WHAT IS A LEASE?
Under English Law, almost all flats are sold on a Leasehold basis and houses, in most cases, will be Freehold. The legal side of buying a property can be confusing and full of jargon. This even applies to the most important document which sets out all the terms of your ownership of your new flat – the Lease itself. In order to avoid problems after you have completed your purchase, it makes sense to take a bit of time to understand why you have a Lease and what it contains.
The Landlord is the overall owner of the building and the land that it stands on. They will then grant a Lease which gives you the right to live in the property for a fixed length of time. The Lease will usually start off being for a term of 99 or 125 years – plenty long enough for most of us! If you are buying a flat from someone who already lives there, rather than a newly-built property, then it will have been ‘running’ for a few years and have got shorter accordingly. Beware of Leases that have 80 years or less remaining – most mortgage lenders will not lend on these ‘short’ Leases. It is possible to extend your Lease after you have owned your Property for at least 2 years – look out for a future blog with more details of this process.
The Lease will describe the property you are buying and will include a car parking space and/or garden if there is one. It will also define what you are responsible for (eg the repair if the interior of the property) and what the Landlord will continue to repair and maintain, such as shared hallways and communal dustbin stores.
You will have to pay the Landlord an annual rent under the Lease. This could be as low as £10 a year or it could be several hundred pounds a year. The Lease may also state how often the rent is to be reviewed by the Landlord and how this will be calculated.
Any repair and maintenance works carried out by your Landlord will be paid for by you as part of the Service Charge. This is a contribution towards the costs incurred by the Landlord in carrying out their responsibilities under the Lease and will be paid by all of the Leaseholders in the block. This may be shared equally between each flat, or may be split according to flat size. The Lease will set out how your particular contribution is to be calculated. The Landlord will also usually be responsible for providing Buildings Insurance for the block as a whole and the premium for this will form part of the Service Charge. The Service Charge may be payable monthly, quarterly or once or twice a year.
You will also have important responsibilities under the Lease, which will contain a list of what you can and can’t do in the property. Although these may seem numerous and restrictive, remember that they are there in order to maintain the value of the property and the block as a whole, to benefit both you and the Landlord in the future.
It is your solicitor’s responsibility to check that the Lease is acceptable to your mortgage lender and also will be a suitable investment for you. The Lease may look like a complicated document, but it has practical implications for you once you move into your new home. At Prince Evans, we take special care to fully advise you on every aspect of your Lease before your purchase goes ahead.
I hope that this overview has given you a good idea of what it means to buy a Leasehold property. If you would like any further information, please do contact me.