Leasehold property – What are the issues?
Buying a leasehold property, whether for use as a home or place of work, is a serious undertaking. There are many legal implications to be considered, which is why it is important to instruct a good conveyancing solicitor to act on your behalf. Back in 1998, we at Langley Wellington recognised the need in the marketplace for a quality conveyancing service, and as a result the Cotswold Conveyancing Centre was launched.
Cotswold Conveyancing employs some of the best conveyancing staff in the business, and they have helped thousands of clients to date to successfully complete on their property transactions, always making sure that their clients’ interests were observed and met.
Any Property transaction is a complicated affair at the best of times; but when the property in question is leasehold rather than freehold, the complications are often compounded.
The many property purchase completions that Cotswold Conveyancing have brought about include a large number of leasehold properties, and with the experience and expertise that they have accumulated, and to help potential buyers who are considering entering the property market, they have assisted us in preparing this short article on what you need to think about when buying a leasehold property.
With a freehold property, once you have bought the freehold, (and therefore the property), it is yours for the rest of your life, and you can bequeath it to whomsoever you wish in your will. With a leasehold property however, you only own the leasehold, (and therefore the property), for a specified duration of time, as recorded in the lease. The usual length of most modern leases when they are first issued is 99 or 125 years, but there are also many old 999 year leases in existence too.
So the first thing that you should be aware of if you are thinking about purchasing a leasehold property is the length of the existing lease. Most banks and building societies will refuse a mortgage on any property with the lease of 55 years or less. But if you do decide to become a leasehold property owner, you should also be aware that it is unwise to let the remaining outstanding portion of the lease fall below 70 years. In most instances it is possible and enforceable by law (unless otherwise stated in the lease) to extend the lease once you have owned the property for at least 2 years, but this will cost tens of thousands of pounds, depending on the individual property and landlord concerned.
The next thing that you should be aware of is that the details of any lease will vary from property to property. This therefore means that you cannot take anything for granted. The lease must be first be examined thoroughly by experts like Cotswold Conveyancing, because it could contain some quite restrictive clauses.
These can include limitations on your use of the property or on building works you wish to carry out. The landlord can also prevent you letting the property or sharing occupation in certain circumstances.
You should also be aware that any such clauses must be observed by law, and that ignoring these clauses could, in a worst case scenario, cause you to lose ownership of the property without financial compensation.
Leasehold properties also come with some additional items of expenditure such as ground rent, and maintenance, both of which will vary from property to property. Whilst the sums of money involved are not huge, they are quite substantial, especially if you are taking out a mortgage on the property as well. You therefore need to do your research diligently to ensure that your finances are equal to the task.
Last but not least, you should also be aware that as a new tenant under leasehold law, you must advise the landlord’s solicitor of the change of ownership. This solicitor is entitled to charge you for this notice. Similarly, if a new mortgage is taken out of the property the landlord may also charge you for that too.
You should also be aware that when you come to sell the property a large amount of information is required and again the landlord is likely to make a charge to you as the seller for providing this.
Whilst we have covered the principal things that you should be aware of when purchasing a leasehold property, there are many other lesser issues; however given the shortness of this article, they cannot be included here. But Cotswold Conveyancing Service is experienced regarding leasehold transactions, so please don’t hesitate to contact us when considering any leasehold property transaction.