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When purchasing any kind of property, it is important to establish whether it is leasehold or freehold. Usually most houses are freehold, unless they are part of a shared ownership scheme, however flats are usually sold as a leasehold property. The length of the lease is extremely important, and if it is less than 70 or 80 years, you will often have difficulty getting a mortgage.
If you are looking to purchase a leasehold property, you will legally own the property but not the land it sits on. The length of the lease determines how long you will own the property for. The freeholder will have a legal agreement in place stipulating the terms of the lease. Ownership of the property will revert back to the freeholder or landlord when the lease expires unless it is extended.
Leasehold properties such as flats or apartment blocks usually have a management agent appointed by the freeholder, who are responsible for any service charges, buildings insurance and maintaining communal areas and gardens. You may be expected to pay service charges towards maintenance as well as an equal portion of the insurance premium. Providing you have 50% of the tenants agreement you can opt for something known as the ‘right to manage’, which gives you control over management of the property, however with that comes a lot of responsibility.
In many cases it can be difficult to find the right information, particularly regarding your rights if purchasing a leasehold property, as there is little information available. For example your property could lose significant value if the lease has a low amount of years remaining as it becomes a wasted asset due to the risk of ownership falling with the freeholder once the lease has expired.
Opting to extend a lease is not guaranteed and can be time consuming. Firstly you must have owned the property for a minimum of two years, then you can lodge a Section 42 notice, where you will then have the right to a 90 year extension to the current term.
If you encounter any dispute by the freeholder regarding an extension or what you may deem as unreasonable charges to the land or property, you can contact the Leasehold Valuation Tribunal who can help arbitrate if an agreement cannot be made. They will help negotiate with the landlord in order to come to a fair and suitable arrangement.
Ultimately the decision of the Leasehold Valuation Tribunal is final and you will get a copy of that decision after it has been made. However bear in mind that depending on the circumstances, a fee may be required of up to £500 if you wish to lodge a complaint or request arbitration.
Ultimately whatever purchase you intend to make, a thorough search and checks should be carried out. Obviously a freehold property would be more preferable to many people, but providing you understand the terms set out within the lease agreement and the length of the lease is for over 80 years, then you should have no problems. However it is important to understand what is involved with purchasing a leasehold property, before you commit to buy.
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