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“We are residential long leasehold solicitors. Should you have any questions, contact us on Leasehold Solicitors
Leasehold law is often complex. Unlike freehold property, a lease comes with a raft of continuing rights and obligations, including financial ones. Just navigating your way through a lease can be confusing, and it’s important to seek advice from experienced leasehold solicitors.
What is a lease?
A lease is a contract between a freeholder and a leaseholder governing the relationship between them. It contains conditions under which the leaseholder occupies the property, for example, not carrying out alterations without the landlord’s consent. Also, the lease document is not necessarily the full picture, as provisions implied by law supplement the express terms in the lease.
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What is the difference between leasehold and freehold property?
A freeholder owns the building, the land it stands on and the air space above. In contrast, a leaseholder owns the property for a ‘term’ of years but not the land it stands on. Typically, the term is 99, 125 or 999 years.
Sometimes, a management company owns the freehold. In turn, the leaseholders own and control the management company, with each leaseholder owning a ‘share of freehold’. However, not all freeholds are owned by a management company; it depends on the legal ownership structure as set out in your lease.
Extending your lease
Although leasehold property can be bought and sold, a lease with less than 80 years remaining is considered a short lease. As the term approaches 80 years, mortgage lenders become increasingly reluctant to advance a mortgage on the property. In addition, the property becomes difficult to sell and gradually decreases in value over time. You should, therefore, consider extending your lease.
Leasehold enfranchisement
Flat owners have a statutory right to buy the freehold of their building, even against their freeholder’s wishes. Known as leasehold (or collective) enfranchisement, the process gives each participating flat owner a share of the freehold. Any non-participating flat owners acquire a new freeholder.
There is also a statutory right for flat owners to take control of the management of their building. As long as at least half of them are in support, they can exercise their Right to Manage (or RTM).
Should your freeholder decide to sell, if certain criteria are met, they must first offer the deal to the leaseholders. Not only is ignoring this right of first refusal a criminal offence, but the leaseholders also have the right to force the buyer to transfer the freehold to them.
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Lease terms
As a leaseholder, your relationship with the freeholder and your neighbours is governed by the lease, which is a type of contract, as well as a raft of legislation designed to protect residential long leaseholders. Our leasehold property solicitors can clarify your rights and obligations under the lease.
Leases vary from one property to another, but under the terms of your lease, it is likely that you will have to:
- pay the freeholder/landlord/management company an annual ground rent (caution –read your lease carefully as some ground rents increase sharply or even double every 10 years);
- pay an annual maintenance/service charge to cover the cost of cleaning, gardening and repairs to the common parts, as well as the cost of buildings insurance;
- abide by rules and restrictions (known as covenants) relating to issues as diverse as alterations, subletting, pet ownership, running a business from home and not being noisy or otherwise anti-social. In return, it is common for the freeholder, landlord/Management Company to have to maintain and insure the buildings and common parts, ensure all lessees comply with their lease terms, permit the lessees to occupy and use their flats without interruption (known as “quiet enjoyment”).
“You took all of the stress out of what I thought was going to be a difficult and uncomfortable process. Anyone considering enfranchisement should speak to him. Thanks again.”
Challenge lease service charges
Leaseholders should be aware that there is a great deal of legislation in place designed to regulate the reasonableness of service charges, including the cost of buildings insurance.
While most leases provide that the freeholder is responsible for the upkeep of the main structural parts of the building, communal areas and surrounding grounds, they are usually able pass the cost of this on to you and your fellow leaseholders. This is in addition to the ground rent.
It is not unusual to find that you must also contribute to a sinking fund as part of the service charge to cover the future cost of any larger long-term projects such as replacing the roof.
Often, a freeholder will use a managing agent or a separate management company to look after issues such as cleaning, maintenance and the collection of ground rent. However, if a majority are in favour, flat owners can exercise their right to take control of the management of their block to appoint their own agent or self manage.
Lease forfeiture
If you fail to pay ground rent or service charges, your freeholder can seek enforcement. This includes an application to Court, or the First Tier Tribunal (Property Chamber) or LVT in Wales.
Where the debt is undisputed, the landlord may apply for your mortgage lender to meet the cost. Doing so will almost certainly breach your mortgage conditions.
Although rare, it is sobering to note that the ultimate sanction for breaching the terms of your lease is forfeiture.
Leasehold house
The vast majority of houses are freehold. But for several years, there was an increasing trend for developers to sell leasehold houses in what became known as the “ground rent scandal“. However, the Leasehold Reform (Ground Rent) Act 2022 (“the Act”) has essentially reversed that trend. As a result of the Act, since 30 June 2022, ground rents on new leases of houses and flats must be at a peppercorn rent – essentially zero.
Find out more about buying the freehold of your leasehold house.
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Leasehold solicitors
We are specialist residential long leasehold solicitors. Should you have any questions, contact us on 01225 462871 or complete the Contact Form below.
