Though homes can be leasehold, this kind of possession applies more often to apartments. Under a leasehold agreement, you own your property for the period stated in the lease. The freeholder, who owns the property outright, grants you the right to do that and possession reverts to him when the lease expires. The length of a lease, naturally, lessens in time ; its initial term can be up to 999 years. As you might think, the length of the lease acquired has an immediate effect on a property’s value the longer the lease, the higher price it has.
In a few cases, leaseholders have a right to a lease extension or maybe buy the freehold. Because leasehold is, actually a type of tenancy, a once a year charge ( known as ground rent ) is due to the landlord ( that is, the freeholder ). Ground rent could be a nominal sum. An upkeep charge is also levied, to cover stuff like handling the building, external redecoration and repairs, gardening, window cleaning, buildings ( though not contents ) insurance, and such like. Such charges may rise yearly without limit, but they’re legally required to be reasonable.
The leaseholder customarily owns everything including the walls, the floorboards and plaster, while the freeholder owns the structure, the land on which it is built, and the common parts ( which include communal entrance halls, staircases and so forth ). The freeholder could be an individual person a corporation a local authority, a housing organisation or a residents’ management panel, in which leaseholders band together to buy the freehold of their building. The key virtue of leasehold instead of a freehold purchase is that it allots clear responsibilities for upkeep and repairs, defending individual leaseholders in the eventuality of, say, a leak from a flat above.
On the other hand, it can be trickier to get a mortgage on a leasehold property ; much will rely on the period the lease will have left to run after the end of the mortgage term.
So leasehold or freehold? The choice is down to you, however whether you make a decision to buy freehold or leasehold, ensure you get legal services before making your last call.
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If you own a leasehold house you normally have the right to buy the freehold after you have owned the lease for at least two years. You will have to pay for all of the legal fees involved.
Being a freeholder is more secure than being a leaseholder. Buying the freehold may make it easier to sell your home and will probably increase its value.
This is because:
• freeholders have more control over the management of their homes
• most freeholders don’t have to pay ground rent
• Freeholders can normally only be evicted if they don’t pay the mortgage or other secured loans.
You can probably buy freehold if:
• your lease covers the whole house – not just an individual flat or maisonette
• the lease was granted to the original leaseholder for at least 21 years
• You have owned the lease to your home for at least two years (it is no longer necessary to have lived in the property during that time).
However, you may be excluded from buying the freehold if:
• the freeholder is a charitable housing trust
• the public has the right of access to your property
• the freehold includes adjoining property (such as farm land)
• you have a business lease (although there are some exceptions)
• You bought your home through a shared ownership scheme and have not yet bought the remaining shares in your home.
How does the process work?
Making a freehold purchase (enfranchisement) can be a very complicated process. The basic steps are explained below. This is only an introduction to the procedure you will have to follow. You will probably need a solicitor to do the legal work.
The first step is to inform the freeholder that you want buy the freehold (the ‘initial notice’). The notice is a legal document and has to contain:
• your name and address
• details of the property
• the price you propose to pay (you can get a valuation to work this out)
• a deadline for the freeholder’s response (you must allow at least two months).
Once the initial notice has been given, you become responsible for the freeholder’s legal costs. You have to pay them even if the sale falls though.
If you find that you cannot afford to purchase your property it is well worth considering –if your lease has only a short term left –approaching the landlord for a lease extension.
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