Leasehold Last
Leasehold is a term that refers to a property that is not owned outright but instead is held on a lease for a set period of time. There are many reasons why people choose to rent their properties rather than buy them – they can be less expensive, have more flexibility and have more tax benefits.
The length of a lease is an important factor when buying a property and choosing the right length depends on a number of things, including how much you plan to use it. For instance, if you are planning to sell the property in the future, it may be more difficult to sell with a short lease than with a long one.
It is also more difficult to obtain a mortgage on a leasehold property than a freehold. This is because banks focus on the risk of the property and the potential resale value should it not be paid off.
How Long Should Leasehold Last?
A good rule of thumb is that a lease should be at least 80 years old, although this can vary between properties. This is because when a lease falls below this, any costs associated with extending it start to increase rapidly.
Extending a lease is a complicated process and it can be very expensive. It is recommended that you appoint both a specialist surveyor and solicitor to help you with the process. The surveyor will advise on the cost of extending the lease and the solicitor will draw up the paperwork needed for the extension to take place.
Ideally, you should begin the process before the lease drops below 80 years. As soon as the lease reaches this point it becomes more expensive to extend and it is very hard to get a mortgage on a property with a lease that is less than 80 years old.
If you want to sell the property in the future, it is also a good idea to get the lease extended before it dips below 80 years. A lease that is shorter than this will make it harder to sell and any potential buyers will be put off if they see the lease is too short.
You should also ask your conveyancing solicitor to find out exactly what is included in the lease. This is because some leases are very restrictive and could prevent you from subletting or owning pets.
Ground rents are also a big concern for leaseholders as they are often reviewed every seven to 21 years (depending on the lease) and land prices in good areas continue to rise, which means that ground rents can get progressively more expensive.
In addition, it is also important to look at whether the ground rents have been reviewed recently – if they have not, you could be facing a huge bill in the next few years.
It is also worth checking if there are any restrictions on making any changes to the property that you would like. These can include things such as needing permission to make alterations to the home, or paying for a licence if you are going to change the garden.