Buying & Selling Leasehold Property

There are two types of property in England and Wales: freehold and leasehold.  It’s important to understand the difference between them, if you are buying or selling a property.

If you own a freehold property, it means that you own the land and any building(s) that stand on it completely.  You own the property indefinitely, and you have responsibilities associated with the property for example, the maintenance of it. 

A leasehold property is different.  If you own a leasehold property, it means that you own it for a fixed period (usually between 21 and 999 years).  That is referred to as the lease and whilst you own the building (or part of the building) you will not own the land it sits on as that will be owned by the freeholder. This type of ownership is common for flats and houses in new build estates.

If you are buying a leasehold property, there are important considerations on which you will need to take advice: –

• You will most probably have to pay the freeholder ground rent and service charges. The ground rent is for the right to use the land on which the property sits.  Service charges are contributions to the maintenance and upkeep of the land (and shared parts of the building).  You will need to understand and budget for those costs.
• You will only own the property for a set time, after which, it passes back to the freeholder (unless it is extended).
• If you are buying the property using a mortgage, your lender, will want to know that you own the property for a minimum number of years (usually more than 85),
• Your rights and obligations are set out in a legal contract called a lease. The terms of the lease can restrict you in ways that are different to freehold ownership for example, you might not be able to keep pets and your choices of how to decorate may be limited.

Leasehold purchases are more complex than freehold purchases as in addition to advising you on the contract, transfer documents and mortgage, we will advise you on the lease, ground rent and service charge.  Often, we will be instructed to act on behalf of your lender in the transaction too.

Our residential property department are also able to advise and assist leasehold sellers and purchasers on issues arising from the Building Safety Act 2022 (BSA).  This is important and complex legislation which was introduced to improve the safety and standards of multi-storey buildings following the Grenfell Tower disaster in 2017.

This is ‘new’ law in that the main provisions only came into effect in October 2023, and it affects buildings which are over 11 metres high or have over 5 storeys and at least 2 flats.  It also designates buildings of over 18 metres or 7 storeys as high risk.

This means that many leasehold flats (old and new) are covered by the law.  

When the Act applies, it imposes financial protections for leaseholders who might otherwise have been exposed to significant costs arising from remedial works needed to improve fire safety in a building.

Whether you are buying or selling a leasehold flat, it is important to understand whether the property is covered by the Act and if so, what your rights and obligations are.

Our partner led team understands that the law, is new and may lead to uncertainty and unconcern and they are here to help.  For more information about our services and costs, please contact us at [email protected]