In its effort to turn Generation Rent into Generation Buy, the Government has announced a £1.4bn fund to build 40,000 new ‘affordable homes’.
Typically, these tend to be leasehold flats, especially for first-time buyers wanting to live in city centres. But how many buyers taking their first step on to the property ladder understand fully what they’re getting into?
England’s leasehold system is unique in the world, and it’s essential that its quirks and complications become more widely understood.
To this end, our work at the Leasehold Advisory Service (LEASE), which was set up 23 years ago, has never been so important, giving free legal advice for residential leaseholders to ensure their financial investments are future-proof.
Thinking of buying a leasehold property? Here’s are our top five things to consider before you sign on the dotted line.
1. Check the current lease length
The longer the lease, the better. This is important for your mortgage offer and re-sale. You can extend a lease, but there is a set process involved and a cost. To avoid an expensive bill to renew, look for a property with a lease longer than 80 years.
2. Ensure you have a good solicitor
Naturally, buyers can get caught up in the excitement of buying their new home and may not appreciate the significance of the terms of the lease. Ensure your solicitor explains the terms fully, for example if you intend to rent the property or carry out alterations; and make sure that you understand exactly what you are required to pay for.
3. Make sure you know what ground rent you are expected to pay
Typically, there will be an obligation to pay ‘ground rent’ (which may be nominal) to the landlord. It must be paid on the due date, subject to the issue of a formal demand by the landlord. There have been recent stories of ground rents increasing substantially over time and causing leaseholders problems, so make sure that you check that your lease and any changes in it are acceptable.
4. Look at the service charges
Service charges will generally vary from year to year, going up or down depending on the building and its needs, but the costs must be reasonable. It is essential to find out, for personal budgetary purposes, what the current and future service charges are likely to be. You may also be required to pay into an annual reserve fund (that builds up over time) to cover any major repairs such as replacing the roof every 25 years. You should check what plans exist.
5. Find out who your freeholder is
Some flat owners can discover too late that they have bought a property from a freeholder that is managing the property badly. Speak to your prospective neighbours before you buy, and check that the freeholder is upholding their responsibilities properly.
At LEASE, we also offer a straightforward interactive quiz for people thinking of buying a leasehold property, as well as information guides, at lease-advice.org.
LEASE is hosting an information evening on January 31 2017 from 6 – 8.30pm at County Hall. For further information, visit leaseconference.com.