Hello World! Welcome Friends! You might have heard the term leasehold property many a time before from estate agents in Oakwood or your friends who are thinking of buying a property. But, do you really know what a leasehold property is? What is the process of buying a leasehold property, and what does owning a leasehold property really entail? Is buying a leasehold property a good idea for you – now that’s a question on everyone’s potential buyer’s mind! Here is everything that you need to know about leasehold properties and what this term really means.
What Is a Leasehold Property?
A leasehold property is a property that the owner has for a fixed tenure. It gives the owner of the property the right to live in the property, but the owner does not have the right to sell the property. When you own a leasehold property, it simply means that you bought a property that you have the right to live in for a certain period of time. In the UK, the set period of time is 125 years. Essentially, you own the property, but you cannot sell the property, so in essence, you are like a tenant in your own home.
When Does It Make Sense to Own a Leasehold Property?
A leasehold property makes sense for people who are living in apartments or residential complexes where there are other people living in the same building as you. In this case, the individual will own their flat or floor. However, leasehold owners are not owners of the shared area, such as the exterior wall or the roof, in which case the responsibility of maintenance or fixing damages does not fall on them.
Keep in mind that a leasehold property owner does not have the right to make changes to their property, such as to add an extension or to break down a wall. In order to make such changes, the leasehold owner will have to take permission from the freeholder, that is, the person or authority who owns the entire building. Leasehold owners might also need to take permission to own a pet or change the structural interiors. Again, think of a leasehold owner as a tenant who might need to take permission from his or her landlord before making any changes to the property.
What Is the Difference Between a Leasehold Property and a Freehold Property?
In short, a leasehold property is a property that has been leased to the buyer of the property for a fixed time period. In a leasehold property, the real owner of the property is the original owner, which could be the government or the authority that made the leasehold property and not the buyer of the leasehold property. On the other hand, a freehold property is a property which the buyer owns, including the land that the property is built on. In simple words, a freehold property is free from any hold, so the buyer of the freehold property is the sole owner of the property.
What Are the Benefits of a Leasehold Property?
The most important benefit of a leasehold property is that the repair and regular maintenance of such a property is taken care of by the freeholder. So, if the roof has a leak or the exteriors need painting, it is the duty of the freeholder and not the leaseholder to do the necessary work. Also, the freeholder has to pay for the insurance of the building, not the leaseholder. If the leaseholder has any issues with his or her neighbors, then he or she can take that issue up directly with the freeholder, who will then be responsible for sorting out matters.
What Should I Keep in Mind Before Opting for a Leasehold Property?
One of the most important things that you need to check before buying a leasehold property is the number of years that are left on the lease. You might find it hard to get a mortgage on a leasehold property that has less than 70 years left on the lease, as a short lease is very expensive to extend. Secondly, find out if you are required to pay any service charges or any other such costs. Usually, leaseholders have to pay a service charge to cover maintenance and repairs of the property, but this charge could cost you thousands and thousands of pounds over the years. Also, find out if you have to pay ground rent on your leasehold property. If you do, find out how much ground rent needs to be paid and if this ground rent will continue to escalate over the years.
Is the UK Government Introducing Some New Bills for Leasehold Properties?
Currently, the UK government is planning on introducing The Leasehold Reform (Ground Rent) Bill 2021-22, which aims to restrict ground rents. This bill, if introduced, will restrict the ground rent on newly built long residential leases by charging leaseholders just one peppercorn per year as the ground rent. In essence, this will bring the ground rent to zero, as one peppercorn has no financial value. The aim of this bill is to make leasehold properties more affordable. Keep in mind that this new bill will only apply to new leases, so it will not impact any existing leasehold properties that might be charging high ground rents.
Should I Buy a Leasehold Property?
If you do find a house that you love, and it happens to be a leasehold property, do not worry. Make sure you read the terms and conditions mentioned in the contract and have your solicitor go over the same. Ensure that the contract does not have any clauses which you might not want, such as an exorbitant increase in the ground rent or a certain fee to make structural changes or even a fee for keeping pets.
If you are looking at newly created leasehold properties, then you might not have to worry about paying ground rent, which means you will be saving a whole lot of money. This will make owning a leasehold property easier, cheaper and definitely better.
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