Properties are bought on a Freehold, Leasehold or part Freehold/part Leasehold basis.
Freehold properties are owned outright including the land that the property sits on. With this comes the responsibility of maintaining the property and land entirely. Some properties can become leasehold properties via shared ownership schemes.
With a Leasehold property, you own the property and the land for a set amount of time determined in the lease by the owner (freeholder). Once the lease has expired, the ownership of the property and land goes back to the owner (freeholder) unless you can agree an extension to the lease. You will find that most apartments, flats and maisonettes are leasehold. If you own a Leasehold property you will not own the land that comes with said property. You are therefore required to pay a service charge to the owner (freeholder) to contribute to the costs, you may also be required to pay into a “sink” fund which will help cover unforeseen maintenance. When buying a Leasehold property, it’s important to check how long the lease is. You’ll struggle to find a mortgage lender who will offer you a mortgage on a property with less than 70 years left on the lease. Most lenders like there to be 25 – 30 years longer than the term of the mortgage remaining on the lease.
When you come to sell the property, it’s recommended that you check the lease to see how long is remaining and make sure you have over 80 years to make the property a worthwhile investment for the purchases. You can extend your lease at any time, you’d just need to make the request to your landlord. If you’ve owned your home for two years or more then you are entitled to extend your lease by 90 years (as long as the lease was originally for more than 21 years). There are costs involved in extending the lease, the freeholder (owner) will make a charge for extending this lease and this will depend on the cost of the property. You may also need to instruct a solicitor and surveyor, which are costs which you will have to pay.
Other types of ownership include:
Commonhold properties, this is a type of freehold ownership and has been designed to help flat owners obtain full ownership of the property. This happens by all flat owners within the block or building creating a Commonhold Association.
Owning a share of the freehold
If you live in a flat, you can buy the freehold of the property from the landlord with other leaseholders in the block/building. As long as 50% or more of the leaseholders agree to buy a share this is a possibility. This would give you control over the costs you have to pay and can mean that you can extend you lease for up to 999 years.
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