When it comes to purchasing a property, the terms of the agreement can vary depending on whether the property is freehold or leasehold. Leasehold agreements are becoming increasingly common in the UK, particularly for flats and apartments.
A leasehold agreement is essentially a long-term rental, where the property owner (known as the freeholder) grants a leasehold interest to the purchaser (known as the leaseholder). This means that the leaseholder has the right to occupy the property for a specific period of time, usually between 99 and 999 years, but does not own the land the property is built on.
Under a leasehold agreement, the leaseholder is responsible for paying ground rent to the freeholder, as well as service charges for the maintenance and upkeep of the communal areas and any shared facilities. The freeholder is responsible for maintaining the external structure of the building and any communal areas.
It is important to carefully review the leasehold agreement before purchasing a property, as there may be certain restrictions or obligations that the leaseholder must adhere to. For example, the lease may prohibit certain alterations to the property, or require permission from the freeholder before any alterations can be made.
There have been concerns raised about the fairness and transparency of some leasehold agreements, particularly in relation to the escalation of ground rent and service charges. In response, the UK government has proposed a series of reforms to the leasehold system, including a ban on the sale of new leasehold properties, and limiting ground rent on existing leases to a peppercorn amount.
If you are considering purchasing a leasehold property, it is important to seek legal advice and fully understand the terms of the lease before committing to a purchase. With the right guidance, a leasehold agreement can be a viable option for purchasing a property, providing a secure and affordable form of home ownership.