Providing the answers to your legal questions
What do I need to consider when purchasing a leasehold property?
Unlike a freehold property, which means you own the property and the land upon which the property is built on, a leasehold property means a Lease is granted to you by the Landlord to occupy the property for the term granted.
The term of the Lease will continue to reduce and if the length of Lease falls below 80 years, the premium payable to the Landlord for a lease extension is likely to increase. A shorter term will also reduce marketability as most mortgage lenders will not lend on a short Lease.
The Lease sets out rights granted and obligations on both the leaseholder and the Landlord. There are normally restrictions under the Lease, which could include obtaining Landlord consent for alterations to the property. It is important to read the Lease to ensure that it will not affect your intended use of the property.
My mother has recently died and her estate is worth £500,000, will I need to pay Inheritance Tax?
The IHT Rules changed this year as a new Residential Nil Rate Band was introduced and so provided certain criteria apply there are more tax savings to be made.
The current threshold for Inheritance Tax (IHT) is £325,000. Where an estate exceeds this amount and the beneficiary of the estate is non-exempt from IHT, then IHT will be payable on the excess at 40%. As a child of the deceased you are considered to be non-exempt and therefore the amount of IHT payable could be as much as £70,000 (being 40% of £175,000).
However, if your mother was a widow and she had inherited her late husband’s estate then the Executor of your mother’s estate could claim his unused nil rate band.
The Landlord is expected to maintain and repair the building structure and communal areas. As a leaseholder you will be responsible for service charge payments which would normally cover a share of the costs of maintenance, repairs and buildings insurance. The amount is likely to vary each year depending on the expenses incurred and whether any future expenditure for major works are required.
In addition, ground rent is also likely to be payable. This is often a nominal amount, but is also a requirement of the Lease and must be paid on the due date.
For further information please contact a member of our Residential Conveyancing team, who will be happy to assist you.
Jane Colver
In this instance the amount to be claimed could be as much as £325,000, which when added to your mother’s IHT threshold of £325,000 could give your late mother’s estate up to £650,000, free of IHT. If this is the amount that can be claimed then no IHT would be payable.
There are a number of factors which must be taken into account when calculating IHT and the rules are quite complex. We would be able to help you with this and prepare all the relevant Inheritance tax forms required by HMRC to make this claim, which could potentially provide you with saving of up to £70,000.
Please contact our Wills & Probate team for further information.
Nicola Lowe
enquiries@hgwalker.co.uk | 01202 881454 or 01202 203200 |
www.hgwalker.co.uk Law Spot is brought to you by Harold G Walker Your Friend-in-Law.
There is no guarantee that your question will be used and you will not get a personal response. The answers in this feature are for guidance purposes only and do not constitute legal advice.
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