Guide to buying a leasehold property

What does leasehold mean?

You only own a leasehold property for a fixed period of time. You’ll have a legal agreement with the landlord (sometimes known as the ‘freeholder’) called a ‘lease’. The lease tells you how many years you’ll own the property. for. Ownership of the property returns to the landlord when the lease comes to an end. Most flats are leasehold. Houses can be leasehold too and usually are if they’re bought through a shared ownership scheme.

4 things you should ask the selling agent about a leasehold:

1. The ground rent

The ground rent is usually paid annually to the landlord and may rise over time. Ask the agent how much is it, and what are the terms? i.e does it double every ten years, or follow inflation?

2. The service charge

This usually covers maintenance of the whole building and building insurance and is paid either monthly, bi-annually or annually. Again, find out how much is it and what it covers.

3. A reserve fund

This is a fund leaseholders pay into and the managing agent holds to pay for future maintenance. If there is one and has built up, this could benefit a buyer, as potential future repairs may already be covered. Ask whether there is a reserve fund, how much it is and how does it work?

4. The length of lease remaining

Often adverts will only include the length of the lease on a property as it was at the beginning, for example 125 year lease. Therefore make sure you find out when the lease began and how many years remain. This is important to know, especially when taking out a mortgage because some lenders will refuse to lend on property with a short lease. Thus making it more difficult to purchase or re-sell.

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Guide to buying a leasehold property