Do you really own your home?

8th December 2014

Property Matters, by Obi Chianumba

as featured in our December Palmers Green & Southgate LIFE 

Newman Webb Chartered Surveyors and Property Consultants, 6 Champa Close, London N17 6RB

Tel: 020 8945 5474 Email: obic@newmanwebb.co.uk Website: www.newmanwebb.co.uk

We have all heard the saying that an Englishman’s home is his castle. The statement is based on the principle that a home owner could do whatever they wished with their house because they owned the freehold of their property indefinitely.

The facts are that there are more leasehold flats being built than freehold houses. With leasehold ownership, you do not own the building, but merely the right for to live in property for period of years. Leases are usually granted for a term of 99 years, 125 years or 999 years. As the number of leasehold properties in the UK increases, the idea that an Englishman’s home is his castle sounds more wishful thinking than reality.

As leasehold ownership becomes commonplace, the chances are that at least 1 in 3 of us will at some time own a leasehold flat. With this in mind, here are a few factors to consider when buying a leasehold flat:

1. Length of lease – a lease is a wasting asset and with the efflux of time the lease becomes less valuable. When buying leasehold property always make enquiries as to the unexpired term of the

lease. A lease with a term of 80 plus years expired is generally accepted to be a long lease.

2. Ground rent – you will have to pay an annual ground rent to the freeholder when you own a leasehold flat. On older leasehold flats these can be in the region of £50 to £150 per annum but on modern leasehold flats ground rents will usually be around £300 - £500 per annum. This will become particularly problematic in later years as the ground rents will often increase periodically throughout the term of the lease adding an additional financial burden to the already growing cost associated with home ownership.

3. Service charge – the freeholder will often be responsible for the maintaining the common parts and external parts of the building including the roof. The cost of doing so will be paid from the monies collected under the service charge which all leaseholder will have to contribute towards.

4. Management fees – the freeholder will likely employ a managing agent to manage issues such

as ground rent and service charge collection, maintaining the communal parts of the building such as staircases, roofs and gardens, and ensure leaseholders stick to the lease's terms. The management agents fees will be payable by the leaseholders via the service charge.

5. Alterations – If you wish to carry out alterations to your leasehold flat, for instance adding a balcony or extending your flat, you will need to seek the freeholder’s written consent. In most instances consent is often be granted by the Landlord, but a leaseholder can be inconvenienced by the time taken for the freeholder to grant consent. Also the freeholder may require that you pay their surveyors and legal fees to document the consent by way of a Licence for Alterations.

This article does not seek to discourage buyers from buying leasehold flats, but should serve as food for thought when considering buying a leasehold flat.