When buying a property, the various terms involved can seem confusing, especially for first-time buyers. With Leasehold property, there are a few extra elements to consider, so it is normal to feel unsure at the start. At Bowsers, our conveyancing solicitors regularly deal with leasehold purchases, and the right advice, at the start of the process, can save you stress later.
Below, our conveyancing team answer some of the most common questions first-time buyers ask us when buying a leasehold property.
What is the difference between leasehold and freehold?
Under current UK property law, there are two types of property, freehold and leasehold. If you own a freehold property, you own the property and the land it stands, and without a time limit on the ownership. If you own a leasehold property, you only own the property, but not the land on which it stands. This is still owned by the freeholder (sometimes known as the landlord). Your ownership of the property is also only for a defined period (as set out in the lease) – which could be years, or even centuries. Once this expires however, technically the ownership of your property will pass back to the freeholder, unless you can agree to extend the lease. Your legal rights and responsibilities are set out in the lease.
Leasehold is most common in flats because the building and shared areas need one overall owner. Some newer houses are also leasehold, though that is less typical.
How long is left on the lease, and why does it matter?
If you own a leasehold property, the remaining term of the lease is important, and you may need to consider extending it one day. The problem with having a leasehold property is that it is a declining asset. You should extend your property’s lease if it has a shorter term, as properties with shorter leases are not worth as much as those with longer terms. If a lease is less than 80 years, it becomes much more important to extend the lease.
A property with a short lease can significantly reduce its value. Leases with terms of less than 80 years become far more expensive and challenging to extend, making them much less appealing to potential buyers.
As a rough guide:
- Over 100 years left is usually comfortable.
- Around 90 years is still fine, but worth keeping an eye on.
- Below 80 years can affect the value and make lease extension or purchase of the freehold more expensive.
Some mortgage lenders are cautious when leases are short, so it can also affect whether you can borrow or remortgage. We can review the terms of your lease and explain what they mean for you, along with any steps you can take. We can also provide specific advice on lease extensions.
What is ground rent?
Ground rent is a payment some leaseholders make to the freeholder, usually yearly. However, the Leasehold Reform (Ground Rent) Act 2022 stopped ground rent on most new residential long leases. So, if you are buying a newer leasehold, the ground rent should be a “peppercorn” (basically zero). Currently, if you have an existing leasehold property, the 2022 Act does not apply to existing leases, but the Leasehold and Freehold Reform Act 2024 (LAFRA) is aiming to make it easier and cheaper for leaseholders of both flats and houses to extend their leases or buy their freehold. Our conveyancing solicitors will check the wording within the lease terms and tell you what you would be paying now and in future.
What are service charges, and how much could they be?
Service charges are your contribution to the upkeep of the building and shared spaces. They often cover things like:
- maintenance and repairs
- cleaning and lighting of communal areas
- buildings insurance
- gardening or grounds
- management fees
The amount can change year to year depending on costs. We will review the service charge accounts and budgets (if available) to assess whether the figures are reasonable and whether any major work is planned. LAFRA will aim to give leaseholders greater transparency over their service charges by making freeholders or managing agents issue bills in a standardised format that can be more easily scrutinised and challenged.
What is a “Section 20” notice?
If the freeholder is planning major works that will cost leaseholders more than a certain amount, they usually need to consult you. If the cost of the works is likely to exceed £250.00, this notice is mandatory. Typically, this is done through a Section 20 notice.
The key point for a buyer is simple: if major works are coming, you want to know before exchange of contracts. Your solicitor will ask about planned works and whether any consultation is underway.
Are there rules about what I can do with the property?
Most leases include conditions (called covenants). Some are sensible, some can feel a bit restrictive.
Common examples include:
- no subletting without permission
- no pets, or only with written consent
- limits on running a business from home
- rules about flooring, noise, or alterations
Our team will carefully review the lease and clearly flag any conditions for you, so you know what you are agreeing to.
Who manages the building?
Leasehold buildings are usually managed by the freeholder directly or a management company. However, many leaseholders feel frustrated with how their building is being managed, often complaining about inflated costs, poor service quality, and a lack of transparency regarding maintenance. Leaseholders who are unhappy can take over the management of their building (provided the building meets certain criteria) without having to prove misconduct through “Right to Manage” (RTM), a legal right introduced by the Commonhold and Leasehold Reform Act 2022.
While there are many benefits to RTM, taking control of building management entails specific responsibilities that leaseholders considering RTM should be aware of. Our conveyancing solicitors can provide specialist advice to leaseholders considering Right to Manage matters. We will ensure the process is handled efficiently and provide clear advice about the processes involved and about whether pursuing the Right to Manage is the best option for your leasehold property.
Can I extend the lease later?
Yes, in most cases. Extending the lease can protect the value of the property and make it easier to sell later.
A recent change is helpful for buyers. From 31 January 2025, the two-year ownership rule was removed. That means you do not necessarily have to wait two years after buying before starting a formal lease extension process.
If lease length is a concern on a property you are buying, we can talk through your options, including whether the current owner could start the process for you before completion.
What if I want to buy the freehold?
Sometimes, leaseholders have the right to buy the freehold (either alone or with other leaseholders in the building). This is called enfranchisement.
Whether it is possible depends on the type of property and your lease. It is not something every first-time buyer needs to act on straight away, but it is good to know the option exists.
Is buying a leasehold home a bad idea?
Not at all. Many people live happily in leasehold homes. The key when buying a leasehold property is understanding the lease and the costs before you commit.
A well-run leasehold flat with a healthy lease term, sensible charges and fair rules can be a great first home. Problems usually come from hidden costs or unclear terms. That is why thorough legal checks by a regulated, experienced professional matter.
When will the Leasehold and Freehold Reform Act 2024 (LAFRA) become law?
Initial expectations that LAFRA would be fully in force by 2026 are unlikely to be met, with some experts warning that long-promised changes could be delayed for several years. Various roadblocks have been causing the delays, including a legal challenge brought by a consortium of major freeholders over LAFRA. A recent news article in Today’s Conveyancer provides further details on how this could impact the full implementation of the Act.
Source: Today’s Conveyancer – Freeholders Appeal High Court Decision on Leasehold Reform.
How Bowsers can help
Buying your first property is a big step. Buying a leasehold property adds another layer of detail, but it does not have to be intimidating. If you are looking at a leasehold property and want a chat before you move forward, get in touch with Bowsers Solicitors. We are happy to talk it through and help you feel clear on your next step.
We have extensive experience helping people in March, Wisbech, and across the Fens, and further Cambridgeshire, with purchasing leasehold properties, lease extensions, enfranchisement, and right to manage.
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