How does buying a leasehold property work?
The process for buying a leasehold property is slightly different than for buying a freehold property and there are a number of issues you need to consider. Your conveyancer should be able to guide you through all of these issues, making sure you fully understand your lease and its implications for your occupation of the property.
The following is an overview of how conveyancing for buying a leasehold property works and some of the key things you need to look out for to help you avoid getting caught out.
What is a lease?
When you buy a leasehold property, you are not buying the property outright. Instead, you are entering into a contract with the freeholder that gives you the right to occupy the property for a fixed period of time.
The period of the lease will be set out in the lease agreement and, unless you are buying a new build property, you will be buying the time remaining on the existing lease, rather than making a new lease agreement with the freeholder.
Reviewing the terms of the lease
The lease agreement will come with various terms, including your responsibility for making any ongoing payments to maintain the lease and the freeholder’s responsibility for maintaining the structure of the property and any common areas, such as stairwells.
It is very important to have your conveyancer carefully check the terms of the lease as this is a legally binding document and once you have signed it, you will need to comply with the terms or risk having your lease terminated or being on the receiving end of legal action by the freeholder.
Conveyancing checks for leasehold property
When buying any property, it is important that your conveyancer carries out various checks to identify any issues that could potentially affect your occupation of your new home.
Common conveyancing checks include:
Title Searches – Confirming who the freeholder is, who the leaseholder is and that they are legally entitled to sell the lease to you.
Local Authority Searches – Looking for any issues such as whether there are any proposed developments, new roads etc in the area.
Environmental Searches – Investigating previous land use in the area, risk of subsidence or flooding, whether there is radon gas in the area and other environmental issues.
Drainage & Water Searches – Identifying who is responsible for the property’s water supply and sewerage, as well as whether there are any public sewers or other such infrastructure running under the property.
What happens if you want to sell the lease in future?
You can resell the lease at any time, but it is worth bearing in mind that, because the leasehold’s value will depend on how long is left on the lease, it could depreciate in value. It is therefore often worth considering applying for a lease extension before reselling.
Key things to look for when buying a leasehold property
Your liability for any ongoing costs – Under the terms of the lease you will normally need to pay annual ground rent and service charges, the level of which should be set out in the lease. You may also be required to cover the cost of maintenance work and/or necessary improvements to the property or to contribute to a ‘sinking fund’ to cover such costs if they arise.
How long is left on the lease – The less time there is left on the lease, the lower its resale value. If the lease falls below 60 years, it can be very hard to get a mortgage on the property.
It’s important to note that, if there are fewer than 80 years left on the lease, you will have to pay half of the leasehold’s ‘marriage value’ if you want to renew the lease. Marriage value is how much the leasehold will increase in value if the lease were renewed and this can be a very significant amount.
Who the freeholder is – This may not always be clear, but is important to note in case there are any future issues with the property or you wish to renew your lease or purchase the freehold.
Get safe, reliable and efficient conveyancing buying a leasehold
At Atkins Hope, our experienced residential property solicitors offer clear expertise and first-class personal service for buying leasehold property, as well as all other types of conveyancing transactions including selling leaseholds, lease renewals and leasehold enfranchisement.
We are members of the Law Society’s Conveyancing Quality Scheme, reflecting the high quality of our property services.