Buying a leasehold property

March 18th, 2023

Buying a leasehold property in the UK can be a complex process and in my experience, many buyers are wary of buying a leasehold property. 

However, it doesn’t have to be that way.  This basic guide will give you an overview of the steps involved in buying a leasehold property and help you understand the key terms and legal obligations that come with it.  Obtaining this information at the outset can give you the assurance you need or help you make the decision to move on before incurring costs of not only your money but yours and your chain’s valuable time.  And don’t panic, this is for your solicitor to investigate – not you.

What is a leasehold property?

A leasehold property is a type of property where the buyer purchases the right to use the property for a fixed period of time, known as the lease term. The property is owned by the freeholder or landlord who grants the lease to the buyer. The buyer of a leasehold property will be required to pay ground rent, service charges and other fees to the landlord or management company.

Understand the lease

The lease is a legal document that sets out the terms and conditions of the leasehold property. It is important to read and understand the lease before buying the property. The lease will specify the lease term, ground rent, service charges, repair obligations, and other important details.

Get legal advice

It is important to seek legal advice from a solicitor who is experienced in leasehold property transactions. Your solicitor will review the lease and advise you on any potential issues or concerns.

Check the lease term

The length of the lease is an important consideration when buying a leasehold property. A short lease can affect the property’s value and may make it difficult to sell in the future. It is recommended that you aim to buy a property with a lease term of at least 90 years.

Check the ground rent

Ground rent is a fee paid by the leaseholder to the landlord for the use of the land on which the property is built. It is important to check the amount of ground rent and how it will be reviewed over time. Some leases have clauses that allow the landlord to increase the ground rent significantly over the term of the lease and you will need this information from the outset.

Check the service charges

Service charges are fees paid by the leaseholder to the landlord or management company for the maintenance and upkeep of the building and common areas. It is important to check the amount of service charges and what they cover.  You will also want to find out whether these are subject to increases, how much they could potentially increase by and how often.  You should also ask to see the service charge accounts to ensure that they are being managed correctly.

Check for any restrictions

Some leases may contain restrictions on what the leaseholder can do with the property. For example, there may be restrictions on keeping pets, making alterations to the property or subletting. It is important to check the lease for any such restrictions.

Check the management company

If the property is managed by a management company, it is important to check their reputation and track record. You should ask to see the management company’s accounts and check that they are managing the property correctly.

Consider enfranchisement

Enfranchisement is the process of buying the freehold of a leasehold property. If the lease term is less than 80 years, it may be worth considering enfranchisement as this can increase the property’s value and reduce future costs.

Get a survey

It is important to get a survey of the property before buying a leasehold property. This will identify any potential issues or defects with the property that may not be obvious from a visual inspection.

Check the insurance

The landlord or management company will be responsible for insuring the building, but the leaseholder may be required to pay a share of the insurance premium. It is important to check the insurance policy and ensure that it provides adequate cover for the property.

Completion

Once all the necessary checks have been carried out, you can exchange contracts and complete the purchase of the property. You will be required to pay the purchase price and any associated fees and charges.

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