Guide to Leases and lease holding

Leases and lease holding – everything you need to know

Unlike buying a house, when investing in a flat or apartment the vast majority will be through a lease.

This means you do not own the property and land outright and may face restrictions on how the space is used.

Here, David Collinson, Director at Block Management UK, explores the subject of leaseholds and what you need to know before entering a contract.

The difference between freehold and leasehold

First, lets look into the difference between freehold and leasehold.

In general, most houses will be freehold, meaning you own the property outright, including the land it is built on.

It means you will be responsible for the upkeep of the property and the land.

On the other hand, when you buy a property on lease, you have control of the property subject to the terms of the leasehold for a length of time – usually 33 to 99 years.

The majority of flats are leasehold, as someone else will own the land the block is built on.

When the lease comes to an end, the ownership of the property will then revert to the freeholder, unless the lease is extended.

This means as a leaseholder, you have responsibility for the upkeep of your flat, but not the communal areas in the building – that’s where we come in.

Leaseholds

As a leaseholder, it is important to understand you do not own the property outright, so there may be restrictions written within the leasehold agreement you need to abide by.

For example, leases can include a variety of restrictions on how the property can be used such as no pets, no partying or no large gatherings after a certain time at night.

Most rules will be there to limit disagreements between neighbours within an apartment complex, but leaseholders should be aware of these before entering into any agreement.

Leases used to include ‘ground rent’ a payment made to the landowner for use of the land the property is built on.

This fee was abolished on all new leases from June 2022, however, ground rent can still be charged on leases agreed before this date.

Most landowners charged a ‘peppercorn ground rent’ – a very small payment used to fulfil the legal requirement of the contract – but there maybe some who charge a full fee.

If you are a leaseholder, it is worth checking whether you are liable for this charge, as landowners can claim ground rent going back six years.

Our advice is to seek legal advice when agreeing a lease to ensure you are happy with the terms of the contact before putting pen to paper.

Block Management

Our role at Block Management is to oversee the maintenance, repair and upkeep of all communal areas in a block or estate on behalf of property owners and investors.

Through a combination of a tech-driven property management system and a traditional on-site presence, we ensure our tenants and clients are well looked after.

For more information on Block Management and how we can manage your property, see here.