Answering your FAQ’s on Leasehold Properties


Image of three apartment blocks for blog post on Leasehold properties



What is the difference between Freehold and Leasehold?

A freehold property includes the land and the building that sits upon it.  Most houses are freehold but in recent years some new build houses have been sold as leasehold.

A leasehold property includes the flat (or house) but not the land that it sits on. Virtually all flats are leasehold and you will own the flat for a given number of years under a lease.


What is a Lease?

A lease is the written agreement which gives you the right to occupy and use the flat and share the use of other areas of the building or estate.

A plan will be attached to the lease.  It’s vitally important that the plan of the property is correct as it will show the boundaries, the position of any parking spaces, paths, balconies, bin stores and communal areas.

The lease will set out the Landlord and Management Company details. It will also set out your rights and responsibilities, and the rights and responsibilities of the Landlord and any Management Company.  It will also set out how the ground rent is reviewed and how the service charges are calculated and collected.

Once granted the same lease is passed on to future buyers of the property and; whilst the Land Registry details will change to reflect the new owners details, the lease details will not.


Are all Leases granted for the same length of time?


Although a lease is always granted for a set time period (term); the term granted can vary and can range from 99 years to 999 years.  Once the lease begins, the lease term will reduce each year.

It is important to know the number of years remaining on the lease, especially if you are having a mortgage.  Mortgage lenders have specific requirements regarding lease terms and most mortgage companies will only lend you money for a lease that has more than 80 years remaining.


Can I extend the Lease Term following completion?

Unless the process is started by the Seller and a strict process followed, you will have to wait until you have owned your flat for 2 years, before you can apply for a new lease. The new lease will extend the existing lease term by 90 years.

However, it is important to know that you will usually have to pay an increased price for the lease extension, once there are less than 80 years remaining. The process is also complex and can be costly too. It is important that you take specialist advice from both a solicitor and surveyor.


Are there regular additional charges that I will have to pay?


Additional yearly charges are payable in respect of the ground rent and service charges and it is important to know what the annual amounts are so that you can budget.

Ground rent is usually a yearly payment which is paid to the person that owns the land upon which the property sits, who is referred to as the freeholder/landlord.  The ground rent payable can be increased periodically in accordance with the terms of the lease.

Service charges are also yearly charges. They are are usually paid in advance, in respect of your share of all the costs of maintaining and insuring the building and any shared areas. The amount payable will vary on the services provided and can include a contribution towards a reserve or sinking fund. The reserve or sinking fund is used to cover infrequent costs or expensive items such as external decoration or major repairs. It enables the costs of major works to be spread over a number of years.


What is the difference between the Landlord, Management Company and Managing Agent?

In the case of a flat, the Landlord will own the land and the building.

Sometimes the Landlord will set up a Management Company to take responsibility for the maintenance, repair and insurance of the building and the shared areas.  The Management Company details are set out in the Lease and sometimes each flat owner is a member or shareholder of the Management Company. If you are a member or shareholder, you may also be asked to be a Director of the Company and this imposes additional responsibilities upon you.

Managing Agents are often appointed by the Landlord or Management Company to deal with the day to day running of the building and shared areas.  The Managing Agent will arrange the services, maintenance, repairs and insurance. They will often also collect the service charges and prepare the yearly budget and accounts.


So, what do I need to know before I buy a Leasehold property?

Your Conveyancer should provide you with the following information:

  • A copy of the lease and a full report on its terms
  • A report to you setting out, as a minimum:
    • The length of the lease term remaining
    • The amount of ground rent payable
    • Any ground rent review provisions
    • Any provisions in the lease which may require you to seek the landlord’s permission for any matters. Such as the requirement to obtain the landlord’s consent to subletting; or any works which you may wish to carry out
    • The amount of service charge


Post written by Lisa Collett,
September 2019

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