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L is for Leasehold
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LEASEHOLD!⠀⠀⠀⠀⠀⠀⠀⠀⠀
Leasehold is a form of legal ownership of property (as opposed to 'Freehold'). As a leaseholder, you own the property, but the land on which the property is built is owned by the freeholder. You have a lease from the freeholder (AKA the landlord) to use the property for a number of years - commonly 99, 125 or 999 years.
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In the UK, most houses are freehold and most flats are leasehold.
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Let's take a look at what it means to be a leaseholder...
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👉 You're obligated to pay annual 'ground rent' to the freeholder
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👉 You're also liable for maintenance fees, annual service charges and your share of buildings insurance
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👉 You're reliant on the freeholder to maintain the fabric of the building (entrance hall, staircase, roof and outside walls for example)
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👉 You have to obtain permission from the freeholder before carrying out any major works
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👉 You could face restrictions on how you're able to 'enjoy' the property, such as not keeping pets or subletting
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👉 In the instance that a leaseholder fails to comply with the terms of the lease, the lease may be forfeit
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When the term of a lease reaches zero, the property reverts to the freeholder and essentially, it becomes 'worthless' to the leaseholder. The shorter the lease, the less it's worth so buyers are understandably keen to purchase properties with leases of 90 years or more.
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If you have a lease of declining value, you have a few options: extend your lease or buy the freehold - but both can be rather pricey legal procedures.
About this article — written by the Agreed team. We publish honest, hands-on guides on UK property based on what our associates and developer partners are actually doing day-to-day. Spot something out of date or wrong? Tell us via the contact page.