Leasehold agreements date back to the 11th century but in more recent years, due to lack of space for houses and therefore need for flats, they have become increasingly popular. According to a BBC news report, 21% of private housing in England are owned via leasehold (as opposed to freehold) with 70% of these properties being flats. This is very common in the purchase of flats and means the owner owns the property for a fixed period of time, usually between 99 and 125 years, before it is returned to the freeholder. However, over recent years new builds are being set up as leaseholds which the Government seeks to tackle.
Owning a property on leasehold tenure has a variety of considerations for the owner. Firstly, ground rent has to be paid on top of mortgage repayments which have been known to double every 10 years. One BBC news report says the ground rent on a family home is expected to hit £10,000 per annum by 2060. Further, lenders will usually only provide security when the lease is over 70 years meaning it could be difficult to buy or sell a property if the remaining lease falls below 70 years. Extending a lease can be expensive depending on the remaining lease term.
The Government says it proposes to make future leases fairer and more sustainable by reducing ground rent costs to be more of a real representation of the costs incurred by freeholder. The Government plan to ban new-build houses being sold on leasehold and further to reduce the cost of ground rent that leaseholds are currently subjected to.
If you are currently own a leasehold property or are considering purchasing one, it is recommended that you do your research and take legal advice.
This is not legal advice; it is intended to provide information of general interest about current legal issues.
Our Residential Conveyancing team will be happy to assist you with any aspect of your property dealings. Please contact the New Business Team on 01245 343980 or via newbusiness@gepp.co.uk.
