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Leasehold Properties

A leasehold is a particular type of property ownership that comes with its own unique legal rights and responsibilities. Before buying a leasehold property, it is important to seek expert legal advice from a leasehold solicitor as this is a specialist area of law. At Davisons, our solicitors have many years of experience in buying and selling leasehold properties. We can help you make the right investment and guide you throughout the process.

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What are leasehold properties?

When you buy a leasehold property, you do not own it outright, which differs from a freehold property. Instead, you own it for the length of the lease agreement.

A lease agreement is a legal contract between you (the leaseholder) and a landlord (also known as the ‘freeholder’). The freeholder owns the ground your property is built on. At the end of the lease, ownership of the property returns to the freeholder.

Leasehold properties tend to be flats, but houses bought through shared ownership schemes can sometimes be leasehold too.

Factors to consider when buying a leasehold property

Leasehold properties have many benefits. You have less responsibility for maintenance and repairs than when you own a property outright as a freeholder. The landlord will pay buildings insurance, and if you have anti-social neighbours, the landlord may address the situation rather than you having to manage it.

However, there are other costs and factors to consider when buying a leasehold property.

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This is money the leaseholder pays the freeholder to rent the land their property is built on. Charges can vary from almost nothing to thousands of pounds. Ground rent can increase over time, but this must be in accordance with what is written in the lease agreement.

This charge covers everything from maintenance of communal areas to gardening, cleaning and decorating. As part of the service charge, the leaseholder might also pay into a ‘sinking fund’ in case major work needs to be completed on the property, such as a new roof.

Service charges can be fixed or variable. A variable service charge can increase throughout a lease, so it is essential to instruct a leasehold property solicitor to check a lease agreement thoroughly. Properties with high service charges can be difficult for leaseholders to sell.

New leases typically run for between 99 and 125 years. However, sometimes properties are sold with shorter leases. A short lease is anything under 80 years. It can be more challenging to obtain a mortgage for a property with a short lease, and the property will also be more difficult to sell.

Usually, a leaseholder needs to have lived in a property for at least two years before applying to the freeholder for a lease extension.

Leaseholders may not be able to keep pets, hang washing on a balcony or carry out building work without permission from the freeholder. They might also have to pay the freeholder a fee for their consent to carry out alterations to the property. It is important that the terms of the lease are checked for these types of restrictions.

Your rights as a leaseholder

As a leaseholder, you have the right to enjoy your property quietly without unreasonable interference from the freeholder.

Leaseholders also have the following rights:

  • Property maintenance. The freeholder must carry out maintenance and repairs as specified in the lease agreement. Some leaseholders have a ‘self-repairing’ lease which means they are responsible for maintaining the interior of their property.
  • Information. If requested, the freeholder must provide the leaseholder with a breakdown of the service charge and any invoices. The name and address of the freeholder must be printed on every document and bill they send to the leaseholder. Demands for service charge payments must also be accompanied by a summary of the leaseholder’s rights and obligations – this is set out in the Commonhold and Leasehold Reform Act 2002.
  • Consultation. The freeholder must consult the leaseholder if they plan to carry out any building work which will cost the leaseholder more than £250. If they fail to do so, they cannot recover their costs over that amount.
  • Protection from unreasonable charges. If the leaseholder thinks the service charge or any other fees the freeholder has demanded are unreasonable, they can apply to the First Tier Tribunal (Property Chamber) or resolve the issue through mediation.
  • First refusal. If the freeholder plans to sell the freehold, then they must offer to sell it to the leaseholder first. This is a legal requirement with some exceptions.
  • Right to manage (RTM). If a group of fellow leaseholders who meet certain conditions want to take over management of the property from the freeholder, they can do so by exercising this right under the Commonhold and Leasehold Reform Act 2002.
  • Right to change a lease. If both the freeholder and the leaseholder agree, changes can be made to a lease agreement at any time. Where the freeholder and leaseholder do not agree, the matter can be taken to a tribunal or resolved through mediation.
  • Right to complain. Anyone managing a property, with some exceptions, must belong to a government approved ‘redress’ scheme. If a leaseholder believes their property is not being well managed, they can apply to their landlord’s redress scheme.

Types of leasehold enfranchisement

Under the Leasehold Reform Act (1993), leasehold enfranchisement gives a group of leaseholders two rights:

  • The right to purchase the freehold from the landlord.
  • The right to extend their lease up to 999 years with no ground rent payable.

To be able to exercise their right to enfranchisement, leaseholders must satisfy a set of conditions. For example, leaseholders must own two or more flats in the building, and at least 50% of the leaseholders in the building must be happy to participate in the enfranchisement.

Buying the freehold gives leaseholders full ownership of their property. Once they own the freehold, there is no ground rent to pay, and they can choose the best service providers to maintain common areas. They are also no longer subject to restrictions imposed by the landlord (such as ‘no pets’).

The disadvantage of purchasing the freehold is that the leaseholders must work together to manage their own building. Sometimes it can be hard to reach an agreement, particularly if many people are involved in decision making.

An Enfranchisement Participation Agreement drawn up by a solicitor can help to make sure leaseholders work effectively together to manage their building. An agreement will include aspects such as a commitment that each leaseholder will meet certain costs and when those costs must be met. Financial and practical issues will be addressed from the beginning, which fosters cooperation and helps to prevent disagreements from arising.

Talk to a leasehold property solicitor

At Davisons, we advise on all the legal aspects of leasehold properties. Whether you are planning to buy or sell a leasehold or you wish to purchase the freehold from your landlord, we can help. We can also advise you on your rights and help if you are experiencing difficulties with a current leasehold property.

Have any questions or need any help?

Our team of specialist lawyers are experts in their field. Be confident in their advice and decisions to help get the right outcome for you. Contact us today to see how we can help