When you buy your new home there are two main types, leasehold and freehold. Broadly speaking a freehold property is where you own the property and the land it is on for an unlimited amount of time. A leasehold is where you own the property but not the land that it is on, and you only own the property for a set period of time.
Leaseholds are usually used for blocks of flats as there are multiple properties and only one piece of land. The majority of houses are freehold properties as they are simpler, however some new build estates the houses are leaseholds.
The key point with leaseholds is that you have the right to live in the property for a set period of time, this could be 999 years, 199 years or any number of centuries and decades between. Technically when that period runs out the ownership passes to the freeholder. To avoid this happening you can extend your lease, extending your lease can be expensive and complicated and as the length of your lease shortens the more expensive the extension will be.
Any lease under 83 years should be ringing warning bells, as the cost to extend the lease would increases massively, this makes it difficult to sell and difficult to mortgage.
The government is currently working on a reform which would a give the leaseholders the right to extend their lease by a maximum term of 990 years at zero ground rent. This is fantastic news and could possibly save leaseholders thousands of pounds in the future.
- The building insurance is normally arranged by the freeholder. (though you still need contents insurance and you will have to pay a contribution).
- Maintenance and repairs will be taken care of by the freeholder. (make sure to check the extent of this within the lease).
- Any nuisances or disputes can be dealt with through the freeholder.
- An annual ground rent and service charge may need to be paid.
- You are not always in control of what you spend.
- Large refurbishment works or changes to your property may require permission from the freeholder.
The Leasehold Advisory Service click here.
For more information on the upcoming reform click here.
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