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Home » What does Leasehold mean?

Conveyancing
Looking up at modern apartment block
Oct 14th, 2020

At BLB Solicitors, our goal is simple – to deliver you clear, practical legal advice and cost-effective solutions. We hope you enjoy exploring our Blog. If you can’t find what you’re looking for, please do contact us.

What does Leasehold mean?

Leasehold specialist, Mike Hansom, explains the main differences between leasehold and freehold property, the implications of a leasehold purchase, and your ongoing rights and obligations as a leaseholder. Mike can be contacted by email, or on 01225 462871.

It is estimated that almost one in five homes in England are leasehold. But many people facing a leasehold purchase do not fully understand the difference between leasehold and freehold, and the possible implications for them of owning a leasehold property.

If you buy a freehold property, you own the building and the land it stands on. Unlike a freeholder, a leaseholder does not own the land and the building. Instead, they essentially rent them from the freeholder for the term of years specified in the lease. If they sell their lease, the purchaser acquires the remainder of the term.

Newly created leases can be for any term, typically for 99 or 125 years, but some are for as long as 999 years. When the term of the lease expires, all of the leaseholder’s rights and interests in the property cease and revert to the freeholder.

If you meet certain condition and can raise the money, you can extend your lease by:

  • 90 years for a flat; or
  • 50 years on a house.

Can I get a mortgage on a leasehold property?

As a general rule, mortgages are available on leasehold properties. However, a lease with less than 80 years left to run is considered a short lease, which will be more expensive to extend. This can significantly devalue the property, making it much more difficult to find a mortgage provider who is willing to lend on it. Once there are less than 70 years to run, it will be virtually impossible to obtain a mortgage on the property.

Other differences with leasehold property

The subject of leasehold houses has proved controversial. However, the vast majority of leasehold properties are flats. The lease will set out contractual obligations for both the leaseholder and the freeholder (landlord).

In most cases, the landlord’s responsibilities will include:

  • building management;
  • building maintenance;
  • insuring the building; and
  • the cleaning and maintenance of communal areas such as the lobby, stairs, landings, and any outdoor spaces and structures within the curtilage of the building.

These will be funded by the leaseholders through the payment of an annual service charge. In many cases, unreasonable service charges can be challenged.

Leases inevitably place certain conditions on the leaseholder’s use and occupation of the flat. These often include restrictions, or even a complete bar, on such things as making changes to the property, sub-letting, keeping pets, and using the property for business purposes. If any of these conditions are breached, the leaseholder risks the landlord taking them to court and the possibility of losing their lease.

Flat owners in a block of flats have a statutory right to take control of the management of their block. They can do this if they form a majority group and exercise the ‘Right to Manage’ created by the Commonhold and Leasehold Reform Act 2002.

If there are a majority in favour and the money can be raised, flat owners have a statutory right to buy the freehold of their building, even against their freeholder’s wishes. This is referred to as leasehold enfranchisement. In return, they must pay a fair price and make a contribution towards their freeholder’s costs.

Mike Hansom
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