An ever increasing number of people purchase a leasehold property as their home, whether as a first time buyer, as a retirement home or an investment. This article explains the basic elements of leasehold ownership.
Leasehold properties have become a large proportion of the UK property market and this is also true in Portsmouth.
Leasehold living offers accommodation for the growing population of the city of Portsmouth and brings a variety of properties catering for varying occupancy needs. Although a seafront apartment with a balcony and sea views is an exciting prospect, it is important to understand the additional responsibility on the homeowner under the terms of the lease.
When buying a leasehold property it is crucial that individuals understand their rights and responsibilities as set out in the lease.
Many first time buyers in particular, may not even know what a lease is so it is important that they are given a copy of the lease and have it explained to them before purchasing their apartment.
For the wiser leasehold property owner they will be only too aware of the benefits and pitfalls of owning an apartmentin a leasehold building. This article aims to clarify some of the prominent aspects of living in a leasehold property.
WHAT DOES LEASEHOLD MEAN?
In it’s simplest form, owning a leasehold apartment is a long tenancy. You have the right to occupy and use the apartment for a long period of time – the ‘term’ of the lease. This will usually be for 99 or 125 years from the date the building was constructed.
As the leaseholder, you will usually own and be responsible for everything within the apartment. This will include the floorboards and plaster to the walls and ceiling. The structure, external walls and communal parts of the building, including the land it stands on, will usually be owned by the freeholder who is also the landlord.
The landlord can be a person or a company including a local authority or a housing association. It’s also quite common for leaseholders to collectively own the freehold through a residents’ management company, effectively becoming their own landlord.
KNOW YOUR LEASE
Your lease may be quite complicated but its fundamental role is simple. It’s a contract between you and the landlord, giving you conditional ownership of your apartment for a fixed period of time. It sets out your contractual obligations as a leaseholder and those of your landlord; therefore, it’s important you know the contents of the lease and understand them. This will include payment of ground rent and contributions to the costs of maintaining and managing the building through service charges.
The lease will also place certain conditions on the use and occupation of the apartment. It’s especially important to understand these before you purchase your apartment. It’s not uncommon for someone to move into their new home only to discover a beloved pet can’t come with them because they are not allowed under the terms of the lease. More recently, issues with subletting have been increasing with the rise of Airbnb and other short term holiday lettings businesses. Although potentially lucrative, check your lease to ensure you’re and not breaching your obligations to the landlord.
SERVICE CHARGES & GROUND RENT
The service charge is the payment made by a leaseholder to the freeholder or their managing agent to maintain, repair and insure the building as well as to provide other services such as lifts, central heating or cleaners. These charges are liable to change from one year to the next but at all times must be ‘reasonable’.
Leaseholders have the right to challenge the service charge if they feel this is ‘unreasonable’ via the Leasehold Valuation Tribunal (LVT). It is important to find out what the current charges are and the charges for the future years and what, if any, reserves are held to cover the cost of major works such as the external decoration of the building. The provison of the ‘reserve fund’ may be provided for within the lease to collect additional funds for the future works.
Details of what can and cannot be charged by the landlord and the proportion to be paid by the individual leaseholders should all be set out within the lease.
“Ground rent” is paid under the terms of a lease by the owner of an apartment to the owner of the land (freeholder) on which it is built. The charge for this is varying from lease to lease; however, it is important to understand as this can increase in increments over time. It is not unusual for the ground rent be renegotiated upon an extension of an existing lease.
With a well written lease and a professionally managed building, leasehold properties can be an ideal home and a secure investment. For more information on the leasehold management service we provide please see our leasehold management page. If you have any questions regarding the content of this article or would like impartial advice in respect to leasehold property matters in general please, contact us with your enquiry.