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Lets be clear on what is a lease hold.

Thursday 16 November 2017

 
 
First of all, let’s be clear about what a lease is. 

Leasehold is one of the two forms of legal ownership that underpin our property market in England and Wales (the other is freehold). 

 

The difference is important and not appreciating the pros and cons can mean having a home that is worth what you have paid for it or one that isn’t.This is because a lease effectively means you rent your property from a freeholder, who may be referred to as the landlord, for a number of years. Leases are usually long-term and can be as long as 999 years. However, leases of 85 years or below can start to impact value and require caution. Certainly, any lease of less case a 999-year lease should not cause any particular issue.

 

Once we have understood the length of the lease does not present any difficulties, the next step is to be clear about the obligations and rights that apply to the lease. For example, in the case of flats, the freeholder will normally be responsible for maintaining the common parts of the building, such as the entrance hall and staircase as well as the exterior walls and roof. For houses, this may include shared ‘green areas’ or driveways in the street.

 

You will, as a leaseholder, have to pay maintenance fees, annual service charges and a share of the building’s insurance. There will be restrictions on your ability to commission any major building works to the property without express permission and there may well be bans on owning pets or subletting. Lastly, and possibly most importantly if your lease term is not an issue, you will need to understand the fees and how they are calculated and then 70 years can start to significantly affect the value of the house when compared to a like property with a longer lease. If you have too short a lease, the property can decline in value even if property prices in your area are generally rising. 

 

This means that fewer people will want to buy it when you try to resell; it also means that mortgage lenders might be reluctant to lend on it. 

 

This has become a contentious area for some leaseholders in recent times, who feel their freeholder is overcharging but are unable to do much about it. The issue for buyers comes from the escalation in ground rent that means the deal initially looks affordable. The freeholder must be approached for permission to alter and, if given, it will usually come at a price - 'justified' on the grounds that the landlord should get a share of the increase in the value of the property. If you are looking to do major work, like converting a loft, it is much preferable to buy the freehold, so make enquiries as to the possibility of this before purchasing the property. Be very careful during the conveyancing process what your lease includes i.g., A top floor flat in a former house may have sole access to the loft and have responsibility for the roo but that doesn't mean the leaseholder owns the loft space.

 

Your conveyancing lawyer should get answers regarding precisely what your lease entitles you to- and things like potential for development of the loft, it should not be marketed by the seller in the property's value unless the space is clearly included in the lease. None of this should put an informed buyer off a leasehold.
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