Buying leasehold flat

[Mayra1367]

Daughter is thinking of buying a leasehold flat . We have no experience of this so can’t offer any advice.
Anyone got any advice on what is normal in a lease , what to look out for ?
Thanks x

I had a lease hold flat, but it was many years ago. What I do know is that you have to be mindful of how many years are left on the lease, particularly when you come to selling it. It might need extending, to sell it on and it can cost you thousands. The main issue I had was the monthly service charge for the upkeep of the communal areas, gardens etc. It increased significantly every year and I just had to pay it. It became very expensive and I was relieved when I sold it on and moved to a property with no service charge. Don't mean to be negative but I wish I'd really thought about it before buying it and I wouldn't do it again.

There can be good and bad sides. I own a leasehold flat in a house conversion and save £50pm for all fees, which are paid once a year.

The laws are changing soon regarding lease extensions and costs. It was announced last week. But in general she will need a lease exceeding 80 years.

It's a good way to get the first step to home ownership.

Depends on how long the lease is. Under eighty years there will be problems getting a mortgage. And service charges can be high and subject to change. Disputes over repairs. And re-selling can be difficult. Basically I think it isn't a good idea. I know somebody who just wants to sell to get out.

Very many flats are leasehold and millions of people have them. Monthly charges can be quite large (£200) but it can be a lot less. Your DDs solicitor should point out all the nuances of the lease. Check very carefully that it meets her requirements. Also a long lease close to 100 years is best. Make sure there are no escalating charges that make it financially unviable and avoid high rise with cladding!

There is a whole episode on Leasehold reform on the BBC sounds app money box. I'd highly recommend you both listen to it, 33 minutes long. There's a lot to learn.

Thanks fir the replies , gives her something to think about.
Any experience of buying with a share of the freehold?

Rising ground rent; you/your solicitor need to do your maths to check that for example in ten years time the ground rent hasn’t jumped up to an extortionate level
How long is left on the term of the lease
How much is in the reserve fund to cover any future expenditure
Are there any imminent major works due

Flats are generally leasehold or share of freehold. Both will mean upkeep needs to be paid for collectively, either with a management company and fee, or ad hoc agreed by the residents. I bought my first flat very green as a repossession. They passed on the lease, but not the freehold, so I was very lucky it had a 999 year lease when it was set up as share of freehold. The new owners bought from me as leasehold. However it did cause issues with the others selling as there was an absent freeholder who couldn't sign the relevant documents. They managed to track him down eventually. I also know that one of the others would never have agreed to pay for any maintenance or repairs - we didn't have a service charge. But if a flat is what she wants / can afford, then it's something she just has to live with and make sure she is happy with the agreed terms before buying.

@Doublevodka

I had a lease hold flat, but it was many years ago. What I do know is that you have to be mindful of how many years are left on the lease, particularly when you come to selling it. It might need extending, to sell it on and it can cost you thousands. The main issue I had was the monthly service charge for the upkeep of the communal areas, gardens etc. It increased significantly every year and I just had to pay it. It became very expensive and I was relieved when I sold it on and moved to a property with no service charge. Don't mean to be negative but I wish I'd really thought about it before buying it and I wouldn't do it again.

I’m a freeholder We have a monthly service charge How else are communal areas to be maintained and work on the fabric building paid for?

The potential issues to look out for are:

• short lease which will need extending and be costly - anything under 90 years really
• high or escalating ground rent. Mortgage lenders don’t want to lend on any ground rents above 0.1 of property value or which will exceed £250 outside LOndon usually.
• High or uncertain service charges which can be hiked
• odd covenants which require permissions for things like letting or changing carpet.

Your solicitor should cover these with you, but before proceeding with an offer, make sure you at least know how many years are left on the lease and ground rent.

I have a leasehold. We pay £2000 a year in maintenance fees and that's it. Decorating fine etc. Almost every flat in London is leasehold.

And that £2k goes towards the sinking fund, cleaning and maintenance of common areas/small garden, any roof repairs (which have been needed this year), pipe work etc.

And you get a letter each year explaining exactly what all funds have paid for and the amount in the sinking fund. Our lease is 999 years though so no problems there.

Share of freehold flats are also leasehold, they're 2 separate things.
So if there are 4 flats in a converted house, for instance, you'd own one fourth of the freehold plus the lease of your own flat.
It's often cheaper than having a separate management company as you can organise it between yourselves, but can also have problems of its own.
As others have said, service charges can be very high, eg 4 or 5 £1000 a year (not just in London) and they can go up every year.
However, as far as I know, practically all flats in this country (meaning England) ARE leasehold, so that's the situation if you want to buy one.

Maisonettes (which have own front door and lack of communal areas) often have no or very low service charges. This reflects the fact there aren’t communal areas. Some have a service charge for funding a sinking fund for things like a new roof (often local authority ones) although as in all flat service charges, when there as big extra one-off expense you can be asked to contribute beyond any standard fees you pay. Some maisonettes leases have no service charge (often when there are just 2 maisonettes) and it is up to the 2 flat owners to deal with anything like external decoration or roof between them, although the less will often say they must pay equally.

In my mind, maisonettes have lots if advantages over standard flats in blocks or converted houses. The own front door is a positive as you don’t have to worry about communal areas, have more privacy, could have a cat flap etc. They often have their own private garden too which is especially valued since Covid. Plus, any service charges are bound to be lower because of the lack of communal spaces.

Share of freehold much better, particularly if the flats have their own management company. Unlikely to charge extortionate costs and care more about proper upkeep. You can look them up on companies house and see there latest annual returns to get an idea of income and expenditure.

Thanks, all very useful advice

Aren't all flats leasehold?

I am 30 (well, a month away).
Mine was an older style lease with 999 years on so no problems there, but do check the length.
HOWEVER. The entire building needs renovating and the freeholder decided this needed doing, but doesn’t pay a penny. We do as leaseholders. I should have looked into what I was responsible for closer but when I bought it I had broken up with my ex and in a rush. Anyway, this work may come to 1k it may come to 15k, but il have to pay.

In other words, I would never buy a leasehold again and if I had my time I wouldn’t buy this one.

I also have like a £1 sharehold of the company but it has meant nothing so far 😂

You have to maintain a freehold property too. A freehold roof might only have one owner if it’s a house.

Always get a very thorough survey and include the roof!

The majority of flats are leasehold but some are share of freehold too. Always use a solicitor who will go through every lease issue with you and possible costs. However no property ownership is cost free!

@yearinyearout

Aren't all flats leasehold?

No!

I own a share of my freehold

Plus think about it

Any leaseholder will be a leaseholder because there is a freeholder!

@Sethy38 you will have a leasehold as well as the share of freehold.

My friend had 50 years of lease left and I think she said it was £25k to buy another 49 years.

Apparently it can be difficult to get a mortgage if you have under 80 years left or something?

So if she wants to sell they have her over a barrel as she’ll need to pay the £25k to extend the lease to appeal to a wider market as if she doesn’t the new buyer will want to buy it and may not have funds?

And that’s a potential new buyer from a small pool of people who are able to get mortgage in this situation. Not the large pool of people had the property hit a longer lease.

Scary and expensive stuff!

The company that has the lease keeps putting the price up too. They can charge whatever they like apparently.

Please don't let her buy a flat. Fees are a complete rip off. The management company of the flat we owned would always get her dad to do any repairs needed in the building. Despite saying it was put out to tender. One year we never got a bill for service charges, so couldn't pay. Next thing we know she threatened legal charges.. OK we said send us the bill and we would pay it monthly as agreed. Next thing we know we had a ccj against us. Never again.