When you are seeking to get on the property ladder, a leasehold property can feel like a more achievable option. But while flats and apartments may have a lower purchase price than other types of property, you should be aware that leaseholders pay hidden costs both during their time living there and when looking to sell. Below, we look more closely at these unexpected leasehold property rules.
The Hidden Costs Of Leasehold Properties
Historically, the biggest hidden cost of leasehold properties was ground rent. This is an obligated fee that the landlord collects in exchange for various – and possibly unclear – grounds maintenance and services.
However, as of June 2022, the Leasehold Reform Act 2022 has prohibited the use of obligated annual ground fees. The Act has also, for the first time ever, clearly defined “peppercorn rent” as “an annual rent of one peppercorn”. This essentially keeps ground fees to a minimal or nominal amount, helping to mitigate financially predatory ground rent practices. Additionally, under the new Act, landlords are banned from charging additional (“admin”) fees for the collection of said peppercorn rent.
These changes to leasehold property law have helped to make leasehold renting fairer and more transparent for all involved, although the changes only apply to leaseholds beginning after the passing of the Act.
Unexpected Selling Costs
When you are selling your home, you’ll be hoping to make some money on your investment, not lose it. The administrative costs can come to more than £1,000, and this can feel like a serious loss. Being aware of this can help you budget for such expenses ahead of time.
Should You Become A Leaseholder?
In order to decide whether it’s worth becoming a leaseholder, you should take every possible cost into account. If you are looking into purchasing a leasehold home, ask for more details on service charges and arrears as well as any upcoming works on the building. This allows you to assess if the service charge gives a full picture of what to expect.
If you are getting on the property ladder with a leasehold property, you should get advice and support from experienced professionals. Get in touch with Bowsers Solicitors to discuss the terms of the lease, and how this could impact you.
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