Leasehold Property in the Spotlight
The leasehold sector has recently been in the spotlight again following a Competition and Markets Authority (CMA) investigation. The findings suggest that some buyers continue to be unclear as to the nature of their purchase and subsequent costs that they may incur. The CMA said some homeowners found themselves in “serious traps” after being misled by unscrupulous housing developers.
This finding does not in itself undermine leasehold as a method of property purchase but it does highlight the need for good legal advice when buying a property.
Some people are not clear in their understanding of what constitutes a leasehold property. Put simply it is a property that is owned for a fixed period of time under a lease and is ultimately owned by a landlord. That period can be incredibly long e.g. 999 years whilst others can be much shorter however, shorter leases are more difficult to secure a mortgage on and we would normally advise clients to look at periods of 80 years and upwards.
Leasehold properties typically come with less responsibility for buildings and maintenance, but will likely have regular ground rent, maintenance fees and annual service charges, which should be factored into the cost of the purchase by a buyer. There has been some coverage about cases where people have seen their ground rents rise dramatically. Often this increase is built into contracts, which can make it more difficult to sell a property.
Undoubtedly there is room for additional safeguards for buyers but given good legal advice, a clear understanding of the benefits and obligations of leasehold it continues to be a good means of securing a property. It is also worth noting that as a result of the Leasehold Reform Act 1967, leaseholders have a right to buy a home outright if they meet certain criteria. This process is called ‘leasehold enfranchisement’.
Property purchases are typically the, or one of the, biggest purchases people make in their lives. It is a process that requires the support of a skilled lawyer.
Leasehold, whilst it has picked up some recent bad press, continues to be a good route to purchase a property and is a method that many people use to get onto the property ladder. We can guide you through this process and help ensure your interests are represented during the purchase.
If you are considering moving home, buying a second home or a buy-to-let, contact our Residential Property Team on 0800 302 9448 , who will be happy to help.