What Happens When A Residential Leasehold Property Expires?
If you own a residential leasehold property or are thinking of investing in one, you may have concerns regarding what happens when the leasehold expires. In order to ease any concerns you might have, the following guide is here to explain what happens when a leasehold property expires. We’re also going to explore a few other relevant factors that you ought to be aware of as a leaseholder or freeholder.
Before we delve into the question of what happens when a leasehold property expires, however, let’s take a moment to clarify the difference between leasehold and freehold property.
Leasehold vs freehold
The main difference between a leasehold vs freehold property is ownership rights. As a leaseholder, even though you have bought the property and pay a mortgage for it, you still have a landlord who is the freeholder. The freeholder owns the land on which the property is built, and you as a leaseholder pay ‘ground rent’.
Whilst the freeholder owns the property and the land on which it is built for an unlimited period, ownership of a leasehold property is for a set period which could be anything from a few years to centuries depending on the lease.
So what happens when a leasehold property expires?
When the leasehold on a property expires, the property reverts back to being a freehold property where ownership of both building and land belong to the freeholder. Even if you have paid your mortgage off and own the property outright, when that leasehold expires you’ll have no legal rights to the property.
With this in mind, it’s really important to seek the advice of an experienced conveyancing solicitor before you invest in a leasehold property, or if you have concerns about what happens when a leasehold property expires. Before investing in a leasehold property it’s therefore essential to consider the following factors:
- How much is the ground rent?
- What are the annual service charges?
- What insurances will need to be paid when you move in?
- How long is left on the lease? (This requires access to the Lease Title which your estate agent should have or you can acquire from the Land Registry for a small fee).
How to protect yourself as a leaseholder
Making sure to check how many years are left on the lease is a really important step to protecting yourself financially. Generally speaking, a ‘good’ lease length should be between 90-125 years. If there are less than 70 years left on the lease then you may struggle to get a mortgage or sell the property on. If you take on a property with a short lease, you should consider trying to extend it with the landlord’s permission. Negotiating a lease extension will also add value to the property if the lease length has dropped below a desirable amount of years.
If you want to make any structural changes to the property such as building an extension then you’ll also need to get the permission of the freeholder. Many freeholders will charge a ‘fee’ for the time and you should be aware that it is the freeholder who controls the cost of building insurance and service charges.
It’s important to be aware of what happens when a leasehold property expires to ensure you protect yourself financially as a leaseholder or freeholder. For legal advice regarding the buying/ selling of a leasehold or freehold property, please get in touch with our experienced conveyancing team who will be able to guide you through the process step by step.
Call 01752 203500 or email enquiries@GAsolicitors.com.