What you need to know about leasehold properties…
When buying a house features key factors such as location, room layout and garden size are significant when choosing a home but many buyers overlook a crucial piece of information which has lasting implications – whether the property is freehold or leasehold.
Leasehold properties are becoming increasingly common, especially in the new build market, and whilst most house hunters will have heard of and perhaps come across leasehold not everyone will be familiar with all aspects of this increasingly common form of ownership and the differences between outright freehold.
What is the difference between leasehold and freehold?
The key difference is that if you own a freehold property, you own the property and the land it is built upon. It is your name in the land registry as freeholder, owning the title absolute. With a freehold property, you won’t have to pay a ‘ground rent’ or answer to the freeholder of the property. You have complete responsibility for maintaining the building including the roof and the outside walls.
If you buy a property with leasehold title although you own your home, you do not own the ground that it’s built on. Leaseholders rent this land from the freeholder to use the home for a certain number of years. The leases are usually long term, often 99 years or 120 years but can be shorter.
In the majority of cases buying, owning and selling a leasehold property will present little or no issues for any of the parties involved and therefore have no impact on the value of the property. However, as all leases diminish in length should the lease fall below 80 years this may affect the value of the property or at lease present challenges for buyers to acquire mortgages on the property – it would be advisable to consult with your legal adviser and/or estate agent prior to marketing and if appropriate deal with any identified issues.
When deciding whether or not to purchase a leasehold property, buyers should be aware that some mortgage providers may offer a lower loan-to-value (LTV) on leasehold properties, meaning that, as a buyer, you may need to have a higher deposit.
If you have held the lease on the property for at least two years, you may have the legal right to extend it as long it was originally leased on a long lease. The law is slightly different depending on whether you have a house or flat but owners are entitled to extend the lease.
Under the Leasehold Reform Act 1967 leaseholders have a legal right to purchase the freehold of their property if they meet certain qualifying criteria (Leasehold Reform Housing and Urban Development Act 1993 is for collective claims). If a leaseholder has owned the property for two years or more they will be able to make a claim to acquire the freehold title. Obviously there will be a cost implication to acquire the freehold which will need to be considered along with any associated professional costs.
For more information about freehold or leasehold property or advice on how to buy a leasehold home, please contact:
Gemma Miller – Alnwick, Northumberland – 01665 603581
Lindsay French – Wolsingham, County Durham – 01388 529579
Victoria Linsley – Barnard Castle, County Durham – 01833 690390
Sheryl Sowden – Bedale, North Yorkshire – 01677 425301
More income from your farm? Diversification may hold the key
It’s been a tough winter for farmers across the region and Spring is proving challenging gi... Read More