A Leasehold Property arises when a Lease is created from a Freehold title. It is a long tenancy, usually between a term of 99 and 999 years. A Lease is a complex document, and should be looked at carefully during conveyancing when purchasing a leasehold property, in order to ensure that all obligations can be met.
There are two main types of Landlord;
a) Where the Landlords are also the Tenants, i.e. each tenant owns a share in the Company that owns the Freehold. The tenants themselves are in charge of the maintenance and insurance of the building as a whole, as well as individually being responsible for their own property.
b) There is a separate Landlord who owns the building and manages. They will sometimes use Managing Agents to do this role for them.
It is vital to know the arrangements for the property you are purchasing, so that you are fully aware of what the position is.
The Lease will grant rights to run and maintain pipes, wires and cables to and from the property. As owner of a leasehold title, you should have the right to access other flats for the purpose of maintenance, and this will be reciprocated to the other leaseholders.
The Lease will contain various rules known as covenants, and this will be identical in all Leases for properties in the same building. These could include that you will keep the flat in good order, not make any undue noise, or perhaps not to keep pets.
Whilst you are responsible for the upkeep of your individual property, such items as the maintenance of the roof, foundations, shared stairways, entrances and gardens are usually maintained by the Landlord. Contributions towards such items are collected by the Landlord from each Leaseholder, periodically throughout the year, and is known as the service charge. The cost will alter depending on the work that is carried out by the Landlord.
The other payment under the terms of the Lease is ground rent. This can vary from a peppercorn, i.e. nothing, to a set figure per annum which is payable to the Landlord, and must be paid.
It is important when purchasing a leasehold property, to see previous years figures for payment of service charge, in order to get an idea of how much you will be expected to pay each year. In particular, it is useful to know when things like the common areas to the building were last decorated, thus giving you an idea of when this will be due to take place again. There is nothing worse to move in to a new home, and two weeks later receive a bill for work that is due to take place in the coming months that you knew nothing about. At least if you are aware of it, you can make the necessary financial arrangements to deal with it.
Buying any home can be a daunting prospect, but with a leasehold property, there are many more pitfalls which can delay the process. It is important to have a full understanding of the Lease, and to ensure you are fully aware of the arrangements in respect of ground rent and service charge payments before you proceed to exchange of contracts.