Written by Rebecca Leeman, a Chartered Legal Executive at Spire Solicitors LLP.
When you buy a leasehold property, most commonly a flat, you own the dwelling for a set number of years subject to the conditions of a Lease. The Freehold is owned by the Landlord and they are usually responsible for maintaining the building (which the flat is part of) and the land (which the building sits on).
Leases are legal documents which regulate your ownership and set out how long you will own the leasehold for, the ground rent payable and the service charge provisions. Ground rent is rent which is usually payable annually to the Landlord in return for the Lease continuing in force. Service Charges are the costs that the Landlord incurs in maintaining the building, the common parts (like stairs and gardens) and insuring the building amongst other things. Service charges can add a significant sum to your monthly expenses and sometimes, you have to pay the full balance in one lump sum.
As the Landlord is responsible for maintaining the building, they may need to pay large expenses, such as to redecorate the whole building or replace all of the windows. These costs may be thousands of pounds per lessee. In order for the Landlord to be able to claim these costs from the Leaseholders, they will need to serve a Section 20 Notice. This is required where the contribution exceeds £250 from any one lessee and you will have to pay this when it is demanded by the Landlord.
As Leases are only for a set number of years, you may also need to pay to extend your Lease. This is usually required before the remaining term drops below 80 years and can be another expense to consider when you are purchasing a leasehold Property. The cost of the Lease extension can be thousands of pounds and you will also need to pay your own legal fees and potentially the Landlord’s legal and valuation fees.
When you sell a Leasehold property, you usually have to pay for a management pack from the Landlord or their agent. This will tell the buyer and their solicitor about the service charges and general management from the Landlord’s point of view. When you are buying a leasehold property, you may also need to pay fees for a Deed of Covenant, a Certificate of Compliance as well as a notice fee to notify the Landlord that you have purchased the Property. Again, these can all be significant costs in the house buying process in addition to your Stamp Duty, Conveyancing fees and mortgage broker fees.
Owning a Leasehold property can come with many additional costs. If you need advice, please call us on 01603 677077.
