Leasehold properties are again in the news as various issues affecting buyers continue to cause controversy. Leasehold can be an attractive and practical option for many homeowners. Buyers just need to be aware of the problems that can arise so they can make an informed decision about whether a Leasehold purchase is right for them. It is even more important with Leasehold properties that care is taken to choose the right Conveyancer. Due to the extra complexities involved getting any online conveyancing quote needs to reflect the realities of the Leasehold process.
What is a Leasehold?
A Leasehold property needs to be carefully distinguished from a Freehold. When looking for an online Conveyancing quote it is very important to know the difference between the two. In simple terms, a Freehold exists where the owner of the property owns both the bricks and mortar of the building and also the land the building stands on. A Freehold purchase does not involve any fixed or defined period of ownership.
A Leasehold means that the Purchaser has an agreement from the Freeholder to occupy the property under the terms of a Lease which sets out in detail, the rights and responsibilities of both parties. Leases have a fixed length, which can span from a few decades to hundreds of years but, it is crucial to check exactly how long is left on the Lease at the time of purchase. Unless it is extended, each Buyer takes on the original terms of the Lease for however many years it has left to run.
What should buyers of Leaseholds be aware of?
The Lease, which is signed by the Freeholder and Leaseholder, contains the obligations placed on the buyer of a Leasehold property and needs to be carefully examined by your Conveyancer. It sets out what rules and regulations that buyers has to adhere to and what obligations the Freeholder has to discharge. It often sets out the procedure for resolving disputes and should be a detailed document making plain the expectations on both sides.
Although houses can be Leasehold, it most commonly applies to blocks of flats. Whether it is a flat or a house, the Freeholder will normally be responsible for maintaining the common (meaning used by everyone) parts of the building, such as the entrance hall and staircase, as well as the exterior walls and roof. Leaseholders can be obliged to pay maintenance fees for the upkeep of these common parts, annual service charges and a share of the buildings insurance. In some cases Leaseholders may have to contribute to the upkeep of roads and paths.
Leaseholders are usually required to pay what is known as ‘ground rent’ to the Freeholder, normally once a year. This can be a nominal amount but there are often provisions for it to increase so you need to ask your Conveyancer to explain this to you. There has been a lot of publicity recently surrounding the alleged mis-selling of Leasehold properties with excessive ground rent clauses.
Buyers need to make sure their Conveyancer is clearly outlining to them the implications of purchasing a Leasehold property. There may be fees to be paid to the Freeholder on purchase which should be set out in the online conveyancing quote.
Leaseholders have to also obtain permission for any alterations made to the property. This can be quite restrictive and there is often a charge for obtaining the permission of the Freeholder.
Leaseholders may also be prevented from owning pets or subletting the property to someone else. The personal circumstances of buyers can change hugely during the ownership of a Leasehold property and so Buyers need to be aware of how life choices may affect the use of the property in future.
One of the risks involved in Leasehold properties is that if Leaseholders do not keep to the terms of the Lease, then the property can be forfeited and the Leaseholder could be forced to leave. This can happen if the ground rent or service charges are not paid by the Leaseholder.
The length of time remaining on the Lease is an important issue for funding the purchase. Many mortgage and bridging loan companies will only lend on Leaseholds when there is a significant number of years left on the Lease. This is because the length of the Lease has an effect on the value of the property and ease of sale, which in turns affects the security it offers the Lender for the mortgage. The approach taken varies between Lenders so early advice from your Conveyancer is crucial.
To get around this issue, it is sometimes possible to extend the Lease or even to purchase the Freehold of a property but this is a complex area on which expert professional advice is necessary. In general terms the shorter the period of time remaining on the Lease the more expensive it can be to agree an extension. This can also in itself affect the resale value of the property.
Choosing a Conveyancer for a Leasehold Purchase
An online conveyancing quote is a great and affordable way of finding the specialist property conveyancer for your Leasehold purchase. But great care needs to be taken to identify the right one. Worryingly, a significant proportion of Conveyancing firms are failing to explain the difference between freehold and leasehold ownership. Recent research by the Solicitors Regulation Authority has found that 23% of firms handling leasehold purchases did not explain the difference between freehold and leasehold!
That is surprising given that there are such fundamental differences between Freehold and Leasehold properties. Amongst the reasons given by firms for this failure were assuming the Client knew the difference or that the Estate Agent would explain it! So if firms are failing to explain even this simple issue, how much care will they take to look at the actual terms and conditions of the Lease? Express Conveyancing only allows properly vetted and experienced firms to be on its member panel. Choosing a firm this way means you can be sure that you have an assurance of the quality of the advice on offer.
Do not be put off buying a Leasehold where it is right for you. But do choose the right Conveyancer. The issue of Conveyancing costs is even more complicated with Leasehold purchases. With the considerations discussed above there is a lot to investigate and think about. Your online Conveyancing quote needs to take account of the special considerations for buying a Leasehold to provide a realistic assessment of the costs involved. Low cost may mean poor or inadequate service and with Leasehold the speed, knowledge and efficiency of the Conveyancer is essential.