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.
In this guide
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 which are converted into multiple flats - are sold on the basis that the owner shares the freehold with others in the same building - known as 'share of freehold'.
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. The reason this causes concern is 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
Flats are sold on a similar basis as commonhold properties are in the rest of the UK. Each flat owner owns their own freehold and the common areas will be looked after by a 'factor' - a company to which flat owners will pay a fee.
Thanks to the Property Factors (Scotland) Act 2011, these factor companies also have to sign up to a code of conduct and a Government redress scheme. The Scottish Government has published a handy guide to buying a property in Scotland.
The differences in Northern Ireland explained
It's a similar situation to England and Wales in Northern Ireland, so it's still worth reading this guide for the basic principles, but there may be some nuances in legislation and definitions. More comprehensive guidance can be found on the Housing Rights NI website.
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.
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 service charge - to cover the cost of the upkeep of the building - and ground rent - as a tenant of the freeholder (this is 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.
In contrast, owning the freehold means you own the property outright including the land it's built on for an unlimited period. Interestingly, thanks to the Civil Aviation Act 1982 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.
What are commonhold properties?
Commonhold properties are relatively new (introduced under the Leasehold Reform Act 2002) and are incredibly rare.
It's essentially a form of community ownership where an apartment building is divided into 'freehold units' so each flat owns its own freehold, while common areas (the stairwell, walls, roof etc) is managed by a commonhold association, which itself is owned by the freeholders of the flats.
Only apartment buildings built since 2002 are likely to be commonhold.
However, despite the good intentions of commonhold (it offers more rights and is more similar to how ownership of flats works in Scotland), it's very rare: the HomeOwners Alliance estimates that about only 20 commonholds exist in the UK.
Its rarity can also pose a problem if you're looking for a mortgage. When it became apparent that commonhold wasn't catching on, most mortgage lenders quietly stopped offering mortgages for commonhold properties on the open market.
Can I extend the length of a lease?
Under the Leasehold Reform Act 1993 most flat-owners are legally entitled to get 90 years added to their lease at a fair market price. However, you must have owned the flat for at least two years.
If you have a lease on a house then under the Leasehold Reform Act 1967 you may be entitled to an extension of 50 years.
If the lease has 80 years or less left to run, it's starting to head into dangerous territory. After that you'll pay 50% of the flat's 'marriage value' on top of the usual lease extension price. Marriage value is the amount of extra value a lease extension would add to your property value.
What charges would I pay as a leaseholder?
Your lease will set out the conditions you've agreed to. This can include how much you'll have to pay to maintain the property, if you need permission from the freeholder to make alterations to the property, whether it's you or the freeholder who has the responsibility to make repairs and deal with other issues such as noisy neighbours, any restrictions on pets, smoking, BBQs and noise, and MUCH more.
It's important to remember this is a serious legal document so if you're in breach of the lease, you could in theory be evicted - though this is rare.
What does the service charge cover?
While the freeholder is responsible for the upkeep of the building, the leaseholder must pay a service charge to cover this cost. Your lease sets out the way the service charge is organised and what can be charged.
If you pay a service charge, you have the right to ask for a summary showing how the charge is worked out and what it's spent on and see any paperwork supporting the summary, such as receipts.
Service charges must be reasonable and fair which means leaseholders can dispute any charges they think are unfair at a tribunal.
Do I have to pay ground rent on a leasehold property?
Yes. This is a fee you pay to the freeholder as a condition of your lease. Given you're technically a tenant of the freeholder then this is the rent. It can be anything from a few quid to hundreds of pounds a year.
Your lease will set out if it stays at the same level each year of your lease, or if it'll increase after a set amount of time. Some controversial leases allow the ground rent to double every 10 years which can seriously add up over time and make the home unsellable. There's much more on how to fight this later in the guide.
Who is responsible for the upkeep of common parts of the property?
The lease will set out what the freeholder is responsible for. This could include the upkeep and repairs of the common parts of the property (eg, the stairwell in a block of flats, as well as the walls and roof) and of the land it's built on, cleaning the outside of the building, and applying the relevant fees and charges.
The freeholder must also provide the leaseholder with a management report which sets out exactly how money has been spent. As this guide is primarily for leaseholders' benefit, for a more detailed look at the rights and responsibilities of the leaseholder and freeholder, it's worth taking a look at the Landlord and Tenant Act 1985 and 1987 legislation.
Do I pay for home insurance as a leaseholder?
There are two types of home insurance - buildings insurance and contents insurance. The freeholder will pay for the buildings insurance, but don't think you'll get it for free - this will form part of your service charge. However, you'll be responsible for getting contents insurance, which covers items such as furniture, clothing and any white goods. It's not a legal requirement to get this but think about what you would do if the contents of your home got damaged or destroyed.
What about any cost for any major unforeseen works on the property?
You may get landed with a major works service charge on top of your ordinary service charge.
For example, if you've bought an ex-local-authority flat in a block on an estate of flats, you may have to pay a service charge for extra work such as upgrading windows or improving lighting around the estate to make it safer at night.
You usually won't get back funds you've paid in when you sell your property though you could always use it to negotiate with the buyer on the price and see if they'll pay more for the property as a result of the works.
Will I be able to get a mortgage on a short lease?
Many mortgage lenders won't lend if the lease length is shorter than 70 years because they see it as difficult to sell (and lenders may need to sell a home to recoup their cash if they repossess it if you fail to keep up repayments). Santander sometimes lends with 55 years remaining on the lease but it is hardly representative of the wider market.
Some go further. In early 2017 Nationwide became the first major lender to refuse to lend where it considers the terms of a lease to be unfair. Since May 2017 all its new mortgage applications on new-build properties must:
- Have a minimum lease length of 125 years if it's a flat.
- Have a minimum lease length of 250 years if it's a house.
- The maximum starting ground rent can be no more than 0.1% of the property's value. So £400 on a £400,000 property.
- The ground rent must remain reasonable during the lease term and cannot escalate unfairly, eg, by doubling every five, 10 or 15 years.
- Ground rent is only allowed to increase if it's linked to a verified index - such as the Retail Prices Index of inflation.
For more information on finding the best mortgage for you when buying a property for the first time, check out our First Time Buyers' Mortgage guide.
I'm not sure what my ground rent is, how can I check?
If you've already purchased a leasehold property, or if you're planning to:
- First, check the ground rent section of the lease. If it's all legal gobbledygook to you, you may need to ask a lawyer if they can translate it.
- If in the process of buying a house or flat, ensure you ask your conveyancing solicitor to check the ground rent clause. Avoid solicitors recommended by the builder who may not be independent.
- If it says any increase is linked to an index such as the Retail Prices Index inflation measure, you can probably breathe a sigh of relief. Though that does mean it will rise at some point, it isn't as onerous a hike.
- If it does say the ground rent will double, it's worth seeking legal advice if you want to challenge it. It's also worth checking with neighbours in case they're affected and you can claim together.
- Again, if affected, you generally only have six years from the date of purchase of the property to bring a claim against your conveyancing solicitor, so time might be critical.
Should I buy a leasehold property?
It might seem after reading the 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.
A ban on leases for new-build houses except where necessary (eg, shared ownership)
Ensuring that ground rents on new long leases are set at zero – for houses and flats
Working to support existing leaseholders and make it easier, cheaper and quicker to buy a freehold or extend a lease
Leaseholder rights & how to complain
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 with 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.
Here's what to do if you have a complaint:
Step 1. Speak to other leaseholders (informally)
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 able to be resolved by setting it out in writing, or even face-to-face, to the freeholder.
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?
You can apply to the First-Tier Tribunal (Property Chamber - Residential Property) to set one up, but you'll need at least 60% of the leaseholders to be members of the association for it to be recognised.
Recognised tenants' (or residents') associations have additional rights and can also act on your behalf in disputes.
The Department for Communities and Local Government has a guide with more information on setting up an 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
If you've exhausted the options above, you can apply to the First-Tier Tribunal (FTT; Property Chamber - Residential Property). 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 to get any help and 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 applied to the FTT first.
You must ask the First-Tier Tribunal for permission to appeal and you must do this within 28 days of the decision. It may decide to reopen the case itself rather than pass it to the Upper Tribunal.
If your case is complex, involves a legal principle 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 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:
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 homebuilder 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?
You'll need to download and complete the relevant form to your dispute, complete it and send it to the address on the form.
You'll then be told whether or not the tribunal requires more evidence from you. If not, you may be told a decision can be made on your application - this is known as a 'paper decision'. You can still request a hearing (known as an 'oral decision').
How much will it cost?
The cost will depend on your area of dispute and will be printed on the form. However, it'll typically cost £100 to make an appeal to tribunal. If and when you receive notification of a hearing date you'll be required to pay a further £200. So you'll be paying at least £300.
If you have little income, savings, or are on some benefits, you may be able to get help with paying these fees. See Getting Help with Court fees for more.
What happens at the hearing?
If you've asked (or been told) that it'll be a 'paper decision', you won't have a hearing.
Instead, you'll receive your decision within about six weeks of the tribunal having looked at your application.
If you've asked for an 'oral decision' then you'll have to attend a hearing. This is public and you'll have to present your case (you can have a representative if you wish, eg, a family member, friend or even a lawyer).
You'll also be asked questions and the tribunal will then make its decision. You'll receive the outcome of this within six weeks.
What if I find further supporting documentation after making my initial case?
You have 28 days from an original decision date to make a request for the First-Tier Tribunal (FTT) to set aside a decision and re-evaluate it.
This is your opportunity to send further relevant documentation to the FTT or make another relevant person available at the hearing.
Where can I find previous decisions?
You can search legislation and previous decisions for help making your own case as well as deciding whether or not you want to take your case to tribunal.
The Government has a searchable database as well as links to legislation that may be relevant to your situation on its previous decisions page.
Is anything being done to reform the leasehold system?
The Government has promised a reform to the leasehold system and following a consulation, selling new houses on a leasehold basis has been banned and new ground rents have been set to zero.
For the full response see the Government website - we will update this guide when we know more.
How do I complain to my solicitor?
If you have a complaint with your solicitor, then, 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 that you should use at the outset.
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 it's 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 then 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 Member of Parliament (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?
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, then your only real alternative currently is to buy, or buy a share of, your freehold.
Unfortunately, this can be expensive, it's time-consuming, and complicated enough that it's not for the faint hearted. However, if you live in England and Wales, using 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 by 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.