If you buy a leasehold property you will only own the lease for a certain number of years. Usually the lease is long term, ranging anywhere from 99 – 999 years. You will have a legal agreement with the freeholder (who is in effect the landlord), this will stipulate how long the lease is for, and also who is responsible for what in terms of upkeep and repairs.
Before buying a leasehold property you should find out what you will be responsible for as the leaseholder. You may need permission to make alterations to the property, and you will probably have to pay an annual service charge towards the maintenance of the property and any common/shared areas.
It is a good idea to ask for a breakdown of the service charge so that you can see how it is worked out.
You may also have to pay an annual ground rent charge as a condition of lease. The ground rent could increase year on year, but this has to be set out in the lease
Fee’s are a major cause of tension between leaseholder and landlord. Leaseholders sometimes feel that the ground rent and service charges are too high. This is especially magnified if the leaseholder feels that the landlord is not maintaining the property to a high enough standard.
What happens when the lease ends?
When the lease ends, the ownership of the property will revert to the freeholder. Even if you and your family have owned the property for sixty years, you will have absolutely no claim as its owner. Properties on short leases are often cheaper that those with long leases, but that is because they are essentially worthless.
You may be able to extend the lease on the property, but it can be expensive and hard to justify, especially if it is a short term lease.
Buying the freehold
If a landlord is planning to sell the freehold then they usually have to give first refusal to the leaseholder. There could also be significant legal fee’s to pay on top of the cost of the property.
Whenever you need legal advice for purchasing commercial property, contact Kaiser Solicitors for a free, no-obligation quote.