Should I avoid leasehold properties?
The concept of owning a leasehold property concerns a lot of buyers, and it’s certainly a topic which many of our clients need reassurance on, whether they’re British buyers or from overseas. The idea of owning a property for a particular period of time and then handing it back to the freeholder at the end of the lease doesn’t sit right with many people. This is understandable given the sums of money involved in buying a property. However, it’s not something to be scared of and, with approximately 70% of properties in central London being owned on a leasehold basis, it’s a concept to get comfortable with if you are buying.
In reality, it is rare that you would ever let the lease run out and hand back the property. Only a handful of properties have restrictions in their leases whereby they can’t be extended. Belgravia, for example, has a number of these properties, and usually buyers view their ownership as more of a rental option rather than a purchase option, as they will sometimes only be able to buy the property for 15 to 20 years with a non-extendable lease. However, for the rest of us, buying a leasehold property (usually a flat) will mean owning the property for however long you want, as long as you keep extending the lease.
The other option is to buy a share of a freehold flat, but it’s worth bearing in mind that even share of freehold properties have an underlying lease. As a share of freehold owner, you and the other owners in the building will typically make up the freehold collectively. If you all have a short underlying lease, you can usually extend it together with minimal cost – and because you are your own freeholders, you’re unlikely to charge yourselves. However, if your property has a short underlying lease and others in the building have a long one, chances are your neighbours had to pay to extend their lease and they’ll charge you to do the same.
So, the first rule of thumb when buying is to focus on the property itself and not reduce your pool of choice by dismissing certain types of properties unnecessarily.
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