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As a solicitor I sometimes fall into the trap of assuming that everyone knows the basics of Leasehold and Freehold properties which is not always the case. In light of this I have prepared a brief guide to the basic differences between the two.

The majority of property in the UK is either held as Leasehold or Freehold. The major difference between the two is that with a leasehold property you own a ‘right’ to occupy a specified piece of land for a specified amount of time. With a Freehold property you own the land or property outright which is not usually subject to the above restrictions. In addition with freehold you actually own all the land directly below your property, and the sky above your property; with leasehold you can own a ‘chunk’ of property – for example a specific flat.

The length of the lease can be any amount of time but typically ranges between 99 and 125 years.

Leaseholds are usually used in relation to some form of flats or apartment. The reason that flats are usually leasehold is that they are usually reliant upon each other for support and shelter (e.g. the top flat will also own the roof, the bottom flat will own the foundations, and all the other flats own their walls. All of the flats rely on each other for support). Because of this mutual need for support you want to make sure that if one flat is letting an important part fall into disrepair, then the others can force them to do something about it. Because of the way property law has formed, it is much easier to do this if they are all leases than if they were all freehold. Hence most flats/apartments are leasehold.

With a leasehold property you enter into a lease with the Freeholder (the person who owns the freehold – yes there’s still a freehold – there’s always a freehold) or Landlord. This is essentially an agreement governing the Tenants relationship with the owner of the land and details what you can and cannot do. The important thing to remember with leasehold properties is that you are restricted in some aspects of your use of the property unlike Freehold properties where you are relatively unencumbered.

For larger blocks of flats there will quite often be a management company which looks after the property on behalf of the Freeholder.

Leasehold properties normally have a ground rent payable. This can be a peppercorn rent (a nominal amount that is quite often not even collected) or several hundred pounds a year. In addition the Freeholder (through the management company) will often collect service or maintenance charges. These charges are for the maintenance of the building and communal areas as well as insuring the property.

A leasehold property is a diminishing asset – i.e. as the length of the lease is reduced below a certain length then it’s value decreases. This actually does not happen until a lease is reduced to about 60 years. When a lease reduces to this level it is usually a good idea to extend the lease or in some circumstances purchase the Freehold – see my separate blog on this.

If you have any questions about leasehold properties or are considering purchasing a leasehold property please get in touch by email or by leaving a comment on this blog.


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Leasehold extension    2 Comments

Hi, it’s William James here – I specialize in leasehold properties at Fidler & Pepper. I’ve had a few clients recently who have been in the process of selling a leasehold property and discovered that as a result of the term of their lease being around 70 years they have been unable to attract any buyers

In light of this I thought I would put together a brief guide as to why it might (from a sellers point of view) be a good idea to extend your lease before you find a buyer!

· As long as you have lived in your property for at least 2 years you have a statutory right to extend your lease.

· If your flat was built or the lease was granted anytime between the 1960’s and 1980’s your lease will almost certainly fall into the category needing extension attention.

· Most people will want to extend their lease as it can increase the value of their property. As soon as your lease reduces to around 60 years then the value decreases significantly and effectively becomes un-mortgagable. It is therefore difficult (if not impossible) to sell to the vast majority of buyers purchasing with a mortgage.

· Extending your lease can take time (sometimes up to 6 months) so it’s not something you want to leave to the last minute if you are thinking of selling your property!

· The longer you wait to extend your lease and therefore the less that is left on it the more expensive the cost of the extension will be.

· An example of a flat with a 68-year unexpired lease, on a ground rent of £100.00 pa, with a current value of £100k would cost approximately £7k to £8k to extend the lease. The same property, on a lease with only 35 years to run, would be considerably more expensive (£50k to £60k). However if you extend your lease before it has less than 80 years left to run (95 years for example) the cost of this extension would be in the hundreds rather than thousands.

· Property prices have fallen over recent years and this can work to your advantage as any compensation that you pay to the Landlord is linked to the current value of the property and therefore you would pay considerably less today than you would 2 to 3 years ago.

If you have any questions about extending your lease please get in touch by email or by leaving a comment on this blog.


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Leasehold extension    No Comments

Recently I was chatting with a colleague, William who attended a leasehold training event in London.

The room was packed with solicitors from London. Most were swamped with buying/selling of the freehold interest in leasehold properties and all the problems that came out of that.

The consensus of the room was that now was a very good time to buy your freehold.

In the present econmic climate Landlords (people who own the freehold) are keen to realise some money to help their cashflow and generally are willing to negotiate a sensible price.

Owning the freehold to your leasehold property gives you:

– Greater control over the management of the property so you can extend the property or make common areas look great if your landlord wasn’t performing its duties.
– Increases the value of your property – a leasehold property sold with the freehold has more value than a straight leasehold and is more attractive.
– Allows you alter the lease so that you can extend the lease term without having to pay a premium for it. You can alter the lease for other reasons such as allowing domestic pets (although these changes would have to occur to all leases in the block).

If you want to have a chat about your options please contact our specialist leasehold solicitor William James on 01623 451111 or at wjames@fidler.co.uk

Matt Slade

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