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’

Leasehold ownership is perfectly normal and nothing to be worried about. Owning a leasehold property will almost always be better than renting in that the owner has a realisable asset and security of tenure. Renewal of a lease that has 100 years or more to run will never be an issue for the purchaser.

Questions to ask are:

what is included within the “demise” ie the leaseholder’s responsibility. I have flats where the windows are and are not included: if the former then the leaseholder is allowed to do whatever they want, if the latter the Freeholder will be required to do the work or give permission for it to be done.

How much are the service charges and insurance costs. What do these cover. How proactive are the management company (responsible for the fabric of the building on behalf of the Freeholder). The state of any common areas in and out of the building will give an indication of how the block is managed.

How long is the lease - less than around 80 years may spook a mortgage lender, as may a ground rent of over £200

If a leasehold property is all that is affordable / available it would be madness to walk away on the basis of this form of ownership alone. Just go in with eyes open

Anything done by the leaseholder inside their property is not subject to the freeholder agreement

As already stated by previous posters, this is incorrect. Quite often leases place restrictions on what can be done by a leaseholder inside their property - it may be an absolute can't do or it may be that permission is required from the freeholder first. This can include things like removing internal walls or putting wooden floors down or having pets, all examples. It's VERY important to check the details of the lease to understand what can and can't be done. If a freeholder decided to enforce a breach of lease, the leaseholder could ultimately lose their flat.

Leaseholds are nothing to be scared of but your friend needs to do her research so she understands her obligations as a leaseholder and the responsibiities of the freeholder / managing agent. It's also important to understand the service charge and sinking / reserve funds. It is not necessarily as simple as look for a low service charge - that could indicate that insufficient maintenance is being done and/or no/little contribution is being made to a reserve/sinking fund which could mean leaseholders being hit by big bills when a new roof is required or fire standards require updates to the building(s).

OP, it all depends on the flat and the terms!

For most people a leasehold flat is a stepping stone to a small house. And as long as the terms are right, much better than renting! She would have security from being evicted and rent rises. She will build equity and the value may well increase over time (though flats are more static atm).

Almost everyone in London started with a leasehold flat, including everyone in my extended family. And none of us have horror stories to tell.

There’s so much incorrect information here. Tell your friend to look at the Leasehold Advisory Service linked earlier.

Gove wants to change the law.

So when she comes to renew the lease in 24 years time she may find that she can have an extra 990 years on it.

BTW even if she buys a freehold house she still needs to do her homework. Lots of houses have restrictive covenants on them.

Yabu.

@IcedupTulip there is some incorrect info on this thread and I've not read the whole thing.

IME estate agents don't always understand the ins and outs of a particular buildings title so if you have very specific questions getting hold of a copy of the lease from the land registry early (it costs about £5) might be a good plan.

The roles/ responsibilities of freeholder vs leaseholder varies especially in modern buildings.

• can she change windows etc off her own back or does the leaseholder have to give permission? - depends on lease - may be up to individual leaseholders or held as a block wide thing

• are there any situations where the leaseholder will need to give permission for anything? Yes, lease will be specific. In my building I need permission to move internal walls, or punch through external wall (e.g installing air-con) but not to replace the existing kitchen/ bathroom. Some properties forbid installation of hard flooring and specify that properties must be carpeted.

You can also be stopped from doing things e.g storing items other than a car in a car parking space, subletting a parking space

• What happens if the leaseholder doesn’t renew the lease when it needs it? Can that happen? The freeholder can't really refuse to renew a lease. This is enshrined in law. Provided you do it before, I think 85 years, it isn't too expensive.

More here: ^www.lease-advice.org/advice-guide/lease-extension-getting-started/^

@IcedupTulip and your conclusion that she would be better off renting is ridiculous.

The majority of flats in London and across England are leasehold!

Yes, there are costs and restrictions but not owning a property isn't the solution.

The leases in some buildings do make them less attractive, but not all are terrible.

Thanks. I did tell her that lots of people own a leasehold and it can’t be that bad but she worries that she’ll be restricted. I didn’t think she would be particularly but after reading this I think she was right. She’ll have to get a copy of the info and make a decision based on her flat. I really thought the leaseholder just owned the land the flat sat on and that was it. Didn’t realise they’d also be a freeholder etc.

One more attempt to explain the terms! If you buy a leasehold property, you are the leaseholder. The landlord is the freeholder. What they own and what you own depends on what it says in the lease.

A leaseholder is basically a tenant that has paid their rent for a considerable period in advance (99, 120, or 999 years for example).

There are many problems with this type of tenure. The leaseholder never enjoys full ownership of their home, although they have greater security of tenure than they would have with a normal tenancy, due to the upfront payment they make when they buy the lease.

If the period of the lease goes below 80 years, prospective buyers will struggle to get a mortgage which will make the home difficult to sell and considerably affect the value. This further complicates what is a longer and more drawn out process than selling a freehold property.

The leaseholder can apply to the freeholder to increase the lease, but it can be a long, difficult and expensive process. The leaseholder will be liable for the freeholder's legal costs as well as their own.

The leaseholder is liable for annual service and ground rent charges which the freeholder can increase every year.

I would not recommend buying a leasehold property unless it is the only way you can afford to buy a home.

A lot of properties come with restrictions - properties in conservation areas, listed properties, properties with restricitive covenants etc.. and there are always planning permissions required for some works even with freehold properties.

She needs to work out what are the red lines, what she can afford etc..

What she needs to understand is these restrictions will be spelt out in the lease she is looking to buy - once a solicitor has explained them she can decide if those restrictions are ones she is happy with or not. No one can say what they are until she gets the lease.

My lease for example says I am not allowed to leave possessions in the communal corridors and stairwells - you could see that as a restriction or as a sensible safety precaution. Only she will know if she is happy to sign up to that.

@SerenChocolateMuncher You can avoid many of those issues by buying a share of freehold property where you buy both the lease and a share of the freehold so you effectively become the leaseholder and the freeholder.

My lease is 995 years because I also own part of the company that owns the freehold.

There are other issues with share of freehold properties though. 😐

Just so you know, fists don't have permitted development rights in the same way a normal house does. Therefore replacement windows may also need planning permission as well as permission from the freeholder.

Flats not fists!

Leasehold rules aren't generally to make life difficult or be awkward, they're to enable good neighbourly relations and aim to prevent anything antisocial.

Whilst your friend would be wise to proceed with caution, I think she'd be daft to rule out all flats.

Some of the flats around me regardless of who the freeholder is now have long leases of 900 years. One of the issues with them though is in the smaller buildings is that the freeholder then often disappears. The freeholder does exist, so it hasn't reverted to the Crown, but they aren't interested in their property so this means that when say the roof needs replacing the leaseholders have to sort it out themselves.

I also have a friend who lived in a block of 5 flats were only 3 of them shared the freehold. Their leases were only 99 years and to sell it even though her lease was 95 years and she one of the freeholders, she had to extend it by 90 years. The buyer's solicitor didn't know what they were doing so the sale took months.

The part about ground rent is not correct.

You can buy a leasehold flat (or even house) with increasing ground rent but you are likely to find that many mortgage providers now won't touch it.

There as many other ground rents are peppercorn. In some cases as it is a few shillings and in a building with long leases the freeholder isn't interested in collecting it.