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10 things you should know about your lease By Ian Mitchell Head of Leasehold Services, Anthony Gold Solicitors
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magine a large house purchased circa 1960. Ten years later, the owner sells the upstairs part of the house by splitting the property into two flats. He does this by granting a 99-year lease of the upstairs. He sells the lease and retains the freehold interest. He continues to reside downstairs. Thirty years later he moves out and grants a lease of the ground floor flat on identical terms to the upstairs lease. He retains the freehold interest. Present day, the owner of the first floor flat has decided to sell up. You are considering buying the flat. What do you need to look out for when reviewing the lease? 1. Has the lease sufficient length? As the length of the lease runs down, the value in the flat reverts back to the freehold interest. This process begins to speed up at the point when the lease term drops below 80 years. The lease of the first floor flat has approximately 59 years remaining. A prudent buyer would reflect this in their offer and request that their solicitor advise how to resolve the lease length. The lease can be extended by statutory entitlement or negotiation. Most mainstream lenders will not lend against this flat on account of the term being below 60 years. 2. State of building Are major building repairs on the horizon? Repair costs are usually divided between the leaseholders, even though the freeholder may carry out the works. You would want to reflect outstanding building repairs in your offer price. It is important to look at the state of the building as a whole, not just the flat you are proposing to purchase. 3. What is the average annual service charge? If this is a lease under which a service charge is payable, then ask for copies 40
of the service charge accounts for at least the past three to five years. 4. Does the lease contain an adequate insurance provision? If the building was for any reason destroyed it is fundamental that the entire building is reinstated. It is desirable to have one single policy for the building as a whole. 5. What is your landlord’s ethos? Some freeholds are owned and managed by large property companies. Their charges may sometimes be higher. Ask the neighbours their views on the current management arrangements. 6. Does the lease protect your continued use and enjoyment of the property? Check that the lease adequately allows you to deal with issues that could later arise between you and the neighbouring flat owners such as excessive noise or water ingress emanating from upstairs. 7. Is the lease free of defects that would affect resale? Leases can have minor and major defects. The list of possible defects is non-exhaustive; your solicitor will review this position and advise you accordingly. 8. Does the lease permit you to rent out your flat? The answer will be in the lease 9. Does the terms of the lease permit alterations within your demise? The answer will be in the lease 10. The ground rent increase Review how the ground rent increases over the term of the lease so you are not in for any surprises. Owning a leasehold flat should not be a concern as long as you know and appreciate your rights and obligations. With a well-written lease and a properly managed building, a leasehold flat should provide a perfectly good home and a secure investment.
