What is Leasehold Property and why does it Matter?
Most of the people are aware of the terms like renting a property and owning the property, but very few know what a leasehold property is, how to go through the lease extension valuation process, etc. Under leasehold ownership, you lease (rent) property for a long period, often for 90 or 120 years or even 999 years, unlike rent agreements which are mainly for a year or two.
- A leaseholder has a contract with the freeholder that sets down the legal rights of either side.
- The freeholder is mainly responsible for maintaining the common parts like – hallways, corridors, walls, roof, staircase, gardens etc.
- Leaseholders are responsible for paying an annual maintenance or service charge along with their share of the building insurance.
- Leaseholders are liable to pay rent of the leased property on a monthly or yearly basis to the freeholder.
- leaseholders are required to obtain permission from the property owner for any major alterations to their property.
- In any case, if leaseholders fail to pay the amount stated in the contract, the lease can be forfeited.
Although a lease is for a very long time it will reduce over time and therefore, there will come a time when the lease length will need to be extended. leasehold property valuation, the extension of leasehold property, So, what is the benefit of extending your lease?
Let’s discuss in detail whether a leasehold property is a right fit for you or not:
How does a leasehold property operate?
With a leasehold agreement, the property owner, who is also known as the freeholder, grants permission to the leaseholder to live in the particular property for a particular time period. During this time (known as “Term”) the leaseholder is required to pay the freeholder a rent (known as “ground rent”) usually on a quarterly, six monthly or annual basis. The advantage of owning a leasehold property as opposed to renting one (on as Assured shorthold basis) is that the leaseholder can improvise or modify the property according to their needs because the lease is for a long span of time.
Leaseholders can even sometimes renovate or build a whole new building on the land and rent separate units. At the end of the lease, the property must be returned to the freeholder
Benefits of a Leasehold Property
- There are a few noteworthy benefits for the potential owner with regards to the leasehold properties such as leasehold properties are less expensive compared to the purchase of the freehold.
- Furthermore, the leaseholder can sell the same lease to a third person even without taking permission from the property owner.
How do I know whether my property is leasehold or not?
If you are unsure that your property is leasehold or not, you should ask your solicitor or directly ask the property owner. Previously, leaseholds used to be aligned with flats, however, now newly built houses, as well as the buildings are sold as leaseholds too. In England, almost 4.2 million homes are registered as leasehold apartments and most of them are newly constructed city apartments. However, the UK government has intervened followed by banning the ‘unjustified use of leasehold in new-houses’.
What happens when the lease ends?
The moment your lease period will end, the property owner will again own the property, regardless of the amount you have paid during the lease period or you have paid the mortgage amount in full. That means that even if you were living in that property for a very long period, let’s say for 80 years, you will not have anything to show at the end of the lease.
How can I extend the leasehold period?
There is legislation which protects the leaseholders’ interest. Providing the original lease was for a minimum of 21 years then you can extend it for 90 years more. Moreover, if you live in a house and it is a leasehold property then, you have the right to extend the lease for 50 years, while following certain conditions.
At LeaseholdValuations, we can help through this minefield to extend your lease.