Understanding Leasehold Residential Properties (1)
05 July 2019
A brief guide of what you need to know about owning a leasehold property.
A leasehold interest in a property is created when a freehold owner (also known as a landlord) grants a lease over their land, allowing the leaseholder (also known as a tenant) to occupy and use the land for a specific period of time for a specific purpose. In the case of residential properties, the “land” is often part of a larger property such as a flat in an apartment block. When you purchase a leasehold property, you accept the provisions of the lease.
What is the ‘term’ of a Lease?
All Leases are granted by the Landlord for a specific number of years – the term. This can be any number of year ( eg. 99, 125, 250 or 999 years)
Before submitting an offer for a Leasehold property, you should determine from the seller the remaining length of term of the Lease. The same lease is passed on every time the flat is sold, so the length of the lease keeps reducing. You should be aware that once you have owned a leasehold property for more than two years you will normally have the right to extend the lease by an additional 90 years. If the lease falls below 80 years remaining you still have this right but you will generally have to pay an increasing premium to the freeholder (or head leaseholder) for this extension. It is particularly important to seek professional advice on this last point, especially if the lease on the property is below 85 years remaining. Most mortgage companies will only lend on a lease that has more than 80 years remaining. Professional advice should be sought. If the remaining lease term is short, it may improve the marketability of the property to apply to the landlord to extend the term. However, to do so you must meet certain criteria, and there will be legal fees involved.
If you are selling a property you can calculate the remaining term of your lease by locating the lease term on the lease (or Land Registry Register of Title for the property), adding this to the date on which the lease term began (not always the same as the date of the lease) and deducting the current year.
We can assist with any queries which you may have in respect of purchasing a Leasehold property, please contact us on the details below to speak to our team today.