Once you buy a property, it's all yours, right? For many homeowners it's not quite as simple as that, especially if you're buying one of the UK's 1.6 million leasehold properties. Before you begin house hunting, it's a good idea to understand the difference between buying a freehold and a leasehold home, just in case your dream house happens to come with an unexpected timeline attached.
Ownership on the clock
How long do you generally own a house for? It could be a few years for a starter flat, or 50 if you settle into your ‘forever’ home. However, when you buy a leasehold property, it instead is signed over to you for a set period of time – until the lease runs out. Then you hand the keys back to the landlord (or freeholder). Of course, it’s different to renting a property, as you have more rights and responsibilities regarding the upkeep, charges and any contact you need to have with the landlord.
Leases typically run for over 95 years, and don't generally cause any issues for buyers. However, if there are fewer than 80 years left on a lease, estate agents and mortgage lenders can start to get a bit wary. This can affect the value of the house, as well as how easy it is to secure a mortgage. When you put a leasehold property on the market, you don’t legally own the house, either – you’re just selling the lease on it.
Extending the lease
You can pay a fee to extend the lease on your property, which will usually set you back around £10,000. This can often be negotiated into the sale price so it’s always worth having a chat with the seller or agent to see if you can strike a deal. A HomeOwners Alliance survey showed that only 58% of leaseholders know how long they have left on their lease, so it's always best to double check the paperwork if you're not sure.
On the bright side, lease extensions should only have to happen once a generation. You can add 50 years onto a house’s lease, or 90 years onto a flat's, assuming you qualify. If the lease does run out, you can carry on living there unless you or the landlord officially call it quits.