Buying a leasehold property is not as straightforward as you might think. Nor is it cheap. You need to make sure the selling agent specializes in this type of property, and you are given all relevant information so you can make an informed decision.
Look out for the hidden costs.
Most leasehold properties include common and or shared areas and responsibility along with the cost of maintaining these parts is shared between the tenants. The expense is called a service charge and this can often be high and burdensome.
Often responsibility for collecting the service charge rests with a commercial agent or Management Company. Upon completion of your purchase the agent or Management Company will expect you to pay a fee for lodging notice of your new ownership as well as your mortgage. They may also require you to enter into an agreement with them direct to make sure you take over responsibility for payment of the service charge. They may require you to pay an additional fee for lodging this agreement. You may also be required to acquire a shareholding in the management company for which a further fee might be payable.
The landlord may also be planning to undertake major works such as replacing the roof or external painting. Sometimes there is money set aside for these extra works. Often there is not. If there is no reserve then you could find yourself having to make a contribution towards the cost of these works and this could mean having to pay out thousands of pounds.
Your solicitors will also be looking to charge you more for the work. This is because there is far more work involved when checking the lease and other legal aspects.
Check the length of the lease and how much of the term of the lease is left to run. If the remaining term is under or close to 80 years then you should consider carefully with the agent or your solicitor how much is will cost to extend the lease. It becomes more expensive to extend a lease that is under 80 years. Keep in mind your lender may not be prepared to lend to you if the remaining part of the lease is under a certain limit.
Beware of rent review clauses. Plenty of leases contain oppressive review clauses that can result in substantial increases in the level of future rent.
Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at firstname.lastname@example.org