New Mortgage Guides

Other Mortgage Guides

Mortgage Types

Mortgage Tools

Mortgage Petitions
Mortgage Dictionary
Maximum Borrowing
Income Insurance
Health Insurance
Useful Sites
Credit Cards
Personal Loans
Life Insurance
Pensions

Buying Leasehold Property

Buying a leasehold property

When looking for a new property you need to check whether the ones you are considering are leasehold or freehold. Many home buyers don’t understand what a leasehold is, how it works, the rights it gives and the responsibilities that it entails.

This is the mortgagecase.com guide to leasehold properties.

For those people who are buying, or are considering buying, a leasehold flat or house it is essential to know what owning a leasehold home entails. Flats are more often sold on a leasehold than houses.

Apart from the cost of buying your home, leaseholders will have to pay ground rent and service charges which includes building insurance.

What is a leasehold property?

Leasehold flats may be in purpose-built blocks, converted houses or part of commercial or retail premises. Leasehold houses are much rarer but are often in a street or development of houses which all come under the same freeholder. In the case of houses, many owners have since bought the freehold.

Leasehold ownership of a flat fundamentally means a long tenancy - the right to own, occupy and use a flat for a long period known as the 'term' of the lease.

This can be up to 999 years but can be just a few short years in some cases. Within that period, the flat can be bought and sold. From the outset of the lease, the term is fixed, and decreases every year. At the end of the lease, the flat is returned to the owner of the building. Look out for the terms 'long' lease and 'short' lease on the property details which refer to the number of years left on the lease.

Even though a leaseholder owns the property on a lease, the owner of the freehold retains ownership of the external and structural walls, as well as any common parts of the structure. The owner of the building is also responsible for the maintenance and repair of the building.

Leasehold properties may be owned by either individuals or companies, and sometimes by housing associations or local authorities.

Often, leaseholders get together to purchase the freehold of the building in which they live by creating a residents’ management company. At least half the leaseholders have to agree for you to be able to go ahead but if there are only two flats in the property – which is typically the case with a converted house – then both owners have to agree.

Alternatively, you can buy an extension to your lease which is often necessary once it falls beneath about 80 years. Whether buying the freehold or extending the lease, you will have to negotiate to agree a price.

What is a lease?

In the eyes of the law, a lease refers to a specific contract that exists between the owner of a property and a leaseholder that provides the latter with conditional ownership for a fixed period of time.

Leases are extremely important documents, and both parties should keep a copy of the agreement and make sure that it is understood. Leases are usually worded in legal jargon so it's advisable to consult a lawyer or solicitor before going ahead with your purchase as they can sometimes contain unusual clauses.

Leases lay out the contractual obligations of both parties: the leaseholder and the freeholder. The lease sets out the leaseholder’s obligations as well as any restrictions and conditions regarding the property. Usually, the landlord is required to maintain and manage the structure of the property, as well the outside and any common areas.

Leaseholders may not be totally free to do what they wish with the leasehold property. The restrictions can be major or minor. For instance, you may need permission from the freeholder before knocking down internal walls or having a pet. The conditions of the lease are intended to protect the rights of all those with an interest in the building.

When a flat is sold, the seller passes all the rights and responsibilities of the lease to the purchaser, including all future service charges.

Receive Mortgage Advice from a Regulated Advisor

There is no better time to be seeking suitable mortgage advice from a Regulated mortgage advisor

Submit your details today for an obligation-free chat and a regulated mortgage advisor will call you back to help you find the mortgage that best fits your needs.

We will only provide your details to one regulated advisor.

Your mortgage

Purpose of mortgage: * Help

Purpose of Mortgage

A first time buyer is a buyer who has never purchased a property before and generally has previously lived with relatives or friends or occupied rented property

House purchase is when an applicant, who has been a previous purchaser/occupier, is intending to purchase a different property for owner-occupation

A remortgage occurs when an applicant wishes to switch a mortgage loan from one lender to another without moving properties. The existing loan is repaid by a loan from the new lender. Depending on the amount of equity, this could also be a means of raising additional funds.

A buy to let mortgage is for when a property is bought as an investment and rented out to a tenant who pays a rental income.

A right to buy mortgage is only available to council tenants or certain types of tenants where the landlord has received a subsidy from the Local Authority. The tenant must also fit certain eligibility criteria related to the type of property and the length of time they have lived there. The amount of discount depends on how long the tenant has lived in the property and is also calculated taking into account any improvements carried out at the tenants own expense.

A self build mortgage is taken out on a property that is either still to be built or still under construction. Typically, the lender will only pay out the loan in stages, corresponding to the completion of various stages in the construction. There are generally six stages to a build where your mortgage company will release funds to allow the project to continue. They are:

Stage 1 - purchase of the land or property;

Stage 2 - preliminary costs and foundations or preliminary costs and structural overhaul;

Stage 3 - main structure erected;

Stage 4 - making the property wind and watertight;

Stage 5 - first fix and plastering;

Stage 6 - second fix through to completion

This is a specialised mortgage product designed for people over the age of 55 , which allows them to release the some of the equity they have built up in the home; this could be through owning the property outright, or from the value of the home increasing over time.

The householder retains ownership of the house whilst being able to use the equity to boost their income. There are several products on the market, some of which you only pay the interest back during your lifetime, and others where you pay nothing back during your lifetime and the repayment is taken out of the estate on death. For this reason, it should be noted that the applicant should be aware that they will be asked if they have discussed with their family members the reasons for applying for equity release.

Value of property (£): * Help

Mortgage amount (£): * Help

Do you or your partner have any adverse credit history?

Yes No

Current lender: Help

About you

Title *

Forename *

Surname *

Date of Birth *

Date of birth of joint applicant *

Postcode *

Email *

Contact number *

Alternative number

Questions marked with * are required

Please be aware that the advisor who contacts you will be a third party advisor who has no connection with us. There is no charge to you for using this service. We are paid by charging your assigned advisor a fee for this service. Any advice or assistance given to you by a third party advisor does not represent our advice or assistance and is not checked or endorsed by us. It is your decision whether or not you act on any advice or assistance you are given.

By clicking “Proceed” you confirm that:

You accept our Terms of use and
You would like to be contacted by a regulated third party advisor to discuss your needs.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Financial Services Net Limited and other trusted 3rd parties would like to keep you advised via e-mail or telephone of products, services and other exciting offers we think may interest you. Please untick this box if you do not consent to us contacting you for further information.