?
Leasehold property means that you are purchasing a property on conditional ownership for a fixed period of time. In other words, you are (in effect) a tenant in your own home. The complete ownership of the property lies with the landlord or the freeholder and even if you want to make any additions to the structure of the property or even if you want to keep a pet you will have to ask permission from them. You can sell the leasehold interest only, rather than the land that the property stands on.
As a leaseholder you will have to pay an annual ground rent and service charges apart from the maintenance fees and the share of the buildings insurance. However, the maintenance of the common areas of the building such as the staircase, entrance halls, roof and the exterior walls is the responsibility of the freeholder.
A legal lease agreement is signed between you and the landlord. The lease agreements are typically made for long-term from 99 years to 999 years. The property ownership returns to the landlord at the end of the lease term. However, if you qualify the lease agreement can be extended at anytime and the lease can be extended by:
- 50 years for a house
- 90 years for a flat
There is a lease extension calculator by the Leasehold Advisory Services UK that can guide you on the cost of extending the lease.
Changing the lease
To make certain changes in the lease you will have to first speak to the landlord. This is called as ‘varying the lease’. In case of disagreement, you can apply to the tribunal and contact Leasehold Advisory Services for advice.
Termination of the lease
This is very rare that the landlord may evict you before the fixed term ends. However, there can be some circumstances or if allowed in the lease, the landlord is allowed to do this. This is called as ‘forfeiture proceedings’. The landlord will have to get the court’s permission and send a formal written notice to you.
On expiry of the lease
When the lease expires, as a leaseholder you don’t need to leave the property and the tenancy can continue on the same terms and conditions unless the landlord or you decide to end it.
Leasehold tenures are common but can be complex. Please seek good legal advice before proceeding.