Leasehold Property?

[girlfriend44]

Does anyone else not fully understand Leasehold?

I know Freehold is better as you own the land. All flats seem to be Leasehold though?

Is it so bad? Does anyone have a Leasehold property and can explain the pros and cons please?

I would like to understand what it means to enter into a shared ownership purchase. Because they seem to be all leasehold but I don't know what that means long term for if you end up buying the whole house or one day hope to sell your share. I don't really understand it all either.

In the North West (especially) many properties are on 999 year leases with a fixed peppercorn rent, ie. they are effectively freehold. People will be along shortly to say how awful leasehold properties are - many are, but it depends on the lease. I live in a south Manchester area with many expensive Victorian and Edwardian (999 years) villas, all leasehold.

Say If you have flats on top of each other, someone has to own the land they are built on. So it could be one of the flats owns the land or all the flats jointly own the land (share of the freehold) or someone completely different owns the land or a company.

That's all I know about it and I'm not even sure that's completely right tbh. I've spent ages trying to get my head around it and I just can't make it make sense.

If you buy a flat, whose land is it on? Yes you own the bricks, but someone else owns the land.

Look at the conditions of the lease, no renting, no pets, must have carpet, must pay into the communal kitty etc.

And how many years are left on it.

And any odd issues that will be hard to sell on.

I've had two leases. Even had to extend one in order to sell it.

Leashold comes with rules as well. Eg. You need permission for renovations. Most flats in England are leashold. Commonhold is pretty rare as far as I know.
Eventually the lease will revert back to the freeholder. If leas is fir 125 years, in 125 years it goes back to freeholder. Unless extension is bought. Issue is then with value. If you have lease for less than 80 years it can be difficult to sell or get mortgage.

It's ridiculous when houses are leashold. With flats, it's kind of understandable.

If you can only afford a one bedroom flat though unless you accept leasehold your out the market.

Our house is one of those leasehold properties described by a pp. We have 910 years remaining on it, and no one has tried to collect the £3 per annum rent, so we’ll be fine I’m sure! We used to have a flat with a leasehold too, which was a bit of a pain with management companies etc, but didn’t cause any issues when we moved.

Can you rent it out?

@girlfriend44 my flat is leasehold. Its lease is 121 years. This means I can live in the flat for 121 years but I can also extend this lease for a cost. The residents bought the freehold years ago but the owner of my flat at that time didn't participate hence my flat is still leasehold; but this means half the flats in my development are share of freehold. The residents hence manage the building;- service charges are collected every year to maintain the communal areas and the communal garden and hire a cleaner and also for the sink fund for the roof. In a way, the service charges are separate from the leasehold; while most leases would stipulate a service charge; i have come across flats where the freeholder doesn't collect a service charge (usually period conversions), but it means if something goes wrong after many years, you can expect to pay ££££. A lot of leasehold flats are run by private companies who want to make money, hence service charges can be very high; but at the same time, modern flats also have lifts and other amenities that can be expensive to run. Compared with a 1930s flat like mine with no lift; the service charges are more affordable. The lease can also restrict the keeping of pets so definitely investigate if this is important for you (in my experience, most flats seem quite pet friendly these days; my lease states no pets without permission but this is quite readily given in actual practice with the stipulation that everyone should pick up their own dog poo).

Technically, even share of freehold means that there is still a lease and it doesn't cost to extend the lease except for legal fees. I just checked how much it would cost to extend my 121 year lease and it costs £1400 excluding both parties legal fees (it becomes massively expensive at around the 80 year mark). Owning a share of freehold means there usually is a company where each flat owner owns a share in it and that company owns the building and land. In fact, its quite easy to check if a flat's freehold is owned by the residents- just search the flat block name/address on companies house and you would usually find it. Even for flats converted from houses e.g 3 Kings Road Management Company or the Poplars residents associaation etc...

Thanks.

Yes we can rent out the property - but can’t keep chickens! 😁

And we could buy the freehold too if we wanted. But it’s such a long lease we have no need to.

Having owned a leasehold flat I would not recommend it to my worst enemy. They are increasingly difficult to sell and mine was only part of a 2 flat building. The more flats that form part of the lease the more complex the whole situation is.

Selling a leasehold property is also a lot more expensive as you normally have to pay admin fees to the management company in addition to your service charge and ground rent.

One of the most stressful periods of my life was when our then service provider decided they didn't want to manage the freehold anymore and I was stuck in limbo unable to well whilst we waited for the free holder to find a new management company, it meant I couldn't sell my flat for two years!

Buyer beware. If you don't own the physical ground the building stands on I wouldn't bother. Most management companies are run by crooks, though some properties my have a management company set up by the owners of the properties, even so this represents challenges as you've got to trust your neighbours will pull their weight and pay their way, and someone actually has to physically do all the admin and register it as a business in order to operate properly.

How do you buy a flat then as they all seem to be leasehold.

We appoint a managing agent to do the work and can switch as the residents own the freehold. Three flats in my block have sold in the last two years.

Flats are generally in areas where buying a house would be very expensive or you would be buying something v small. A house with the same floor area as my flat would be £600k. I doubt admin fees and service charges can add up to £150k! But at the end of the day, it depends on what the person wants. Most FTB don't have the £150k extra though...

I would say if you can find a leasehold that has the 900 years and low ground rent you are fine.

There are differences within the leasehold - I would be more wary of a lease of under 150 years (and not go anywhere near anything under a 100 without negotiating) and be very clear as to what is and isnt expected

or move to Scotland

You buy a house if you don't want leasehold....or buy in Scotland.

For me, buying a house would mean paying £8k in season ticket fares for me and DH plus longer commute and I didn't want to do that.

Ex mortgage underwriter here.

Put very simply, imagine with freehold you own the property and everything above and below it (although you have to allow pipes, aeroplane access etc). So if you have a house it's ideal.

As you can imagine, a flat therefore that is freehold is a bit of a nightmare - who own the roof for example? So what's usually done is that the exterior of the building is freehold, and you own your part of it on a lease (usually 100-1000 years). That way the freeholder (which can be a company) is responsible for things like the roof. Once your lease is due to expire you can usually pay to extend it again - anything less than about 80 years and lenders tend to get a bit twitchy though until it's extended - and that will affect the value.

Freehold flats are sometimes possible - but they are very complicated legally and so again this can affect the value and a lot of lenders don't like them.

Shared ownership is a little different - you buy a percentage of the property and rent part at less than market rates. So your overall monthly costs are usually less than buying outright and you can put down less of a deposit. You can "staircase" ie buy more and rent less percentage wise until you own it all.

We own a leasehold property that isn't a flat and it's been ok. The ground rent is small and our lease is 999 years so not bad at all. Even though I sometimes moan about the service charges I think they are actually pretty reasonable, and they do cover quite a lot. We don't need to worry about maintaining any external areas, our house gets jetwashed annually and any external repairs are done promptly. We live in a "naice", kind of unique area where most of the houses and flats are leaseholds, and the residents' service charges cover the maintenance of the entire estate, and the estate is kept pristine. It's so nice to walk around when everything looks lovely, and all green areas and walkways etc are kept in good condition and the estate feels really safe. I recently learned where the border of the area that our management company looks after is, and once you cross to the other side you can really see the difference as the rest of the town looks quite tatty. I appreciate that not everyone wants to contribute to this sort of thing, but I love living where we are and will be sad to eventually move out.

Having said all this, I have heard stories about bonkers charges and other issues, so I guess it just depends on the place.

Freehold flats are sometimes possible - but they are very complicated legally and so again this can affect the value and a lot of lenders don't like them.

I own a 'freehold flat'. What's complicated ? All the owners in the block (15) have an equal share in the freehold, which we collectively own. We appoint a management company to oversee day-today management. Most blocks in the area have a similar ownership structure. It works well. The flats are 'sought after' and there's no issue with 'lenders' liking them. On the rare occasion they become available, they sell very quickly.

I have a flat on a 999 year lease. Contrary to pp I don't own the flat (the freeholder owns all the flats in the building), I only own a long lease on it. We have a management company (all leaseholders are members) and an agent to actually run the property. We had to fire our previous agents as they were incompetent and then take them to court to recover money they had stolen. Dealing with agents in general seems like a hassle but that's probably because I volunteered to be a director of the management company.

I think it would be very complicated if Flat A (for example) wanted to add a balcony to his property and had to get permission from the other 14 freeholders!

@Isleoftights if you own a share of the overall freehold, along with several others, then you're right, that opens the mortgage market up a bit more. If you didn't have the collective agreement, if you each truly owned the freehold to each individual flat, then it would be a lot more complex and difficult to get a mortgage.

My friend owns the ground floor flat in a converted house and also owns the freehold for both flats in the building. I don't think she had problems getting a mortgage for that. Her boyfriend owns the top floor flat so technically she is his freeholder! He did buy his flat before her and she was living with him, which was why she was able to build a relationship with the neighbour downstairs and buy the ground floor flat after she died.

There seems to be a campaign to abolish leaseholds altogether and give LHs the right to aquire their freeholds at a bargain price, if I understand it correctly. The forums on Landlordzone have a lot of discussion about this if anyone is interested (or google "leasehold reform act"). Also, as of a few days ago, ground rents are no longer legal (!) but unfortunately that doesn't apply to my property as my lease pre-dates the Act.

I own my house in a shared ownership arrangement in Scotland. Currently, our share is 51%, but there is NO rent to pay on the rest either.

Since it was a pilot scheme in 2011, we can buy up to 90% of the house. It's 80% now for everyone else on the same type of ownership here.