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Leasehold and freehold – what every buyer should know
Leasehold, freehold….why does buying a property have to be so complicated? Mostly because of archaic English laws that still permeate so much of what we do today. In this post from our friends at Paramount Properties, you’ll get the lowdown on what you need to know about extending the lease on a property. They are West Hampstead estate agents with a range of leasehold and freehold properties available.
Are you living in a leasehold property? There are many flats, custom built or conversion that are sold as leasehold in England today. In central London the Cadogan, Grosvenor, Portland and Howard de Walden estates own a great deal of residential and commercial property which is sold under leasehold terms.
Leasehold property
You bought your property – so you own it, right? Not exactly. If you are living in a leasehold property, you own the right to live in it for the length of the lease only. The freeholder continues to own the land which the property is on all the time you live there. The terms of the lease between yourself and the freeholder (or landlord) will dictate what obligations you owe each other. Usually the freeholder will look after the buildings insurance and maintenance, but the terms of each lease can vary. The leaseholder will have to pay annual rent and may have to contribute to the building maintenance costs.
Length of lease
The length of lease is normally given in years, and can be anything up to 999. If you are looking at a new property then ask the estate agent what the the length of lease is before you view it. This will certainly affect the purchase value and the potential resale. The longer the lease the better for you in terms of property value, and bear in mind that when you come to resell, the length of time that you’ve lived in the property will now be gone from the length of lease.
Leasehold enfranchisement
More complicated terms to throw around? Sorry about that. But this is a helpful one. It means you have the legal right to extend your lease or purchase the freehold (if you fulfill certain criteria). Which can be a good thing if you are a leaseholder. The law on this was first introduced in 1967 and has been amended several times and given a lot of property lawyers a good chunk of work.
Extending your lease
OK – you want to extend that lease. Perhaps you’re going to resell and you think this will be a key decider. Maybe you want to stay in the property but you’d like to extend your rights to make changes. If you’ve been in the property for two years then that’s a good starting point. You are going to need to get the lease valued, and serve notice on the freeholder of your intentions with a section 42 notice. If the freeholder agrees to the valuation then you could have a smooth and quick process ahead.
Collective enfranchisement
Do you live in a block or conversion where the building itself is shared by more than one tenant? If you satisfy the correct criteria on length and type of residence then you and your fellow tenants can apply for collective enfranchisement, where you buy or extend your lease as a group.
Leasehold Valuation Tribunal
If the leasehold extension value can’t be agreed upon by the parties then they need to go to this specific tribunal, which will make the decision for them. This tribunal also makes decisions in cases where leaseholders believe that the service charges they are paying are unreasonable or the level of service they are receiving is not up to scratch.
So that’s the round up on leasehold basics that every home owner should know. If you are going to extend your lease or try to buy the freehold then start with some advice from the leasehold advisory service, your estate agent or lawyer.