When it comes to seeking lease advice, it’s important for landlords to first determine whether they are purchasing a leasehold or freehold property.
The difference between freehold and leasehold is ownership of the land; when a buyer assumes ownership of a freehold property, they obtain both the property itself and the land on which it is built. When buying a leasehold property, a buyer obtains the property but not the land. They in effect rent the property from the leaseholder for a period of time, with the standard lease being around 99 years. When that lease expires, the freeholder assumes ownership of the property once more. It is more common for leaseholds to apply to flats, and it’s important to understand the difference between freehold and leasehold properties as it can impact things like resale value and saleability.
Some key lease advice
If you have found that you have a leasehold property, you should first do some research into how the building is managed by the freeholder to ensure the property is kept in good condition and that the freeholder is reasonable and easily contactable.
If you are purchasing with a mortgage, you should check the terms and conditions with your lender – some lenders will not issue a mortgage for a property with less than 70 years left on the lease, while others may accept 65. It is ideal not to buy a property that has 85 years on the lease without assessing your options for exiting the lease or possible freehold acquisition, as lease length can impact your ability to sell later on. Also worthy of note is the fact that when the unexpired term of the lease falls below 80 years, should you wish to buy your share from the freeholder or consider a lease extension, you may be hit with an additional fee known as “Marriage Value” or “Marriage Fee.” If your chosen property has a lease of around this length, seek the counsel of your solicitor prior to purchase. There are some things to think about when it comes to the process of lease extension too. Provided you meet certain criteria, you may be able to extend your lease by up to 90 years on a flat, and 50 years on a house. There may be costs associated with doing so in addition to the premium, and tools like this free lease extension calculator will help you to see an estimate of what these could be. For other changes to the lease beyond the length of it, you may be able to reach an agreement simply by speaking to the freeholder and arranging to have the document amended. If there is any discrepancy, it may be necessary for you to take the case to tribunal.
If you want to end the lease for your leasehold property, you have some options. You can choose to buy the property from the freeholder, you could renegotiate a new lease and continue your tenancy, or you can leave (providing you give the leaseholder due notice, normally a period of one month).