| What are the main differences in the conveyancing process between buying a freehold or a leasehold property?
The term freehold refers to owning a property outright and forever. The term leasehold refers to owning a property for a set period of time. At the end of the term you will hand it back to the freehold owner.
The conveyancing process is likely to take longer if you are purchasing a leasehold property. This is due to the legal work required before you are able to complete.
A Management Company is often involved when purchasing a leasehold. The Management Company oversees the maintenance and repairs of the common parts of the property. Your Conveyancer will require a “Management Pack” from the freeholder / Management Company. This should contain statement of accounts, buildings insurance and risk assessments. This can take considerable time for the Management Company to put together and for the Conveyancer to review.
You should consider the number of years left on the lease at the time of purchasing a leasehold property. You will be entering a lease agreement for the remainder of the term specified in the lease. Most mortgages will not provide borrowing on a leasehold property with a term of less than 70 years.
Most freehold properties do not have a Management Company because maintenance obligations are on the property owner themselves. Therefore, the process can generally be quicker however, there may be a few obstacles to overcome. For information on why a freehold property may have a Management Company involved, read this blog.
| What are the main differences in owning a freehold and a leasehold property, and what is commonhold?
There are a number of differences between owning a freehold property and a leasehold property.
When owning a freehold property you own the property essentially own the property forever, until of course you sell the property or otherwise dispose of it. Most houses are usually freehold however not all, some houses can be leasehold such as some new build and shared ownership. Most flats and apartments are leasehold.
When owning a leasehold property you only own the property for a certain number of years (term), this can vary and depends entirely on the lease.
A commonhold allows a person to own part of the freehold title, such as a flat in a block. The freeholders own the common areas collectively. This means there will be no restrictions on selling or transferring the property and ownership of the cannot transfer back to a landlord.
| What impact will the Leasehold Reform Bill have on future leaseholders?
The Leasehold Reform (Ground Rent) Bill is part one of the Governments attempts the reform leasehold. The Bill is set to reduce Ground Rent for newly created long residential leases to one peppercorn per year. This effectively means that Ground Rent will have no financial value. The effect of this is to make leasehold ownership more affordable for future leaseholders. However, there is no indication as of yet when this will become law.
| What impact could the Building Safety Bill and the Fire Safety Act 2021 have on leaseholders?
The Building Safety Bill introduces tougher and more stringent requirements for residential buildings, particularly high rise buildings. It comes following the Grenfell Tower tragedy in 2017 and will ensure that high risk buildings are safer and will place greater responsibility on those designing and constructing buildings to ensure that the building is safe for occupation.
Additionally, following Grenfell, the Fire Safety Act (amending Regulatory Reform (Fire Safety) Order 2005) was also introduced. The intention of the Act is to improve fire safety in multi-occupancy residential properties. It essentially provides that external walls of a building and the fire doors to individual flats must be assessed as part of the requirement for a fire risk assessment.
The aim of the Bill and the Act is to ensure the upmost safety for future Leaseholders of high risk buildings.
| I own a leasehold property which passed all safety inspections before completion. The cladding has since been deemed unsafe. Who is liable for the costs to make the necessary replacements?
Usually when landlords carry out major works to blocks of flats, leaseholders are liable to pay a contribution towards the cost of the works. This depends on the provisos in the lease agreement. The landlord will collect a service charge and the cost may be substantial. The Government has made attempts to assist leaseholders with the costs for any remedial works and they initially set up a £5bn ‘Building Safety Fund’ allocated for this work. However, the deadline for registering for this has now passed. The Government has also discussed a loan scheme stating that leaseholders should pay no more than £50 a month towards cladding removal. However, the Government has yet to introduce this scheme.
For more information about buying a flat or other leasehold property, contact our team on 0800 988 7756.