If you are considering buying a leasehold flat in Central London, there are some important questions to ask before making an offer for the property. Whether you are purchasing the property to live in or rent it out, failing to ask the right questions could lead to problems further down the road.
What Is A Leasehold?
When you start your property search, you will notice that some are described as freehold and some as leasehold. Depending on which you buy, there may be limits on what you can do with the property.
In England and Wales, most flats are owned on a leasehold basis, so if you are looking to buy a flat in Central London, there is a good chance it will be leasehold.
The key difference between leasehold and freehold is that with a freehold property, you own both the property and the land it is built on. With a leasehold, somebody else owns the land, and you will usually need to pay ground rent, service charges or permission fees.
To make sure you have all the information that you need about the property, ask these questions before making an offer on a leasehold flat in Central London:
1. How long is left on the lease?
The time you have left on the lease determines how long you have permission to live in the property. Therefore, a longer lease is better than a short lease. The lease length on a property can vary greatly, usually anywhere between 125 years to 999 years.
If less than 70 years are left on the lease, this can be a problem. You may find it difficult to sell in the future and mortgage lenders will see this as a risk and may refuse to approve a mortgage on the property.
Once you have owned a leasehold property for two years, you will usually have the option to extend the lease. If there are less than 80 years left on the lease, it is a good idea to ask the seller to extend the lease before you buy the property.
To find out more about why you may want to extend the lease and the expected cost, read our blog on How to extend the lease of a Central London property.
2. How much is the service charge, and what is included?
Another of the most important questions when buying leasehold property is how much the service charge is and what is included. The service charge is an annual fee paid to the management company or landlord and covers the cost of maintaining communal areas of the building.
The lease will detail how much you must pay for the service charge and what is included. Generally, service charges need to be paid once or twice a year, and you may have the option to spread the cost and pay monthly.
3. How much is the ground rent?
The ground rent payment can vary significantly between properties, so this is another question about leasehold agreements that you should ask. The ground rent will usually be somewhere between £10 and £300 per year, but it can be subject to change, and the ground rent is usually reviewed every 20 years. Your conveyancer should be able to tell you what the ground rent agreement is and when it was last reviewed.
4. Are there any planned works for the building?
Before you set your heart on a new flat in Central London, you should check whether any major works are planned for the building. This could affect your service charges as there could be an upcoming large payment that you hadn't factored into your finances.
Some leasehold properties have a reserve fund (sometimes known as a sinking fund) as part of the service charges that is in place to build up a pot of money that will pay for any future irregular costs.
5. Are there restrictions in the lease?
You should also check with your conveyancer whether any restrictions in the lease limit how you live in and use the property. For example, you may not be legally entitled to rent your property out or take on a lodger. Some leases even restrict you from having pets in the property or installing satellite dishes.
6. Who are the managing agents?
It is also a good idea to find out who the managing agents are and to see what sort of reputation they have. You may be able to find some online reviews of the company, and you should be able to find out more information about them to see whether property owners have had any issues with the property in the past.
Are you looking to buy a flat in Central London? Plaza Estates is a London-based estate agent specialising in leasehold properties. We can help ensure you have the answers to all the essential questions about leasehold properties. Contact us today for more information about leasehold properties or to view our properties in Central London.