Understanding your leasehold12.04.2018
Leasehold homes account for around 18% of all housing stock in England, according to the most recent government figures. Standing at just under a quarter of all residential property, it’s clear that leaseholds affect a significant portion of Brits. However, as we discussed recently in our guide to ground rent, the growing number of leasehold disputes signals a gap in understanding for many UK homeowners. As property experts, we have significant experience in dealing with the legalities that go with these kinds of contracts. Read on for our top tips to understanding your leasehold.
What is a leasehold?
First thing’s first, you need to understand where you stand when you purchase a leasehold property. A leaseholder legally owns the property for a set amount of time, as laid out in the leasehold agreement. The freeholder retains ownership of the land on which the property sits, meaning they still have significant control over the estate as a whole.
The Home Owners Alliance describes leasehold in the following terms:
“Leasehold means that you just have a lease from the freeholder (sometimes called the landlord) to use the home for a number of years. The leases are usually long term – often 90 years or 120 years and as high as 999 years – but can be short, such as 40 years.”
In other words, a leasehold is a contract between the homeowner (leaseholder) and the land owner (freeholder) which lays out the legal rights and contractual obligations of each party.
Normally, the freeholder will be responsible for maintaining any common parts of the building (such as stairways in flat blocks) as well as exterior walls and the roof.
Leaseholders are usually responsible for maintenance fees, annual service charges and their share of the building insurance. It’s worth remembering that this is not the same as ground rent; put simply, this is rent that the leaseholder pays to the freeholder to stay on their land.
What are your rights?
As a leaseholder, your rights will be laid out in your leasehold contract. A typical leasehold agreement will contain the following rights and obligations for the leaseholder:
· The fees that the leaseholder will pay, and any increases that these may be subject to.
· The ground rent that the leaseholder will be liable for.
· What permissions the leaseholder must seek to carry out any major works on the property.
· Any restrictions with regards to subletting.
· Penalties for not fulfilling the terms of the lease agreement.
It’s important to read the lease agreement carefully before you make any final decisions. Once everything is signed the lease can be difficult and expensive to change.
The lease applies to the freeholder too, and they are equally liable for anything that is laid out within the agreement. Usually, these will include:
· Any maintenance the freeholder is responsible for.
· When the freeholder can legally demand any fees or ground rent.
· If and when the freeholder can make changes to the amount of money paid by the leaseholder.
It’s worth noting that, whether it’s laid out in the lease agreement or not, it’s a leaseholder’s legal right to have “quiet enjoyment” of the property. This means that the leaseholder, as the owner of the property, is entitled to inhabit the property without unreasonable interference from the freeholder for the term of the lease.
What to look for in your lease agreement
Before you buy a leasehold property, be aware of the following things in your contract:
· The duration of the lease. This can have a significant impact on the value of the property.
· Regular fees and charges that you will be liable for.
· Whose responsibility it is to maintain the property.
· The type of business operations allowed on the premises.
These kinds of agreements can be very complex, so never sign your lease agreement without taking advice from a legal professional. They will be able to advise you on any clauses that will have a significant impact for you and explain any legal jargon in plain English.
At Austin Gray, we have a wealth of experience when it comes to helping our clients buy and sell leasehold property. Our property experts are always happy to offer impartial advice on every aspect of the process. Get in touch with our team today to discuss your requirements.