MORTGAGE FINDER ~ Types of LEASEHOLD PROPERTY
Special considerations for leasehold property
There are three types of ownership of property - freehold, leasehold and Commonhold
- The most common form of ownership is freehold estate. This means that you own both the property, and the land on which it is built, for an unlimited period of time.
- Flats and maisonettes are more likely to be (but not always) leasehold. This means that you lease the right to occupy the land for a fixed period of time, usually between 99 and 999 years, for an annual ground rent. While you do not own the land on which it is built provided the period of the lease is a long way off this is not usually a problem.
- Commonhold is a more recent system of ownership for flats, but at the moment it has not yet become as established so you are less likely to come across it. It is designed to provide ownership of individual flats for an unlimited period of time, and to make provisions for the joint right to participate in the collective management and maintenance of the shared building. Your conveyancer needs to do extra legal work if you are buying a leasehold property. The lease is the legal document that sets out the rights and duties of both you (the leaseholder) and the land owner (the freeholder).
The lease will specify the number of years you are entitled to own the property. In most cases, a lease would start off lasting for at least 99 years, but its length and value will decrease over time. You may have trouble getting a mortgage on a property where the lease has fewer years left to run. However, you may be able to buy a new lease that adds more years to the time left running on the existing lease or purchase the freehold directly.
Your conveyancer will check the details of the lease on the property including
- the length of time the lease has left to run;
- the ground rent you will have to pay the landlord or freeholder, and any management fee or service charge (to cover repairs and maintenance of shared parts) you will have to pay;
- Any restrictions of the lease regarding building use or access etc
- who is responsible for maintaining the shared areas of the building and whether that responsibility is shared in a fair way; and
- if there is likely to be any major work which you may have to pay towards, for example re-roofing or painting the outside of the building. If you are a leaseholder of a flat in a block, you and the other leaseholders in the block can buy the freehold of the building if you meet certain conditions. This is known as the right to "enfranchise" and leaseholders have this right even if the freeholder does not want to sell.
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