10 Important Things You Need to Know Before Buying a Leasehold Flat

Things To Know Before Buying A Leasehold Flat

1. How Long Is The Lease?

The initial point to consider is the duration of the lease. The duration of a lease may be 99-999 years. The smaller the lease period, the more problems you can encounter, though. When the lease contains fewer than 80 years, the value of the property may decrease, and obtaining a mortgage may become more difficult. In case of a short lease, you might be required to renew the lease, and this can be very expensive, such as when the lease is less than 70 years; extending it may become quite expensive.

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2. Who Owns What?

When you purchase a leasehold flat, you are in effect purchasing the right to reside in the property for a set number of years. But what is it you own? The inside of the flat is normally yours, however, the outside of the building, the roof, and any shared spaces (such as hallways or gardens) tend to belong to the freeholder. That means that, when it comes to these common areas of the property, you will require the consent of the freeholder in order to carry out any changes.

You should always consult the lease to ascertain what parts of the property you have the right to manage and which belong to the freeholders.

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3. Have Any Changes Been Made?

You should also ensure that you find out whether the past owners conducted any changes to the premises. In case something has been done without approval by the prior owner, you might have to take care of the repairs or even pay penalties. Find out what sort of alterations have been carried out, and enquire of the freeholder whether such alterations were consented to.

4. Ground Rent-  What’s The Cost?

Ground rent is a yearly payment to the freeholder. This may be a petty amount, but in other instances, this may be a huge sum. Before you purchase a leasehold flat, ensure you check the ground rent charges.

In some cases, the ground rent may rise annually or within a specified time, and this may render your flat more costly to keep in the future. Ensure you are fully aware of the ground rent amount and whether it is going to increase with time.

5. What’s The Service Charge?

Service charge is another expense that one ought to know about. This includes the charge of maintaining and fixing the common parts of the building, e.g., cleaning, gardening, and even the lift or heating system. Service charges differ considerably, and it is therefore important to find out the amount you will be paying annually as well as the services that the charge covers.

Another question is whether the amount by which the service charge may be raised over time is limited. When the service rates are expensive, you may wish to rethink the purchase.

6. Is There A Reserve Fund?

A reserve or sinking fund is all money put aside to be utilised in case of substantial repairs or construction projects, including repairing the roof or renovating the heating system in the building. You also want to make sure that there is a good reserve fund for the building, such that you are not slapped with a large bill later on to fix the place.

Enquire about the reserve fund and see whether they have sufficient money saved up that can be used in the event of any work. And in case there is not, you may be called upon to add to it after you have purchased the flat.

7. Any Planned Major Works?

It is worth finding out whether there is any big work that is intended on the property before you sign the contract. This might involve such things as renovation of the outside part of the building or new plumbing. When there are big works in prospect, you may be called upon to share the expense.

Discover whether there is any repair or renovation that is going to happen and how it is going to impact the service charge or your personal expenses in the future.

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8. Administration Charges- Are There Extra Fees?

Some leasehold properties come with additional administrative fees. These may include things such as giving information or permission to you to carry out changes on the property. Ask whether they have administration charges, so you are not surprised when you commit.

In case they exist, request a dissection of these expenses and ensure you comprehend their utilization and application time.

9. Restrictions In The Lease

Most leases have restrictions on your use of the property. For example, the lease may prohibit keeping pets, subletting the flat, or making major alterations without permission. These regulations may impact your intentions with the flat, and before you purchase it, it is a good idea to be aware of them.

Make sure you read the lease carefully and ask the seller or solicitor about any restrictions that may apply.

10. Can You Extend The Lease?

In case the lease is short-term, you need to know whether it can be extended. Most leasehold properties allow extension of the lease after two years of ownership by the leaseholder. But it is also an expensive exercise. The nearer the lease approaches 80 years, the more costly it may be to renew.

When purchasing a leasehold flat, it is always a good idea to negotiate the lease extension possibility with a solicitor or property expert in case the lease is about to become shorter.