Lease hold property

[Moni123]

Hi I am thinking to buy a flat and the property is lease hold option. I understand basic meaning of that . But I don't know what I need to be really careful . I know I will owne the property but not the ground and I will need to pay some amount per month for a lease graund. But how much it can be , how the price can change , for how long it is good to have the lease, what happend when the lease finished ... is anyone have it is that good option ??? I would be thankful for any advices.

You need to get all these details from the estate agent. They can tell you the length of the lease and the price per year. You want to have a long lease - 98 years or above is good. If it's less than 50 or 25 you might find it hard to re-sell and the value will depreciate so you'd need to extend the lease (with additional cost).

Key is finding out what protections there are on the rate of increase it will go up by in future years. There is a risk the owner could sell on the freehold which could undermine your position. If it's a an older property - a sub divided house for example, you and the other leaseholders way want to buy out the lease in future. However if it's a new build block of flats that's not likely to be possible. Most new build flats are leasehold.

You don't own the property, Moni. Leasehold is simply a licence to occupy for as long as the leasehold term lasts. When the term eventually expires (if not extended), the property reverts to the freeholder. Most flats are leasehold though so as PP said, initial information will be available from the EA which should also be able to show you a copy of the management information pack (i.e. more detailed information about the lease, the ground rent, any service charges, whether there are any restrictions on what you can do with the property such as building work or owning pets, etc). If you decide to make an offer, make sure your solicitor has a good understanding of leasehold law. Not all do.

Boulezvous thank you . The property which I am interesting is quite new . The lease in for 99 years. But the flat ( 2 bed ) cost 50 k and I was wondering it that normal price or it's cheap becouse of lease hold or becouse of brexit.. I am first time buyer so I have got knowledge about it . Do you think the owner can give me any protections ..? Is there opportunity by law to have any protections..?

If you can stretch your budget to a freehold house, that is what i would advise.

I generally find estate agents pretty clueless but the management pack with have the info.
Things to watch out for would be any building work required (e.g. Roof repairs) and whether there's money. In some buildings, you pay a higher service charge and there's a 'sinking fund' for all these repairs. In other buildings, you'll pay low service charge but then you can get a bill for a big repair (even 5 or 10k).

You have the right to extend the length of your lease. It starts getting expensive if there are less than 80 years left on it. You can also buy the land under the building but again lots of legal details around that.

Singing Lilly thank you I understand now . Have you got any potential solicitor to recommend in Kidderminster?

Jon65 thank you hymm I would I think but I am 32 single and I don't want to have mortgage for 20 years or more so I though I can buy a flat and pay it off I 8 years ....

JojoMS2 thank you hymm like I said up I don't want to have mortgage for 20 and more years and I am singel so I can fix the roof... if I would be in relationship that would be great idea. And about that huge bill which I can get when I am on lease hold I though that why I pay some money every month to save them for big repair..

Sorry, Moni, but I don't live anywhere near Kidderminster so can't really help. It's always best to look for a personal recommendation first so if any of your family or friends or your colleagues at work have used a local solicitor, and are happy with the service they received, that would be a good place to start. If you can't do that, then I would suggest you ask the estate agents or your mortgage advisor which ones they normally do business with and whether they can recommend any of them.

Good luck. It's always an exciting time when you are choosing your new home.

Moni, yes, if you pay a service charge, you expect that everything will be ok. Unfortunately, some management companies are very good and some are rubbish. If you don't want to worry about the management company, short lease etc it is better to buy your own freehold house rather than a flat. If it needs a repair, you just pay a builder yourself.

I think 98 years is considered an extremely short lease. You will need to extend it which can be really expensive, possibly a lot more when it's so short to start with. You'll need to check if you can even get a mortgage on it with only 98 years left

Most full leases are either 99 years or 125 years although some are 999 years. The number to get nervous about is 80 years. If a lease is approaching 80 years, be very careful as extending it is more costly because of its "marriage value". This refers to the "marriage" between the property and the land on which is stands, presumably because 80 years is conceivably within someone's lifespan.

I own a few properties but would advise against buying a leasehold. The legal framework surrounding leasehold is very weak, and there are very limited options to challenge high service charges. By the way we aren't talking 5 or 10k here, a new roof in one of our buildings would cost us around 25k each leaseholder due to a badly managed building and very small sink/reserve fund. Not too much of a problem for an investor as losses can be carried forward and offset to a degree by income, but for an owner occupier it could be dire.

Buying a leasehold property is not a problem, but there are matters to consider so that you are aware of the costs and the differences over a freehold property.

A 99 year remaining lease term is absolutely fine. Anything 80 years or below you will need to extend the lease term, as mortgage lenders may not lend. The seller can start the process (providing they have lived in the property for two years) with a statutory lease extension (you may have to pay the costs). Don't expect a seller to extend the lease if there are 85+ years remaining.

You will need to be aware of how much the ground rent per annum is and whether it increases every 10/25 years and by what percentage.

You will need to be aware of how much the service charges are per month.

You will need to be aware of any Section 20 Notices for major works in the pipeline, whether any works have been completed recently but not yet paid for. Is there a sinking fund and how much is in it?

You will need to be aware that on completion there will be notices served on the management company/freeholder about the change of owner and whether you will need to enter into a Deed of Covenant. These come with costs which you will be expected to pay for.

Although service charges are quite high in some cases, bear in mind that all works in the communal areas and to the building are the reason you pay service charges. If you own a freehold property, you won't have service charges, but you will have to pay out for any maintenance costs yourself.

You can order the lease from Land Registry which will set out the length of the lease, what the ground rent is and any stipulations over what you can and can't do. It will also detail how ground rent can rise (some don't).

The seller has to pay for a management pack which is sent to your solicitor. You need to ask your solicitor to outline the important points regarding service charges, if there are any major works planned etc, which the solicitor generally will do when they report to you. But, bear in mind, by the time the solicitor has got this far, you are already a fair way in to the conveyancing process, but this is exactly why you instruct a solicitor.

Once you have owned the property for two years you have the right to apply for a statutory lease extension, so absolutely no need to forfeit the lease by letting the lease term reduce to nil years, when the freeholder could take possession.

Please do not rely on the Estate Agent for information. He is representing the seller and will only pass on information the seller has told him. EAs do not see the legal documentation and have no legal knowledge so anything they do say is not based on facts.

Thank you everyone for answers now I see it's not so easy and there is lots to be aware but I understand more thanks