To ask about leasehold properties?

[IcedupTulip]

My friend is looking at buying a leasehold flat but neither of us have lived / owned a leasehold before.

she has an appointment to view the flat and will ask the estate agent in more detail but wants a bit of an idea on a few things. she’s wondering

• can she change windows etc off her own back or does the leaseholder have to give permission?
• are there any situations where the leaseholder will need to give permission for anything?
• What happens if the leaseholder doesn’t renew the lease when it needs it? Can that happen?

I can’t remember what else we were discussing but it will probably come back to me when I press ‘ post’

The leaseholder is your friend, freeholder is the owner of the property.

Freeholder will be responsible for all structural repairs and upkeep of communal areas. Anything done by the leaseholder inside their property is not subject to the freeholder agreement. I am not sure where windows would fall in this. Possibly, your friend will need permission from the freeholder.
If the leaseholder does not renew the lease, the property will be transferred back to freeholder possession. It is up to the freeholder's discretion whether they would like to renew the lease when it expires.

Your friend would need a wayleave agreement for things like replacing windows. The freeholder owns the land and issues the lease with clauses therein about use, repair, etc.

Once the lease expires, the property reverts back to the freeholder. You can extend leases but they cost ££££.

Your friend will be liable for annual service charges and insurance together with ground rent.

I would avoid a leasehold unless share of freehold inc. At worst, a long lease, 125+, low service charge & low ground rent. 'Sinking fund' also needs consideration. I hate leaseholds but unavoidable in London.

Not heard of a freeholder as well as a leaseholder with flats!

I assumed she would own her property and the land it sits on was owned by the leaseholder. I must admit i didn’t realise she’d have to ask permissions about changing windows but she thought she would. Guess the estate agent will give her a copy of the lease to look through to see what she can and can’t do.

she really doesn’t want a leasehold and would much prefer a freehold home but can’t afford it.

i have said that so many people live in leaseholds that they can’t be that bad but she’s not so sure.

What’s a ‘sinking fund?’ Is that in case something communal needs repairing? Roof, driveway etc?

Concerning windows, the freeholder will need to give permission. He/she may want to ensure that the replacements will match or be in keeping with the windows on the rest of the building. I did this on a previous flat and, although the freeholder was not easy to deal with, he was OK about that. Of course, the choice of windows may more crucial if you are in a conservation area or if the building is listed.
The other thing I did in that flat was move the front door so that I had space in my hall for a good built-in cupboard. Again, I assured the freeholder that the new wall would be made good and a light switch moved by
a qualified electrician.
Of course, it is up to the freeholder whether to give permission - perhaps your friend could ask the freeholder for a broad decision before the purchase, preferably before contracts are exchanged (the solicitor handling things should be able to help).
Lease lengths are very important - too short, and the flat will then be difficult to sell and therefore fetch a lower price, possibly less than your friend paid. You need to be looking at, I think, 80 years or more for a good investment ( I may be slightly out on that but, again, the solicitor will be able to advise). As PP have said, extensions are possible but can be expensive.

Yes, that sort of thing.

I'm currently trying to sell my leasehold flat.

Avoid. I am NEVER doing leasehold again.

With flats normally the physical building is owned by the freeholder (aka landlord) and the leaseholder (aka your friend) would have the right to occupy the flat that they own for the duration of the lease.

Actually some of PPs advice is wrong. Basically it completely depends on the terms of the lease and your friend's solicitor is the first port of call for advice on all of these things. Some leases have all this stuff written into them in minute detail about whose responsibility everything is. Some leases don't. If it's not specified in the lease that she needs the freeholder's permission for something specific, that generally means she doesn't, because the lease should be exhaustive and clarify everyone's rights and responsibilities (like a hardcore version of a rental lease).

For example some leases have it written into the lease that they don't allow pets and some have it written into the lease that they allow a specific number or type of pets, and some don't say anything which means your friend would not be bound by a lease on that topic.

Unfortunately this is incorrect. We live in a leasehold flat and have to get permission (in the form of licenses which we have to pay for, and which can be refused) for various things inside our flat. Replacing the heating system, basically any major works require permission. We also need permission to replace our windows - this involves getting architectural drawings done to submit to the freeholder, and we are only permitted to purchase from one manufacturer.

Our lease is more restrictive than most, so I would recommend your friend gets as much info as possible before considering a purchase. Some people live very happily in leasehold flats with no issues. Ours makes us miserable at times.

This doesn't contradict my statement. Major works, replacement of heating and plumbing constitute changes to the structure of the building which is freeholder's domain. You can presumably decorate and refit to your heart's content without permission (if not, this indeed would be a very restrictive lease).
I can see how replacing windows would fall outside of the lease since they apparently fall under structural changes.
Leases do vary a great deal but above is good rule of thumb.
My friend was able to build a whole extra bedroom in his property by converting the walk-in wardrobe, expanding onto the landing roof and moving property entrance all with freeholder's enthusiastic permission. I appreciate, this may be quite unusual for most leases.

The initial questions to ask are:

-who is the freeholder?
-what service and/ maintenance charges are there?
-please can she see a copy of the lease agreement

Only the lease specific to that property can confirm who is liable for what works/costs, and what can be carried out.

Your friend should not rely on anything the estate agent tells her. Ask, yes, but don't take anything as a given.

She should learn as much as she can about how leaseholds typically work, but she will need her solicitor to help her understand all of the restrictions on the flat she hopes to buy.

I would avoid anything with a short lease - but most have hundreds of years left so this should not be an issue. If there are less than a hundred years left the price should reflect this. The freeholder will have to extend the lease (but it will cost).
the freeholder also usually owns (although this will depend on the particular lease) the window frames, outer walls etc, but the leaseholder (ie friend) will be responsible for the glass.
not only does permission need to be asked and granted - it usually costs a fee to ask the question,
also need to look into the ground rent, and how it increases. Nee blocks have zero, or a peppercorn ground rent. Older ones may have less favourable terms.
in Amy block of flats there will also be service charges, for communal area, lifts etc.
Finally - I wouldn’t look at a flat in a block with cladding - might be unmortgageable.
it also takes longer to buy/ sell a leasehold property, and costs more in solicitor fees, and other fees, as usually a sellers pack needs to be purchased (when selling). Finally, getting s mortgage on a property where the ground rent exceeds £1000 pa might be more tricky.
if I had the choice I’d live in a freehold. As it stands I am in my second leasehold.

She may not be able to see a lease before buying, it will probably be with the sellers mortgage company or solicitor. There are share of freehold flats in London, what's her budget and what areas is she interested in.

If the ground rent is more than £250 it can impact the choice of available mortgages.

I wouldn’t look at a lease under 100 years.

Re maintenance it depends on the lease terms.

You have your terms and understanding mixed up.

When you buy a leasehold property you are buying a lease: a lease to live there for as many years are on the lease. Generally you buy the lease from the current leaseholder, and one that lease until you sell.

Millions of people in London and other places live in leasehold flats and the terms / risks vary a lot.

It could be a large block with lifts, communal gardens etc with v high service charges.

It could be a converted Victorian terrace where the two or three leaseholders also jointly own the freehold and are in effect the management company with a deed that dictates what structural parts of the building are joint responsibility.

My preferences would be avoid anything with a lift, cladding, high service charges.

I lived in a big converted house, 5 flats, we were all directors of the company that owned the freehold, so didn’t charge ourselves ground rent, did set a reasonable contribution per annum for the sinking fund , and obviously set a v long lease which obviously we would have renewed for ourselves. There was a covenant that said no rentals / sub letting which cut down problems for those of us that lived there but restricted sales from BTL or would-be landlords / investment buyers.

We live in a Leasehold flat, which is currently on the market. We've had any number of issues, some our fault, some our (crappie, nonexistent) freeholders.

Our flat is what could be described as a maisonette. It's an Edwardian purpose built property. From the outside it looks like a terrace house with 2 front doors, if that makes sense. So the freeholder owns the freehold to our flat and that of upstairs.

We moved in in 1995. At the time, you could do shared ownership on the open market ie you didn't have to go for an estate, you found a property and approached the HA about buying a share. So we went in with a HA, meaning the freeholders were the original freeholder plus the HA.

When we moved in the lease was just under 99 years and the solicitor advised us to lengthen it ASAP. Tbh we were just so happy to be in (in awful council flat before) we didn't really listen to that.

For 5 years we got a demand each year for ground rent which was paid. Then the demands stopped. The upstairs neighbour went to the freeholders address to find out he'd died and we then had no idea who the leaseholder was as noone approached us.

In 2011 my mum died and I inherited some money, which I used to buy out the HA and clear the mortgage. During this process, the freeholders were located, who demanded the back rent but the solicitor reminded them that (a) they were supposed to approach us annually with a formal request which they hadnt; (b) we didn't know who they were for years and (c) legally we were only liable for 6 years. The lease was sorted out showing we were now the leaseholders (ie not us and the HA together as it was initially). However, we never heard from them again.

So last year we decided we wanted to move. By this stage, we had not been approached directly for ground rent in any shape or form, bar an indirect request via our solicitors in 2011. By this stage (and this was our fault) the lease now had less than 80 years on it. We took legal advice and basically we had no option but to increase the lease if we wanted any chance of selling, because it is practically impossible to get a mortgage with than 80 years. So we applied to increase the lease, which cost £55k plus legal to increase by another 99 years. Fortunately we had a second property (holiday let) which we sold to release equity. So now our lease is ok for us to sell but it's been a logistical and financial nightmare.

Would I go for another leasehold? No, not if I could avoid it, unless it was a share of freehold or like our holiday let was a 999 year lease, which do happen. Fortunately we moving out of London and are looking for a house making it easier. Flats are often Leasehold properties.

During our time here we've replaced the windows and boiler and tbh it didn't even occur to us to ask the freeholder! With the amount of contact we've had from them that's hardly surprising! They haven't even asked us for ground rent since the Millennium!

We've had a civil relationship with the upstairs neighbour who has always been the same regarding communal areas, roof, drainage etc and have an informal agreement that up to about £500 we cover any repairs to ground/underground works and he does the same to the roof/guttering. Anything more we go halves. We've never involved the freeholders. Luckily our agreement has worked for us.

We did consider asking the upstairs neighbour if he would consider a share of freehold but he spends long periods away and we couldn't pin him down and needed to do something with the lease asap as the shorter it is, the more expensive it gets especially once it gets under 80 years.

Firstly your friend is not buying a flat, they are buying a lease that gives them the right to occupy a flat for a certain number of years.

Typically the lease will set out the rights and responsibilities that buying that lease brings.

I would advise getting a good comveyancing solicitor that has experience of leasehold.

Thanks all. Looks like my friend is right about being quite ‘trapped’ by owning a leasehold flat.

I feel quite sad for her now. Would never have looked at it as she is paying about £200k for the right to live in the flat and not for the flat itself.

maybe she is better off renting.

she has an appointment to view the flat and will ask the estate agent in more detail but wants a bit of an idea on a few things. she’s wondering

Waste of time asking the estate agent.

The only thing she should try to get from them is the name of the freeholder and the name of the management company if the freeholder uses one.

She then should research them - Google is your friend - to see if either the freeholder or management company is notorious. If they are then your friend should go no further with that flat.

What she really needs if she makes an offer is a photocopy of the lease sent to her.

She then needs to read it herself, use https://www.lease-advice.org/ and ask people she knows who have leasehold flats showing them her lease wording to understand the basics. (So things like understanding who is responsible for the windows and whether there is a sink fund are basics, more complex questions including queries about specific lease terms e.g. having pets, running a business from home, nuisance terms. )

She should then ask her conveyancing solicitor any detailed questions this is includes finding out if any major works are due.

She needs to ensure she understands everything before buying. She should check whether t She also should be aware like if she was buying a house, about any more developments such as more flats, roads, rail stations etc in the area.

Not necessarily.

Some flats have leases of 999 years while others have share of freehold.

It just means your friend has to do her homework.

She knows the flat has 105 years left on the lease and that that’s good but within the next 20 she would need to purchase more.