FREEHOLD Vs. LEASEHOLD
It is very important to know the difference between leasehold, share of freehold and freehold when buying a property in London. This will impact the value of the property and there may be associated costs further down the line. Generally speaking you will find that flats are leasehold and share of freehold, and houses are freehold. In rare occasions you will also find that some houses are on a lease.
FREEHOLD – you own both the property and the land it stands on outright.
SHARE OF FREEHOLD – you own the property for the duration of the lease and share the land.
LEASEHOLD – leases usually start at 90 or 125 years and new properties are often on a 999 years lease. With a leasehold you own the right to use the property for the number of years on a lease which, when it runs out, ownership will revert to the freeholder.
With freehold property you are responsible for the upkeep of the property and associated costs, whereas with share of freehold or leasehold these responsibilities are shared with the other leaseholders in the building. This would include the external walls, the roof, and all communal internal areas. Leaseholders generally have more control in the smaller buildings such as conversions. With larger purpose built buildings for example, where there are many leaseholders, usually managing agents will be appointed to organise all running costs of the building. Annual costs include a ‘ground rent’ to the freeholder and a service charge, paid by share of freehold owners too, which covers the costs of maintenance, buildings insurance and other administration.
EXTENDING A LEASE
The value of the leasehold (and property) will decrease as the number of years decrease. Once the lease decreases below 80 years, known as the ‘marriage value’, the cost to extend the lease becomes more significant. Generally speaking it is advisable to extend a lease between 90 and 80 years. In order to extend a lease you will need to obtain permission from the freeholder and and appoint a surveyor to value and negotiate the cost to extend the lease with the freeholder on your behalf. A leaseholder is required to own a property for a minimum of 2 years in order to qualify to extend the lease.For further information you can get in touch via our contact page.