What does a "125 year lease" actually mean?

[Lottaberry]

Say I pay 200k for a flat, which is stated to be 100% ownership (i.e. not one of those shared ownership type things) but states 125 year lease.. what does that mean? That I'm merely renting the flat for £200,000 total for 125 years - what happens after 125 years? It gets automatically given back to the freeholder or whatever the term is?

I know a person is very unlikely to live for 125 years post-getting their mortgage lol but just mean in terms of inheritance etc as well as major rennovations etc.

It means you will have to pay to extend your lease. Beware of selling with less than 100 on the lease - I’ve no idea why but someone more knowledgeable will come along :)

You might not have to pay BUT someone in the future will.

The lower the time left on the lease the lower the value on the flat, and the more it will cost to renew said from bitter experience
A lease shouldn't go less than 80 years ideally. You may find it harder to remortgage if it is much shorter than that.
Essentially, you are buying the bricks and mortar but leasing the land that they are built on. In theory yes, if it goes down to 0 the landlord could claim their land back but it doesn't really happen as essentially the property would be all but worthless by this point.

You buy the remaining portion of the lease. I bought 82 years remaining of a lease. It cost me £5k to extend. It's fine. If you are in the SE it is an affordable and very common way to be a homeowner. A freehold house would have been a third more expensive (and way out of budget).

With flats for example, the property and the land it sits on are owned by a freeholder. The building is carved up into the flats and the freeholder grants the first owner of each flat (leaseholder) a lease for a set number of years (e.g. 125 years). That lease gives the leaseholder of the flat the right to live in the flat but there are rules set by the freeholder e.g no knocking down walls, don't change the windows.

The leaseholder usually pays the freeholder a ground rent each year which is basically the rent for the flat occupying the freeholders land and building. The leaseholder also pays service charges to a management copy who should maintain the building and common areas. The freeholder can also bill the leaseholder for major works e.g a new roof.

When the original owner comes to sell the flat, the remaining lease or right to occupy the flat is sold to a new person but the lease is still counting down from the original person. So if the lease started at 125 years and the first owner lived there for 10, the next owner will be buying a 115 year lease. Technically at the end of the lease the flat reverts to the freeholder but this is unusual as leases are normally extended before then by paying the freeholder more money.

The less time a lease has to run, the more expensive it will be to renew, mortgage companies do not like short leases and anything under 80 years left you will struggle to get a normal mortgage. With less than 80 years left the value of the flat is likely to be affected. It may also be the case that the ground rent increases as the length of the lease decreases.