This article is designed to introduce buyers and sellers to the complexities of buying or selling leasehold property.
Most homes are owned on either a freehold or leasehold basis. A freeholder owns the property and the land outright, whereas a leaseholder owns the property for a fixed period of time, after which it returns to the freeholder.
If you own a flat, then you are more than likely to own a leasehold. The majority of flats in the UK and Wales are leasehold properties, while nearly all houses are freehold properties.
If you are in the process of buying a leasehold property, your conveyancer will need to go through a number of additional steps before ownership can legally be transferred to you. This is because ownership of the property exists in conjunction with the freeholder. It is also often the case that a leaseholder shares with other leaseholders the costs of managing the building in which his flat is located, and a managing agent or management company is also usually involved in the transaction.
Once an offer has been made and accepted, your conveyancer will liaise with both the freeholder and the other parties or their solicitors in order to acquire all the relevant information regarding the lease. Leasehold conveyancinginvolves more people and is therefore more prone to delays than freehold conveyancing.
In all probability, you will also be asked to pay fees, through your solicitor, to the freeholder and/or management company for providing the information you need and replying to your enquiries.
The residential lease is a legally binding contract that exists between yourself and the freeholder, giving you the right to occupy the property for a set period of time. It is the responsibility of your solicitor to scrutinise the lease carefully in order to ensure you understand all conditions written into it before deciding whether to accept them.
Your solicitor will provide you with a report , detailing your main obligations as a leaseholder, such as payment of service charges, administration charges and ground rent, and will explain to you the obligations of the freeholder and the company responsible for managing the building.
The remaining term is one of the most important pieces of information regarding the lease because it affects your ability to get a mortgage and to sell the property when you want to leave it.
We would advise you to factor in the cost of obtaining a lease extension in the near future should the property you are buying be subject to a a remaining term of under 100 years. This expense can be used as a negotiating tool when agreeing the purchase price.
There are procedures in place to protect leaseholders against excessive service charges or failure of the landlord to maintain the building properly. In addition, subject to qualifying under the statutory rules leaseholders can extend their leases or even buy the freehold of their property .
Our solicitor, Angela Davies, has specialist knowledge of this complex area of property law and is well placed to advise on all matters relating to residential leases and conveyancing.