We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
PLEASE READ BEFORE POSTING: Hello Forumites! In order to help keep the Forum a useful, safe and friendly place for our users, discussions around non-MoneySaving matters are not permitted per the Forum rules. While we understand that mentioning house prices may sometimes be relevant to a user's specific MoneySaving situation, we ask that you please avoid veering into broad, general debates about the market, the economy and politics, as these can unfortunately lead to abusive or hateful behaviour. Threads that are found to have derailed into wider discussions may be removed. Users who repeatedly disregard this may have their Forum account banned. Please also avoid posting personally identifiable information, including links to your own online property listing which may reveal your address. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
Confused about Leasehold (LOOONG POST)

balsingh
Posts: 1,501 Forumite


In some of my previous posts, I have mentioned that I am lookign to buy a flat in London as a BTL investment.
Up till now, I have only ever bought a house which was freehold so I didnt really make much sense of how leasehold works so hopefully you guys can clear up things for me.
I know that if I buy a leasehold flat, then I have to pay ground rent to the leaseholder. I also knwo that once the lease finishes, the property becomes the leaseholder's. In this situation, what happens? Can I buy the freehold? Do leaseholders extend leases?
What is also meant by having 'a share of the freehold'? What happens when the lease ends in that situation?
Also, I have been told that mortgage lenders will only give mortgages where the lease lasts for at least 30 years longer than the mortgage term. Why is this?? If this is the case, would that rule me out of a flat in London as I woudl be taking out a 25 year mortgage and woudl need to buy a property with at least a 55 year lease on it (most flats leases seem much shorter). Also, When I come to sell (say in 10 years), will I have problems as any potential buyer wont be able to get a mortgage? In which case, if I get lumbered with it, once the lease ends, will I lose out totally as the leaseholder will stake a claim on it?
SOrry to sound so thick but the whole leasehold thing is confusing.
Up till now, I have only ever bought a house which was freehold so I didnt really make much sense of how leasehold works so hopefully you guys can clear up things for me.
I know that if I buy a leasehold flat, then I have to pay ground rent to the leaseholder. I also knwo that once the lease finishes, the property becomes the leaseholder's. In this situation, what happens? Can I buy the freehold? Do leaseholders extend leases?
What is also meant by having 'a share of the freehold'? What happens when the lease ends in that situation?
Also, I have been told that mortgage lenders will only give mortgages where the lease lasts for at least 30 years longer than the mortgage term. Why is this?? If this is the case, would that rule me out of a flat in London as I woudl be taking out a 25 year mortgage and woudl need to buy a property with at least a 55 year lease on it (most flats leases seem much shorter). Also, When I come to sell (say in 10 years), will I have problems as any potential buyer wont be able to get a mortgage? In which case, if I get lumbered with it, once the lease ends, will I lose out totally as the leaseholder will stake a claim on it?
SOrry to sound so thick but the whole leasehold thing is confusing.
If you found my comment helpful, please click the 'Thanks' button below :T
0
Comments
-
From what you say, it seems you have a reasonable understanding of "leasehold" and it's effect on a mortgage.
If you have a decent solicitor- they will explain the implications, but it isn't a big deal- a lease just defines who does what with the communal parts of the building and creates ground rules so that neighbours can exist side by side.
Share of the freehold is effectively a leasehold, but all leaseholders in the same "property" have a share of the overal freehold- Simplest way to describe is if a house is split into two flats the the downstairs and upstairs have a lease each but also a (presumably equal) share of the freehold. It is not a "freehold flat"!!
Still be very aware of short leases- your description is accurate.
Hope this hasn't confused you more- it's been a long day!
SSI am a fee charging WoM Mortgage broker.I now no longer give information and opinion within the Mortgage boards, because a number of posters who, having approached me professionally, agreed my fee-which has been been made very clear at the outset, taken my advice (normally cancelling a [home visit] meeting at short notice) have then approached one of the fee-free brokers on here to arrange the very same deal I have advised.Whilst I totally concur with the ethos of "money saving"- abusing the goodwill of a professional who provides a quality service is taking it too far! :mad:0 -
It might also be helpful to have a look around this site:
https://www.lease-advice.org/newintro.htm
There are statutory rights to extend leaseholds and even buy the freehold but these will cost you, if a price can't be agreed a tribunal will decide. So it's not really a correct scenario to assume the leaseholder [in most cases] simply takes over the property at the end of the l/h term, usually an extension is agreed or occasionally forced on them.
Lenders are wary of short l/hs because it can have a negative affect on the value of the property which is their security on your loan.0 -
Hi balsinghbalsingh wrote:I know that if I buy a leasehold flat, then I have to pay ground rent to the leaseholder.
No,if you buy a leasehold flat, you are the leaseholder. You pay ground rent to the freeholder, who owns the building that the leasehold flats are in.I also know that once the lease finishes, the property becomes the leaseholder's.
No it becomes the freeholder's.In this situation, what happens?
Normally what happens many years before the lease expires, is that it is extended by agreement between the freeholder ( the owner of the building) and the leaeholder (the owner of the flat, ie you).You pay money to the freeholder for this extension according to a quite complicated formula.Can I buy the freehold? What is also meant by having 'a share of the freehold'?
It is now quite common for all the leaseholders to club together and buy the freehold from the freeholder.They set up a company to do this in which they own one share each. They then manage the building themselves.
It is possible for one leaseholder to also own the freehold.Freeholds are usually bought and sold separately from the flats within the building and are valued according to quite different criteria.What happens when the lease ends in that situation?
Again, usually long before the leases end, the leaseholders, who are also now jointly the owners of the freehold, will decide to extend all their leases. This might be free.Also, I have been told that mortgage lenders will only give mortgages where the lease lasts for at least 30 years longer than the mortgage term. Why is this??
It is because the value of the property goes down as it gets closer to the end of the lease and the lenders are concerned they might not get their money back.If this is the case, would that rule me out of a flat in London as I woudl be taking out a 25 year mortgage and woudl need to buy a property with at least a 55 year lease on it (most flats leases seem much shorter).
Length of leases in London varies enormously depending on the area. If the lease is too short the leaseholder who is selling a flat can usually be asked to seek agreement with the freeholder to extend it as a condition of the sale.Obviously there is a vibrant property market in London leasehold flats, so I doubt you'll find this is a serious issue.Also, When I come to sell (say in 10 years), will I have problems as any potential buyer wont be able to get a mortgage?
You could do if the lease is very short, so you need to make sure it's long enough when you buy.In which case, if I get lumbered with it, once the lease ends, will I lose out totally as the leaseholder will stake a claim on it?
You mean the freeholder. It's very unlikely you will buy a flat with a 10 year lease, isn't it?Trying to keep it simple...0 -
crikey and i thought the first post was long:DYou're not drunk if you can lie on the floor without holding on0
-
I'm not sure why it all causes so much confusion.
There's a building, a block of purpose-built/newbuild flats or an old house converted into flats. The freehold covers the land the building is on, the common walls and roof, the hallways, lifts, garden, fences etc, which are shared by all the separate owners of the leasehold flats within.
The lease draws up the rules about how each flat owner has to contribute towards the maintenance of those shared common parts and pay a little bit of annual rent to the owner of the freehold land.
I admit it can get a bit baffling when you get a leaseholder who is also a freeholder at the same time, not to mention when ALL the leaseholders are also freeholders at the same timeTrying to keep it simple...0 -
Thanks for the info guys ... makes more sense now!! Another few quick questions ... when I enquire about a property through the EA, will they always know how long is left on the lease?
Also, is there any benefit in buying a property with a short lease? I have seen some properties up for sales at around 50% of the market value but they onlt have 6 year leases. Is there any way that this coudl be used to my advantage?If you found my comment helpful, please click the 'Thanks' button below :T0 -
balsingh wrote:when I enquire about a property through the EA, will they always know how long is left on the lease?
They will have been given an idea by the Leaseholder, and hopefully will have been provided with a copy of the lease, or some confirmation from the vendor's solicitor or freeholder. They won't tell you exactly unless they know for sure, because of the Misdescriptions Act.balsingh wrote:Also, is there any benefit in buying a property with a short lease? I have seen some properties up for sales at around 50% of the market value but they onlt have 6 year leases. Is there any way that this coudl be used to my advantage?
I'm only a layman but a 'short lease' is classed as one of 21 years or less and once you get to this point the law starts to weight in favour of the freeholder. But anything with less than 7 years left to run, I believe you have virtually no chance of getting anything from the Freeholder. I don't think you can force a lease extention beyond this point and there would be little point in the freeholder doing this voluntarily when they will own the flat outright in such a short period of time.
It's better to stick with leases of more than 70 years. If you're looking at auction properties with less than that then that's probably the reason they're in auction in the first place.Everything that is supposed to be in heaven is already here on earth.
0 -
No, an estate agent will not always know how long is left on the lease. Some vendors lie outright to the ea, others are carefully vague. It is always best to confirm with the vendors just how long remains on the lease. Although your solictor will check this as part of the buying process.
If a property is up for sale with a short lease there is normally a reason for this & it should be like a red rag to a bull to you. It will generally signify that the vendor has not been able to extend the lease for one reason or other. Perhaps the cost being too prohibative for them.
I wouldn't advise going for a property that had less than 80yrs on it.
Usually you can manage to extend or renew the lease on the majority of properties by negotiating with the freeholder. You have to have owned the property for 2 or 3 years( can't recall which) before you can do this though.
There are lot's of flats with decent length leases in London & if the cost seems out of your grasp then consider an ex local authority property. Usually much cheaper, long leases & good for letting.The bigger the bargain, the better I feel.
I should mention that there's only one of me, don't confuse me with others of the same name.0 -
I'll gve u our example,
We bought a flat six years ago ( london area) and it had 84 years left on the lease. I was worried about what would happen when we tried to sell and with my neighbour downstairs enquired about buying the freehold. The landlady wanted 8k each plus cost (i.e. a total of 16k). Now, five years later she is willing to accept 5k each. We are in the middle of buying the freehold.
My main concern was if i sell the flat, the fact that there is only 78yrs left will put off some buyers and potentially delay the whole process. Also i am told extending a lease can often be more expensive than buying a share of the freehold.
Once we obtain the freehold, we will extend the lease to 999years at no cost to us.
Incidently, when i recently remorgaged the BS would not do it if it fell below 75 years.
Btw, i got alot of advice from estate agents and my solicitor before proceeding and everyone seemed to think it was a good idea selling or not.
Hope thats useful0 -
EdInvestor wrote:I'm not sure why it all causes so much confusion.
There's a building, a block of purpose-built/newbuild flats or an old house converted into flats. The freehold covers the land the building is on, the common walls and roof, the hallways, lifts, garden, fences etc, which are shared by all the separate owners of the leasehold flats within.
The lease draws up the rules about how each flat owner has to contribute towards the maintenance of those shared common parts and pay a little bit of annual rent to the owner of the freehold land.
I admit it can get a bit baffling when you get a leaseholder who is also a freeholder at the same time, not to mention when ALL the leaseholders are also freeholders at the same time
Unfortunately not. The freeholder owns all the land and buildings. The leaseholder owns the RIGHT to use the specified buildings (ie flat) for the duration of the lease. If a leaseholder sells, he is selling the right to use the property for the remaining period. The ground rent is the lease rental.I can spell - but I can't type0
This discussion has been closed.
Confirm your email address to Create Threads and Reply

Categories
- All Categories
- 352.1K Banking & Borrowing
- 253.6K Reduce Debt & Boost Income
- 454.2K Spending & Discounts
- 245.1K Work, Benefits & Business
- 600.7K Mortgages, Homes & Bills
- 177.5K Life & Family
- 258.9K Travel & Transport
- 1.5M Hobbies & Leisure
- 16.1K Discuss & Feedback
- 37.6K Read-Only Boards