If you’re buying a purpose built or converted flat, you will have seen it advertised as ‘leasehold.’ A lease gives you the right to live in your home for a certain number of years (usually 99 or 125) and you can sell the property if you want to move on.
The lease will be signed by you and the freeholder of the property. The document will make clear your obligations and that of the landlord.
What to Check
Firstly, it is important to know how many years are left on a lease. When a flat is newly built or converted it will start off with 99 or 125 years and then decrease every year after that. For example, if you have a new lease and you sell the property after five years the lease will have 94 or 120 years left on it.
Be careful if a lease has less than 70 years because you might find it harder to obtain a mortgage. If you want to sell your flat and it has less than 70 years you can apply for a lease extension for another 90 years. You will have to pay the costs involved, but your home will then be easier to sell because you have a long lease. You can normally apply for a lease renewal once you have lived in the property for over 2 years.
The Freeholder will usually insert in the lease, the right to make a charge for the property being on his or her land. In most cases the figure is low and can be under £100 a year. Some new conversions though can have higher Ground Rents which might be in the region of £200 or £300. Others will put the Ground Rent on a sliding scale, which means it will go up in stages over the years.
Depending on the type of property you are buying your service charges can be cheap or expensive. For example, if you buy a converted property with no garden and only a communal hallway and stairs, the service charges should only include electricity, insurance and any reserve fund the freeholder has for repairs.
On the other hand, if you buy luxury accommodation that includes a lift, a maintenance operative or a gardener, communal TV aerials and broadband, you will obviously pay a lot more for these services.
An additional cost included in a service charge from any kind of property is that of a Management Company. If the Freeholder manages the property then the costs will be lower, but if the flats are in the hands of a management company, their fees must also be included in the maintenance charges.
It’s important to find out the extra costs involved in buying a leasehold property so that you can add them to your budget and there are no nasty surprises after you have made the purchase.