Leasehold flat

MoDo

Hey guys!

Does anybody own a leasehold flat? I would like to have a flat, but this kind of ownership sounds too strange to me. You buy something, but it's not actually yours, it's just a long term rent (when you want to extend it, you have to pay again - like buying same thing again).

I understand the principles of leasehold, but I would like to hear some experiences of leasehold owners whether they think it's worth it or not.

G_M

MoDo wrote: »

Hey guys!

Does anybody own a leasehold flat? Yes. Tens of thousands (probobly millions) of people in England and Wales.

I would like to have a flat, but this kind of ownership sounds too strange to me.
Presumably because it is unfamiliar to you.
You buy something, but it's not actually yours,
You buy a lease. You own it. You can sell it. It is yours.
it's just a long term rent (when you want to extend it, you have to pay again - like buying same thing again).
No. When you rent something you cannot sell it.

I understand the principles of leasehold, but I would like to hear some experiences of leasehold owners whether they think it's worth it or not.

If you are unhappy buying a leasehold, why not look for a flat where you can buy the lease and the freehold, or a part-share of the freehold?

phill99

Birtually all flats in the UK are leasehold. Some are keasehold and vome with a share if the freehold. There are a few genuinely freehold flats in a few specific geographical locations, but most people will never come scross them.

While you msy not agree with it, it will be the only way you will own a flat. If you want freehold, you need to buy a (non-leasehold) house.

G_M

phill99 wrote: »

While you msy not agree with it, it will be the only way you will own a flat. If you want freehold, you need to buy a (non-leasehold) house.

or buy the freehold as well as the lease. Then you can renew the lease at any time you wish, for whatever new length you wish, and at whatever price you wish.

padington

Personally I wouldn't touch a leasehold property myself unless I couldn't afford anything else. My father used to say the same. It's one of those simple rules in life which can really benefit a family.

MoDo

G_M wrote: »

You buy a lease. You own it. You can sell it. It is yours.

Yes, but lease is getting shorter and shorter and eventually it can run out. It's actually not a full ownership that will stay here forever for your heirs, is it? From this point of view it's just a long-term rent.

G_M wrote: »

No. When you rent something you cannot sell it.

Not technically, but yes, you can. It's common with business properties that you are renting (long-term). Then you decide to let somebody else take your place (e.g. your spot at the town market) for a reasonable amount of money. Of course, landlord has to approve it.

brightonman123

l/h ok if you don't intend to live there 'forever' - make sure there's plenty of years left, to retain some value for whenever you sell on.


and remember- ground rent / service charges / major repairs will ALWAYS be payable, ongoing basis!

CashStrapped

I own a leasehold flat.

The concept is weird when you first encounter it, especially if you have never heard of it before.

The majority of flats in the UK will be leasehold. If you think about it, all flats are contained within one large structure, someone owns that structure, and this is the freeholder. So you are leasing the flat you buy within that structure as a whole. Normally you pay a ground rent, which is a minor fixed fee per year and does not change.

You also pay a service charge (this can change), this is usually for the upkeep of the building. It is a contribution from every leaseholder in the block. It goes to the freeholder, the owner of the whole building. It goes towards maintenance (lifts for example, roof repairs, individual flat repairs), gardening and grounds maintenance, administration etc. Mine has gone up with inflation. Some are low, some are high (depends on the type of flat, where it is, and your freeholder (landlord). Leases with private freeholders can be more at risk from above inflation rises. As a leaseholder you can challenge a service charge fee if it increases by a unfair amount.

If you are considering buying leasehold, there is nothing wrong with it as long as you have a good solicitor who is well versed in leasehold law. You will need to be able to go over your lease with a fine tooth comb. Leases can vary, so you must ensure you know what you lease makes your responsible for, what clauses are on it, what you can and can't do. Some things for example, like windows, you may not own, as these are classed as part of the external structure. So you cannot replace them without permission from the freeholder.

The two things I would look out for are

1) Lease length, how long is left on the lease when you buy the flat. The lease will have a fixed expiry date, even if it sold multiple times. That lease will slowly tick away. Be very wary of a lease with 80 years or less on it. The renewal costs (to re-extend the lease) can be much larger and they can be difficult to get mortgages on or sell.

2) Major Works (Repairs). Every so often leasehold buildings will undergo one off (20-30+ year cycle) major repairs. Complete new roofs etc. The costs of these major works can be huge. The costs are usually divided by the number of flats. So you will pay a share of the costs. These can add up to being over £10,000 if not much more in more expensive areas. So find out when the last major works cycle was done, if there is anything pending the pipeline, and what your contribution may be in such a circumstance.

The biggest mistake people make is buying a leasehold flat without even knowing what a leasehold is. You can imagine the problems this can cause.

Do not be put off by leasehold. It is not a perfect system, but as long as you have a good solicitor, and you understand it too, you will be fine.

Here are a few good links, just in case I have confused you:

http://www.leaseextension-uk.info/what-is-leasehold.html

http://www.independent.co.uk/money/mortgages/beware-the-menace-of-the-expiring-lease-1876942.html

http://www.theguardian.com/money/2005/feb/05/firsttimebuyers.homebuying

http://www.lease-advice.org/information/faqs/#RightsandObligationsunderaLease

padington

Freeholds are always cheaper to maintain and hold their value better. Obtain a freehold if you can.