Buying Property
Leasehold and Freehold
If you're a flat-owner you must think you're living in a parallel universe. You have a piece of paper saying you own your apartment and yet someone you may never meet has another piece of paper which claims ownership as well. However much you wish things were different, they're not, so here's a guide to avoiding the legal pitfalls.
What does it mean?
Freehold means you completely own the building and the land it stands on. Leasehold means the freehold of the building is owned by someone else. A large proportion of flats in England and Wales are leasehold, although with it now being easier to buy the freehold, this is slowly changing.
The good news here is that solicitors are accustomed to dealing with the complexities of leasehold properties and can advise you. See The Conveyancing Process and How To Negotiate for more on the mechanics of the purchase.
Who pays what?
As leaseholder you're responsible for the upkeep of your own flat. The freeholder is responsible for maintaining and insuring the building and the communal areas - although the leaseholders pay the bills. Be aware that if a managing agent looks after the freeholder's affairs, you'll end up paying commission on top.
How long?
The lease you buy runs for a set amount of time - usually 99 years - before it reverts to the freeholder. Flat buyers are often appalled to discover that their leases have less to run than they thought - and it can be an expensive business to extend them.
Sands of time
The shorter the lease, the less the property is worth, particularly when it has 75 years or less to run. Mortgage lenders are nervous about lending money on a depreciating asset. See Choosing a Mortgage for more on the types of mortgage that would be right for you. Leaseholders have the right to extend their leases by up to 90 years, but you must have lived in the property for the past 3 years, or 3 in the past 10.
Freehold means you completely own the building and the land it stands on. Leasehold means the freehold of the building is owned by someone else. A large proportion of flats in England and Wales are leasehold, although with it now being easier to buy the freehold, this is slowly changing.
The good news here is that solicitors are accustomed to dealing with the complexities of leasehold properties and can advise you. See The Conveyancing Process and How To Negotiate for more on the mechanics of the purchase.
Who pays what?
As leaseholder you're responsible for the upkeep of your own flat. The freeholder is responsible for maintaining and insuring the building and the communal areas - although the leaseholders pay the bills. Be aware that if a managing agent looks after the freeholder's affairs, you'll end up paying commission on top.
How long?
The lease you buy runs for a set amount of time - usually 99 years - before it reverts to the freeholder. Flat buyers are often appalled to discover that their leases have less to run than they thought - and it can be an expensive business to extend them.
Sands of time
The shorter the lease, the less the property is worth, particularly when it has 75 years or less to run. Mortgage lenders are nervous about lending money on a depreciating asset. See Choosing a Mortgage for more on the types of mortgage that would be right for you. Leaseholders have the right to extend their leases by up to 90 years, but you must have lived in the property for the past 3 years, or 3 in the past 10.
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