First time buyers: please help me understand! (LEASE)

[Gemmy96]

Hello! DH and I are hoping to buy a house in the very near future, however to live in our desired area we have had to start looking for flats instead of houses (not an issue as the flats are honestly bigger than some of the terraces we've seen!). On one of the houses we are looking at, the information in the leasehold section states that (1) you become a director of the management company upon completion (2) you hold shares in the company & (3) you have a say in running the company in the leasehold.

...Neither of us have a clue what that means in terms of the actual lease! Some places we've looked at have a lease of 90 years or so, which really put us off-- for the flat above does that essentially mean that the residents bought the lease off the freeholder so there is now no 'limit'? Please tell me if I have completely misinterpreted! TIA

Confused - are you looking at a leasehold house or flat?

It basically means you will have a share of freehold as well as leasehold. They are separate things so do not confuse them up.

You could still have a short lease on the property and then you would have to negotiate with your fellow freeholders for a lease extension. It is in everyone's best interests if this is done as amicably as possible as the other freeholders may need a lease extension at some time in the future as well.

Find out the current lease length and go from there.

At least being a share of freehold you will have more control over service charges etc...... but make sure it is being run fairly and correctly as some share freeholders skimp on the maintenance as they live on site so don't want bills for maintenance. This is a false economy. You also have legal responsibilities as a freeholder so do read in to it.

This is what you pay your solicitor for: to interpret the legal documents so you can understand them. Ask them to explain anything you do not understand.

@Gemmy96

Hello! DH and I are hoping to buy a house in the very near future, however to live in our desired area we have had to start looking for flats instead of houses (not an issue as the flats are honestly bigger than some of the terraces we've seen!). On one of the houses we are looking at, the information in the leasehold section states that (1) you become a director of the management company upon completion (2) you hold shares in the company & (3) you have a say in running the company in the leasehold.

...Neither of us have a clue what that means in terms of the actual lease! Some places we've looked at have a lease of 90 years or so, which really put us off-- for the flat above does that essentially mean that the residents bought the lease off the freeholder so there is now no 'limit'? Please tell me if I have completely misinterpreted! TIA

Please clarify - are you buying a leasehold house or a leasehold flat?

You are buying the leasehold title to the property.

A management company either manages the freehold title on behalf of the freeholder or the management company own the freehold.

You are buying one share (you will receive a Share Certificate) in the management company, so you and the other leaseholders can be involved in decisions on works to be done. You will be a member of the residents association (if there is one) and may attend the AGM.

The title deeds and the lease will tell you how long the lease is for and the date it started. You can then work out how many years are remaining. If the owners have extended the lease, there will be a Deed of Variation to that effect. The lease will also tell you what the ground rent is and whether it increases, and if so, by how much and when.

90 years remaining is not a red flag. You will be able to extend the lease term after 2 years of ownership by the formal route, which will add 90 further years to the term and take the ground rent down to a peppercorn. The seller's can start the process off for you so you don't have to wait 2 years. Extending a lease is more expensive when the remaining term is 80 years or less.

When I bought my first flat there were 5 flats in the building.

The freehold was owned by the Management Company. Only owners of the leases on the flats could be members / directors of the management company, and when you bought a flat you became a member / director of the management company.

It was the way that between us the flat owners shared ownership of the freehold.

We did have to make joint decisions about things like getting the roof replaced, which could be fraught, but it also enabled us to keep the shared overheads down.

I am not sure why you see a 90 year lease is a bad thing?

The management company runs the building, eg books cleaners for the corridors, sorts out maintenance of the lift, arranges for external windows to be cleaned.

How much it does depends on how complicated/big the building is.

They’re saying if you buy the flat, you become a director of the management company so you’d be one of the people responsible for making those decisions and arrangements.

In a small block the flat owners may just decide to sort it all out themselves. But it’s more usual to hire a company as agents who basically sort everything out, but have to ask the directors for approval on bigger decisions, budgets etc.

You pay for the maintenance, cleaning, and agent fees via service charge.

The directors may or may not also own the freehold of the building, you’ll need to check who the freeholder is.

These arrangements for management companies don’t affect or change the length of your lease. If you want to increase the length you have to buy the longer lease from the freeholder.

To the people saying is it a house of flat, it’s pretty clear she is talking about a flat! Maybe read the first post.

@FAQs

To the people saying is it a house of flat, it’s pretty clear she is talking about a flat! Maybe read the first post.

With respect FAQ, the OP also says this:

On one of the houses we are looking at, the information in the leasehold section states that (1) you become a director of the management company upon completion (2) you hold shares in the company & (3) you have a say in running the company in the leasehold.