Leasehold property Archives

Aug 19

Is buying a Freehold a waste of money?

I am buying a Leasehold terraced property which currently has 75 years left on its lease. Would it make sense to buy the Freehold, or is it a waste of money?

You will, therefore, need to consider the possibility of either buying the Freehold or extending the Lease term once it falls below 65-70 years. Buying the Freehold at an early stage has its benefits as the cost is only likely to increase.

However, before parting with hundreds of pounds, you must appreciate that the only benefit to you will be the saving of a nominal annual payment in ground rent and the ability to insure with a company of your own choice. The benefit, therefore, of buying the Freehold will usually be closely related to the remaining number of years of the Lease term.

Provided you have owned the property for at least two years you are entitled to purchase the Freehold interest as of right under the Leasehold Reform Act 1967, but most freeholders will agree to transfer the Freehold interest without having to follow the strict procedure laid down by that legislation.

You should ask your Freeholder how much it might cost and, if necessary, take the advice of a Surveyor on any quote received.

* Emyr Pierce is Managing Partner of Emyr Pierce Solicitors in Rhiwbina, Cardiff, Western Mail Conveyancer of the Year, specialising in Domestic and Commercial Property. Contact www.emyrpierce.co.uk or email law@emyrpierce.co.uk

Nov 16

Do I need buildings insurance in leasehold flat?

I have been living in a new build apartments complex for the last 12 months, but have just been told by one of my neighbours that I don’t need Buildings Insurance as that is covered by the Management Fee. Is that right?

It probably is. In a leasehold complex of multiple units, whether it be apartments or flats, the obligation to insure will remain with the Freeholder who also has the responsibility of maintaining the building.

The cost of this is distributed proportionately among the tenants via the service charge. The service charge will include those contributions towards maintenance, repair and shared utilities as well as a proportionate contribution towards the overall insurance premium for insuring the building. Each individual apartment owner need only insure their own contents, fixtures and fittings.

You should also ensure that your mortgage repayment does not include any building insurance premium as this is already covered by the landlord and payable by you in the service charge.

Feb 28

Demised premises provides a full description

What does “Demised Premises” mean on the Deeds of my house? Should I be concerned?

“Demised Premises” is a reference to the extent of the land the subject of the deed and which you can expect to occupy or own. The use of the term “demise” usually refers to leasehold property, the subject of a Lease of land, and therefore the “Demised Premises” will represent a full description of the land which you can expect to acquire and which will be the subject of any such Lease.

Nov 26

Flat has 87 years left on lease

I am buying a flat which has 87 years left on the Lease. Is this acceptable or would I be safer if the Lease was longer?

Lease terms can vary substantially. Up until 10-15 years ago long residential leases were generally granted on a 99-year term. However, the increased demand for mortgages and the introduction of mortgage products for longer terms has brought pressure to bear on this length of term.

The problem is their acceptability to Lenders. The general principle is that the Lender will require a term of years left to run on the Lease of at least 30 years beyond the term of the mortgage. With a 30-year mortgage term this results in a minimum term remaining of 60 years.

However, some mortgage products are now granted over even longer periods of say 35-40 years to make them affordable to borrowers. In such cases you will see that a minimum Lease term requirement could be anything up to 70 years.

With a 99-year Lease this problem arises relatively early during the lease term, and the majority of existing long leases have less than this period to run in any event – resulting in the need for an extension of the Lease term from your landlord.

A term of 87 years remaining on your lease is, therefore, more than adequate as this will give you a minimum of 17 years before it becomes an issue with Lenders for mortgage purposes.

Oct 18

Buying a Freehold – does it make sense?

I am buying a Leasehold terraced property which currently has 75 years left on its lease. Would it make sense to buy the Freehold, or would that be a waste of money?

If you are looking to sell a Leasehold property with less than 70 years to run then it is possible your buyer’s mortgage company may insist on either the lease term being extended, or that the property is Freehold. You will, therefore, need to consider the possibility of either buying the Freehold or extending the Lease term once it falls below 65-70 years.

Buying the Freehold at an early stage has its benefits as the cost is only likely to increase. However, before parting with hundreds of pounds, you must appreciate that the only benefit to you will be the saving of a nominal annual payment in ground rent and the ability to insure with a company of your own choice.

The benefit, therefore, of buying the Freehold will usually be closely related to the remaining number of years of the Lease term. Provided you have owned the property for at least two years you are entitled to purchase the Freehold interest as of right under the Leasehold Reform Act 1967, but most freeholders will agree to transfer the Freehold interest without having to follow the strict procedure laid down by that legislation.

You should ask your Freeholder how much it might cost and, if necessary, take the advice of a Surveyor on any quote received.