Buying a leasehold
There are many different factors to consider when buying leasehold, for many there are benefits but equally, there are complications that can make the process somewhat less appealing. Buying a leasehold means that you own a property, but lease the land from a freeholder or landlord for a certain amount of time. It also means that you will be paying ground rent, as well as the possibility of annual service charges. With this in mind, leasehold can be an expensive process.
Advantages and Disadvantages of buying a leasehold property
Once someone has a leasehold, they will be known as a leaseholder. With this, they will have a legal agreement with the landlord which states how long the agreement is for and the conditions of it. For people needing short term accommodation, leasehold can be beneficial as it allows them to choose how long to live in a property and in what way. With this, there is still the option of buying the property – usually through sharing of the freehold or full enfranchisement. It also means there are fewer responsibilities in regards to the upkeep of the property than there might be with renting or buying.
One risk of leasehold is that once the agreement expires, the person living in the property will need to approach the landlord, either to continue with the lease or request changes. The catch is that the landlord does not have to accept. A short lease may also affect your ability to get a mortgage, and additional expenses such as services charges are decided by the landlord. A well-known disadvantage of buying leasehold lies within, of course, the recent leasehold scandal.
How to buy a leasehold
Before buying a leasehold property, it is imperative to do your research. Without thorough thought, planning, and preparation, leasehold property can throw up problems without you realising. There are different legal regulations depending on whether the property is a flat or a house. If it is a flat, you may have the opportunity to buy a share of the leasehold and if it is a house, you can buy the leasehold completely. It is possible for the leaseholder to informally approach the freeholder (or landlord) to buy a share of the property by agreement. There is no direct route, it is often a matter of negotiation. There is also a formal route, but with the complexities of buying a leasehold, it is generally recommended that you do so with the help of an expert solicitor and surveyor.
As a result of varying clauses in property leases, a recent scandal has been uncovered in recent years. It involved over 10,000 people, and means that many leaseholders are being forced to pay ground rent. They pay this rent to the freeholder, and it can double in cost within 10 or fewer years. These issues have made it much more difficult for properties to sell, as well as causing major blockages in remortgaging. As a result of the leasehold scandal, a number of lobbying groups have been formed to ask the Government for change. One of these making huge strides towards reform (although this will take years whilst Brexit is on the anvil) is the National Leasehold Campaign – a Facebook campaign for the abolition of residential leasehold in England and Wales – set up by a disgruntled leaseholder, Katie Kendrick. There are many calls for the Government to solve this issue, some of which have been actioned. However, many feel there is still a long way to go.
If you would like to find out more about the leasehold scandal and seek advice, get in touch with our friendly team today.