GET IT RIGHT FIRST TIME: Sarah is here to help first time buyers get to grips with the conveyancing process. This month she explains how leasehold and freehold properties differ…
My solicitor tells me the house I want to buy is leasehold. What does that mean?
This may seem like technical jargon, but it is a fundamental part of house ownership that all new buyers need to understand – particularly if you want to live in and around Sheffield.
There are two forms of legal titles to property, freehold and leasehold. If you purchase a freehold house, you will own the building and the land it stands on outright. You will not be charged ground rent or have make any other payments to a third party.
Just because the property you are buying is freehold, however, doesn’t mean there won’t be any restrictions on the title. It may still be subject to what is known as ‘restrictive covenants’ outlining what you can and can’t do there. This is not unusual and your solicitor will make you aware of what they say.
If the property you wish to purchase is leasehold, it means someone else (known as the freeholder or landlord) owns the land on which it stands. The house will have been granted a lease and you will pay ground rent during your ownership. Your solicitor will let you know how much this will be, but it cannot be increased by the freeholder during the term of the lease. This type of arrangement is not uncommon in Sheffield and it is nothing to fear.
The chances are, the house will come with a long-term lease, somewhere between 90 and 999 years. Only if there are less than 80 years left on the agreement should you consider whether to proceed with the purchase.
There will definitely be restrictive covenants on the title of a leasehold property, which are likely to state you cannot carry out any major work, i.e. extensions or alterations, without the landlord’s consent. This would be in addition to any planning permission or building regulations approval you’d need to obtain. There could be other constraints applied to the property too, preventing you from owning pets, for example, or sub-letting without the freeholder’s agreement.
Can I convert a leasehold property to freehold?
If you are keen to buy a leasehold property, but would prefer to own the freehold, it might comfort you to know there is legislation in place that means once you have owned it for more than two years, you have a legal right to apply to buy the title and lease from the landlord.
You may have seen some bad press about leasehold properties recently, but this relates to homes that were sold on short term leases with ground rent of more than £250. Sadly, there have been a number of cases where freeholders have charged excessive sums for granting consent on covenants or purchasing the lease. As a result, the government has announced plans to look at banning leasehold titles on new homes in England.
It is quite acceptable to buy a leasehold house, as long as you take on board your solicitor’s advice and check it has a suitably long lease and minimal ground rent. It will not prove any different day-to-day to owning the freehold and it is certainly not something that should stop you securing your dream home.
If you are a first-time buyer with a question about moving home, our residential property expert, Sarah Gaunt, would love to hear from you. Email: email@example.com