LEGAL Legal talk:

To make your home your castle, be sure who owns the drawbridge… With Elmhirst Parker Solicitors

When buying a new home, the first thing that comes to mind is probably not whether your dream property is freehold or leasehold. But understanding the interest of land before taking ownership can save you a lot of hassle and money in the long run.

While many houses in Britain are freehold, increasing property prices and high population densities have meant the number of leasehold properties across the country has grown rapidly to around 1.4 million.

Many assume leasehold generally applies to flats, apartments and shared spaces; however, over the past twenty years, new-build developers have increasingly sold houses on leasehold terms, which add further costs to buyers. These sales have seen ground rents being set at much higher levels than the ‘peppercorn’ arrangements with scheduled increases every decade or so.

In a bid to tackle this, the government has announced plans to put new measures into place to cut unfair or abusive practices within the leasehold system. Following consultation this July, new legislation will hope to ban leasehold agreements on almost all new build houses, allow ground rent for new long leases to be set to zero, as well as supporting existing leaseholders to purchase or extend their agreement.

But before this more transparent system comes into being, get to grips with the difference between freehold and leasehold; whether buying or selling, understanding the two could save a lot of wasted time and resources all round.

What form of ownership?

It’s important to check exactly what form the ownership takes in order to ask the right questions.

If it’s freehold, you will own the property and the land it sits on outright and will be responsible for all maintenance. While you don’t have to worry about ground rent or a lease ending, there may be other responsibilities that are not so obvious such as contributing towards a private shared access road. If it is leasehold, then you will be buying the right to live in the property for the remaining duration of the lease; this is effectively a long-term tenancy which can vary from 99 to 999 years. The land, structure of the building and shared spaces are owned by the freeholder who may be an individual landlord or a property management company.

Let us take away all the stress of buying or selling your home.

Our residential conveyancing team will help ensure transactions run as smoothly and quickly as possible.

Telephone or e-mail Karen Grandidge for free initial advice Tel: 01226 282238

17/19 Regent Street, Barnsley, S70 2HP (also in Selby and Sherburn-in-Elmet) 59

Things to consider when buying leasehold:

Before buying a leasehold property, you will need to consider how long is left on the lease, any service charges or ground rent you’ll need to pay, and how it may affect any resale. You may also need to ask for permission if you wish to extend the property or own a pet.

The freeholder will hold the buildings insurance and must consult with leaseholders about any works that are required, collecting service charges to pay for all maintenance and work management.

How much is the ground rent? Ground rent can be a fixed charge or one that will change over time. Check out how much is being paid currently, but look through the small print as well to be sure there are no big increases on the way. If any escalation is written in then it should not allow for a rise that is more than RPI. If you are seeking a mortgage, a lender will be looking to see affordability not just in the purchase price, but also in the ongoing costs of ground rent and the service charges.

How much are the service charges? Service charges can strike fear in the hearts of leaseholders, even when they have very deep pockets, as all work is likely to be relative to the size and standing of the overall building. You have a right to ask for a summary of how the service charge is calculated, what it will be spent on, evidence of the service charge budget and the accounts for the past three years.

Are repairs and maintenance

up to date? Take a good look at how well things are

maintained in comparison to the service charge accounts you’ve asked for. If everywhere is looking a bit run down or there’s no evidence of regular work being done, you can expect a big bill or an increasingly rundown environment. Don’t be afraid to ask about the freeholder; the agent may assure you it’s a big property management company, but if research shows they have a poor reputation in getting work done, you’ll be glad you checked.

They must also consult you for any work costing over £250 or that will last for longer than one year.

How will a lease affect a future sale?

Generally the value of a property will reduce as the lease gets closer to the end and you may struggle to sell the property if it drops below 70 years.

But don’t expect to snap up a bargain if you’re looking for a mortgage as lenders are unlikely to make a loan on a property with anything less than 25 years left.

If a property has only a short time left on the lease, you can ask the seller to seek an extension, but expect to pay for the benefit.

Looking to sell?

It’s always a good idea to get your ‘house in order’ by tackling paperwork before the sale board goes up.

There are forms requiring detailed information about the property itself and one covering all the fixtures and fittings. You will also have to detail specifics around the lease such as the rent, service charges, insurance and future work. By working with your lawyer in advance, you’ll be well prepared to answer all questions your potential buyer may have for you.

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