What to look for when purchasing a leasehold property
Published 7 March 2019
The last few years have seen much negative publicity for leasehold properties, driven in large part by some house builders marketing their new homes on a leasehold basis inappropriately.
But that doesn’t mean that buyers should shy away from leasehold properties in the right circumstances – there are some types of property where leasehold is actually a better way of owning your home than freehold.
The most obvious example is when buying an apartment in a block. Whilst your flat is your own home, the block’s roof, foundations and common areas are important to all living there, and leasehold is a good way of ensuring that all of these things are maintained for everyone’s benefit.
A well-organised lease can ensure the smooth running of the block, and is there to protect all the homeowners – including laying down a set of rules about how the homes in the block can be used. It’s a classic case of acknowledging that society can be as important as the individual.
When purchasing a property on leasehold, there are a few things to be aware of. The first is the length of the lease – most lenders will not give a mortgage on a leasehold with less than 80 years to run. It’s not unusual to find leases running into hundreds of years.
The second thing to look out for is any onerous covenants. If you are a pet owner, for example, does the lease allow you to keep animals? Can you buy the home as an investment for letting out, or is it for owner-occupiers only?
You also need to look at what the lease is going to cost, both in terms of ground rent and any service charges. Are increases limited to inflation, or can the landlord increase them at will? Are there any major works required which might see leaseholders sharing the cost?
As with any property purchase, it’s a case of buyer beware, and due diligence by your solicitor is crucial. But in the right circumstances, a leasehold can be the right way of owning your home, and you shouldn’t dismiss it out of hand.
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