Leasehold

Leasehold means you own the right to occupy your property for the remaining term of a lease, while the freehold belongs to a landlord. Most flats in England and Wales are leasehold. Some houses are too, though this is less common. As a leaseholder, you pay ground rent and service charges, and must comply with the terms of your lease. When the lease term expires, ownership reverts to the freeholder unless it is extended. Most leaseholders extend their lease rather than let this happen.

Usually yes, especially if the remaining term is below 85 years. Below 80 years, a lease attracts what is known as marriage value (an additional element in the premium calculation that applies when the lease drops below 80 years), which significantly increases the cost of an extension. Lenders are also increasingly reluctant to offer mortgages on properties with short leases. Timeframes do differ between lenders – so it’s best to check your lender’s terms. Extending before selling widens your pool of potential buyers and mortgage options, and can significantly increase the property’s value. We advise on whether extending is worth doing in your circumstances and what the cost is likely to be.

The premium for a statutory lease extension depends on the property’s value, the remaining term, and the ground rent. There is a statutory formula for calculating the premium, though the amount is negotiated between surveyors acting for each party. In addition to the premium, you pay your own legal and valuation costs and contribute to the freeholder’s reasonable legal and surveyor costs. We provide a cost estimate at the outset. Getting a valuation before serving the formal notice is strongly recommended.

Ground rent is a rent payable under a long lease to the freeholder (landlord). For most new long residential leases granted since 30 June 2022, ground rent must be a peppercorn (effectively nil) under the Leasehold Reform (Ground Rent) Act 2022. Existing leases may still require ground rent and may include review/escalation clauses, which we check carefully when acting on a purchase.

Service charges are payments towards the costs of maintaining, repairing, insuring and managing the building and any shared parts (for example, cleaning and lighting of communal areas, lifts, gardens and managing agent fees). Leaseholders have statutory rights to receive information and to pay only charges that are reasonably incurred and for works/services of a reasonable standard. If you dispute a service charge (or certain administration charges), you can apply to the First-tier Tribunal (Property Chamber) for a determination. We advise on ground rent provisions, service charge disputes and the options available.

Depending on the issue, you might be able to apply to the First-tier Tribunal (Property Chamber) to challenge service charges and certain administration charges, and to resolve some leasehold management disputes; exercise the right to manage (through a right to manage company), so qualifying leaseholders can take over management of the building without buying the freehold; and in more serious cases, apply for the tribunal to appoint a manager where the landlord has breached its obligations and statutory conditions are met. We advise on your rights and the most appropriate route for your situation.