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What is a leasehold?

Including your rights when buying one

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Amy and Sam | Edited by Johanna

Updated 15 Jan 2018

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Millions of people own a leasehold property, but this type of home ownership can be complex and has recently been embroiled in scandal, so you need to have your wits about you.

In this guide we explain what a leasehold property is, your rights and how to complain if something goes wrong and importantly what to do if you're caught up in the latest 'doubling ground rents' scandal.

Important. We've limited the scope of this guide to England and Wales. If you live in Northern Ireland, the rules are similar so it may still be worth reading the guide, but for more see the Housing Rights NI website. If you live in Scotland the rules are different; the Scottish Government has published a guide to buying a property in Scotland.

This is the first incarnation of this guide. Please give us feedback, suggest improvements and share your tips in the Leasehold forum thread.

What is a leasehold property?

When buying a property in England or Wales there are two main types – freehold and leasehold. In a nutshell, they mean the following:

Freehold: Someone who owns the freehold of a property owns the property and the land it stands on.

Leasehold: A leaseholder essentially rents the property from the freeholder for a number of years, decades or centuries. Unlike a freeholder, as a leaseholder you do not own the land the property is built on.

Most flats are sold as leasehold properties with the freehold held by the builder or a firm they have sold the freehold to. However, this isn't always the case. Some flats – especially in houses converted into many flats – are sold on the basis that the owner shares the freehold with others in the same building, known as 'share of freehold'.

row of houses

Houses tend to be sold as freehold properties as it's a more clear-cut scenario, given there's only one property on that piece of land.

However, controversially, some new-build houses have recently been sold as leasehold properties. This causes concern as some argue there should be no need to have a separate landowner and leasehold owner when there's only one property on that land. Plus it can reduce the rights of the homeowner.

There is a rarer, third type, called 'commonhold', explained below.

If you live in Scotland or Northern Ireland it's different

The differences in Scotland explained

The differences in Northern Ireland explained

Leasehold explained

Owning the leasehold gives you the right to live in a property for a set period of time – which can be years, decades or centuries.

fully explained

But it's important to understand in the eyes of the law, you're essentially a tenant of the freeholder for that period. Also, you don't technically own the property, you own the lease – even though you can obviously buy and sell the physical property.

Historically a typical lease length was 99 years, although more recently 125 years has become the standard, while some last as long as 999 years. However, any lease under 80 years is dangerous territory and something to be wary of when buying a leasehold property as it can make it difficult to remortgage. See more on this below.

You'll get a contract listing the rights and responsibilities of you the leaseholder, and the freeholder.

Normally the freeholder will be responsible for the upkeep of the common parts of the property (eg, the stairwell in a block of flats, as well as the exterior walls and roof) and of the land it's built on.

As a leaseholder you'll have to pay a couple of fees, including a service charge – to cover the cost of this upkeep – and ground rent as the freeholder's tenant (technically your rent).

The freeholder may appoint a managing agent to manage the property on their behalf. The managing agent will manage the property within the terms of the lease and will be paid for from your service charge so you don't incur a separate cost for this.

You may have to get the freeholder's permission before you make certain changes to the property, such as building an extension, or even owning a pet. But upkeep of the inside of the property and anything that goes wrong in there is your responsibility.

Freehold explained

In contrast, owning the freehold means you own the property outright including the land it's built on, for an unlimited period. Interestingly, the Civil Aviation Act 1982 means you'll also 'own' and have rights to the 'airspace' above your property up to about 500 feet.

Meanwhile, beneath your feet, in theory there's no limit to the depth at which you cease to own the land your property is built on – although this is largely because it's not been tested in court.

But as you own the property as well as the land, it also means you are responsible for all the upkeep and any repairs.

Quick questions

What are commonhold properties?

Can I extend the length of a lease?

What charges would I pay as a leaseholder?

What does the service charge cover?

Do I have to pay ground rent on a leasehold property?

Who is responsible for the upkeep of common parts of the property?

Do I pay for home insurance as a leaseholder?

What about costs for any major unforeseen works on the property?

Will I be able to get a mortgage on a short lease?

I'm not sure what my ground rent is, how can I check?

Should I buy a leasehold property?

It might seem after reading this guide that buying a leasehold property isn't worth the hassle. But far from it. If you've fallen in love with a property that happens to be leasehold, there's no reason you shouldn't go ahead and purchase it. Leases themselves aren't an issue – it's bad leases that are the issue.

The key considerations are that it's not caught up in the leasehold scandal as explained below, and that it has a long enough lease length as a starting point.

In fact, there are even some pros to buying a leasehold over a freehold, for example:

  • You don't have the headache of dealing with the upkeep and repairs of any communal areas in and around the property or negotiating with neighbours to get it sorted.

  • Terms in your lease mean if you're having any issues, for example with noisy neighbours, this can be dealt with. A freeholder's only course of action is taking the complaint up directly with the police.

  • The buildings insurance will normally be sorted for you by the freeholder.

  • Any other issues should be picked up by your solicitor before you purchase the property – as they would be with any other kind of property type – giving you time to change your mind if needed.

    Leaseholder rights & how to complain

    know your

    Even if you've properly vetted the terms of your lease before moving in, you may still run into issues. There are any number of things that could trigger a dispute with your freeholder and all of them could be grounds for you to complain.

    As a leaseholder you have a right to gain information about your service charge and any insurance paid, know the name and address of your freeholder, be consulted about certain maintenance and running costs and challenge certain charges under some circumstances.

    In reflection of this, according to the HomeOwners Alliance, some common causes of disagreement include high service or administration charges, high cost of buildings insurance, poor appointment of managing agent by the freeholder, a breach of the lease terms and being denied the chance to buy or extend the freehold.

    It's worth noting that your freeholder may have appointed a managing agent to act on its behalf. Unless your complaint is specifically about the managing agent, you may wish to complain to the freeholder in the first instance.

    What to do if you have a complaint

    Step 1. Speak to other leaseholders (informally)

    know your

    If you're on an estate, or live in a block of flats, other leaseholders may have faced similar issues to you. It's worth having an informal chat with your neighbours (in person is probably best), because if they've had a similar dispute (whether or not they've raised it as an issue yet), you'll be able to make a stronger case to the freeholder if you complain together. Or if they've had a successful resolution, you'll know what to do.

    Step 2. Try to resolve any issues with the freeholder directly

    Some disputes, especially those that are relatively minor, may be resolved by setting it out in writing to the freeholder, or even doing so face-to-face.

    If your freeholder is an individual, it should be fairly simple to get hold of them. If your freeholder is an investment company, or an individual with a large portfolio of freeholds, it's likely they'll have appointed a management company – and that's what you should contact initially.

    Consult your tenants' association (if you have one)

    The freeholder will have to consult with your tenants' association about major work and long-term changes to agreements and the association may be able to guide you in your dispute.

    How do I set up a tenants' association?

    Step 3. Use a mediation service to settle the dispute

    You can use an independent and impartial mediator to act as a 'middleman' between you and the freeholder to try to settle a case without having to take it to tribunal. The decision isn't legally binding, but you have to go down this route before going to a tribunal.

    Typically a company offering mediation services will be accredited by a recognised body and will be a solicitor, surveyor or accountant. The Ministry of Justice has a searchable database of civil mediation providers in your area. The cost will be dependent on how much you're claiming in your dispute, but starts at about £50 plus VAT for a one-hour session.

    Step 4. Apply to tribunal

    know your

    If you've exhausted the options above, you can apply to the First-Tier Tribunal (Property Chamber – Residential Property), or FTT. This tribunal is independent of the Government and will listen (at a hearing) to both sides of an argument before making a decision.

    Any leaseholder or freeholder can take a case to the FTT – there's no requirement to be a member of any particular scheme. If you want help or advice before applying, you can go to the Leasehold Advisory Service or Citizens Advice.

    Step 5. Appeal if you're unhappy with the outcome

    If you're unhappy with the decision you may be able to appeal to a different tribunal – the Upper Tribunal (Lands Chamber) – but you'll need to have first applied to the FTT.

    You must ask the FTT for permission to appeal and you must do this within 28 days of its decision. It may decide to reopen the case itself rather than pass it to the Upper Tribunal.

    If your case is complex, could hinge on a legal argument or is in respect of a large financial sum then it may be transferred to the Upper Tribunal without you making an appeal. The Government appeals site has more information on how to appeal against a decision.

    The BIG problem: Spiralling ground rents & how to fight 'em

    Due to onerous clauses in leases, a scandal has emerged, meaning leaseholders are faced with doubling ground rents every 10 years.

    The Government announced a raft of new measures in December 2017 to tackle the problem, including:

    • A ban on leases for new-build houses (not new-build flats) except where necessary (eg, shared ownership)

    • Ensuring that ground rents on new long leases are set at zero (ie, they're not charged) – for houses and flats

    • Working to support existing leaseholders and make it easier, cheaper and quicker to buy a freehold or extend a lease

    However, it will be some time before these measures become law, and the Government has yet to announce what relief or redress it will provide for those who've already been caught out. For more information on the Government's new measures, go to Gov.uk.

    For those who have been caught up in the scandal before any Government reform, while ground rent may start out at a reasonable £200 a year, at the end of a typical 120-year lease, the ground rent would exceed £800,000 a year – likely far more than the property is even worth, leaving it practically unsellable.

    While you may not live that long, let alone live in the property that long, it nevertheless can make the flat or house unattractive to future buyers, and of course, make bills expensive even after a more realistic 10 or 20 years.

    One home-builder and the original freeholder, Taylor Wimpey, has set up a 'Ground Rent Review Assistance Scheme' for all its customers who purchased and still own one of its properties with a 10-year doubling ground-rent clause in their lease – but not all have such redress schemes.

    For more information on eligibility and how to access the scheme, see the Taylor Wimpey site.

    Quick questions on applying to tribunal

    How do I apply to the tribunal?

    How much will it cost?

    What happens at the hearing?

    What if I find further supporting documentation after making my initial case?

    Where can I find previous decisions?

    Leasehold Q&A

    Is anything being done to reform the leasehold system?

    The Government has promised to reform the leasehold system and following a consultation, selling new houses on a leasehold basis has been banned and new ground rents have been set to zero.

    For consultation responses and more on its outcome, see Gov.uk – we will update this guide when we know more.

    How do I complain about my solicitor?

    If you have a complaint about your solicitor, as long as it's signed up to a reputable body such as the Solicitors Regulation Authority, it'll have its own internal complaints procedure.

    You'll need to be able to explain what your complaint is regarding and you're more likely to be successful if it's to do with the conduct of your solicitor as opposed to specific advice they have given you.

    What do I do if my complaint to my solicitor isn't successful?

    If you've complained to your solicitor and the outcome hasn't been satisfactory, you can escalate your complaint to the Legal Ombudsman. It's worth noting that the ombudsman can only investigate conduct, eg, emails not being returned, fees not as quoted.

    It has no jurisdiction over advice you've been given, or potential negligence, meaning it's unlikely you can complain to the Legal Ombudsman if you're stuck in an onerous lease. See the Legal Ombudsman website for more information on making a complaint.

    Is contacting my MP an option as a last resort?

    If you have an issue, whether it's that you're trapped in an onerous leasehold or you're dealing with an unruly building developer, contact your MP and ask them to investigate. You can use the independent website TheyWorkForYou to find and contact your MP.

    Is there anywhere I can get free legal help?

    The Leasehold Advisory Service is a public body that provides free legal advice for leaseholders and landlords. As well as it offering written guides, you can sign up for a free 15-minute phone call or send a written enquiry for free legal advice.

    How do I buy the freehold?

    As we mention above, if you're stuck in an onerous leasehold and you don't fancy heading down the legal route to challenge your contract, your only real alternative currently is to buy, or buy a share of, your freehold.

    Unfortunately this can be expensive, time-consuming and complicated enough that it's not for the faint-hearted. However, if you live in England or Wales, a legal process called 'collective enfranchisement' gives you the right to club together with other leaseholders to buy the freehold for a fair market price.

    This underused right was brought in with a 1993 law, and boosted by the Commonhold and Leasehold Reform Act 2002.

    How do I extend the leasehold?

    Under the 1993 Leasehold Reform Act, most flat-owners are legally entitled to get 90 years added to their lease at a fair market price. To be legally entitled to extend, you need to have owned the flat for at least two years.

    We mention above the potential implications on your mortgage of your lease length as well as the impact it can have on your ability to resell your property. As with buying your freehold, extending your leasehold can be expensive and time-consuming.

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