So if you buy a flat with a lease, that means that, the same as a house, you own the land it stands on, right?

So, no additional charges other than ground rent – no managing agents, no tenancy committees, you can choose what repairs to make and when, but you have to pay for it yourself?

From what I can see, buying a flat leasehold is no better than renting, and frequently more expensive because of service charges and dodgy managing agent practices.

Whereas buying a flat with freehold or share of freehold means you’re in the same position as buying a house, except the living space is smaller and you may not have a garden…

Anything I’ve missed out?

you own the land it stands on, right?

no. You own nothing, you’ve just paid for a very long tenancy (with no/little rent but with service charges).

Although virtually all flats (in England and Wales) are leasehold, it’s just that some come with a share in the company that owns the freehold too.

If you have a share of the freeholding company ou have a say in service charges etc but can be outvoted.

Think you still will likely pay management fees and deal with tenancy committees, you just avoid paying charges to the freeholder (mine were 25 quid a quarter) and asking permission for stuff like subletting (more fees).

I confess I never really understood the concept of “leasehold” though …

So what does this reply from the estate agent mean then? I asked him what the service charge would be:

There are no service charges.
999 year lease,

When he says there’s a 999 year lease, does he actually mean I would own the freehold, and would not be buying the flat leasehold?

I guess it says that you are buying leasehold, but with a v long lease.

no service charges tends to mean you have to pay bills for redecoration/new roof etc in full and as they arise rather than paying monthly into a ‘pot’ that gets rolled up to cover big expenditure.

No service charge can mean that communal areas never get cleaned and rarely decorated so can look shabby. Does depend if it’s a house split intot 2 flats or a block of 20 though.

It’s worth finding out when the last time windows were replaced/decorated and what state the building is in to make sure there’s no major bills around the corner forcing the current owner to sell. People who’ve bought flats in local authority blocks have been given bills for £10’s of thousands for major work.

There are no service charges.

seems a bit odd, unless this is just a flat above a shop rather than a block of flats – otherwise who does the maintenance/insures the building/etc?

Freehold – you own the land and structures (buildings) attached to. You can, within the law, do what you like to the land and buildings.

Leasehold – you own a right to occupy the land for a specified period. Most flats are leasehold – short term leases when you’re renting, and long leases (100 years plus) when you’re buying. What this means in practice is that you have a clear idea of what you own and can do stuff with, and what the landlord owns and is responsible for, eg you can fit whatever bathroom you want (just like a freehold property) but the landlord is responsible for maintaining the water supply to your flat.

So long as the lease is long enough for you to occupy and make it a valuable asset, then the reality is all about what’s yours and what belongs to the landlord. With flats there is usually then a management company. You will often get a share in this with the flat and a right to become a director. The management company is responsible for maintaining the common parts, exterior, roof, windows etc. This is funded by all of the leasehold owners, either through a management charge or one off charges. This often feels risky, as it’s an unknown (just like buying a freehold place), so make sure you ask lots of questions about work that has been done, work that is already planned and work that will bee needed in the next few years.

If it’s a nice flat and all this stacks up, go for it!

Leasehold strikes me as a mug’s game tbh. I was offered a flat last year with £190pcm service charge, 50% of which was a sink fund for building repairs. On top of the mortgage, this made a small 2-bed flat more expensive on a monthly basis than a 2 bed terraced house. Financially and in terms of quality of life it’s a no-brainer.

I don’t get why he’s saying no service charge if it’s not share of freehold. It’s also small and priced cheaply so I’ll steer clear – something not quite right here

It would be well worth paying a decent local lawyer to look at this . Buying a leasehold flat suggests you will be in part of a larger building that will need to be maintained and repaired. Who is responsible for that ? How is it funded ?who decides what is to be done? Worst case you end up liable to pay a service charge for monthly general maintenance , have the disruption of no structural maintenance for years then get landed with very expensive and in your view inappropriate major works which you are liable to pay for .
Leasehold flats can be a nightmare .

Be careful with the remaining lease. Once it falls below about 60 years,banks are reluctant to give a mortgage on it, meaning when you come to sell it, you have to find a cash buyer or bend over a barrel for the freeholder. When I sold a flat a few years ago (59 years remaining) the freeholder wanted 30k to extend the lease. I didn’t pay that much after surveyors reports etc but still much more than I would have, had I extended the lease as soon as I moved in.

And I got a 3 grand bill for flat roof repairs just after moving in,when it sprang a leak (service charge didn’t cover it, so the money was demanded from the 12 leaseholders)
Worth doing your homework on this, just like I didn’t.

Leasehold is entirely normal and in principle nothing to worry about. Some properties do have a large management charge – especially old converted stately homes, but in this case they often cover buildings insurance and even maintenance of shared gardens, so it’s not quite as bad a rip-off as it might appear (though you want to check). For more modern properties, it’s more likely to feed into a fund controlled directly by the leaseholders and used for communal maintenance.

As for being “just a long tenancy”, that’s sort of true, but you have rights to extend the tenancy for a reasonable fee, and 999 years is far longer than anyone cares about anyway, so it’s effectively the same as buying. Much less than 100 years, you might like to look into getting the lease extended (before you buy).

Bob & others are correct. The service charge usually covers day-to-day maintenance (cleaning, gardening, etc.) and *might* contribute to a war chest for big costs but equally it might not. I’ve had to fork out several times in the past to pay for external works over & above the service charge I’ve paid.

My parents are facing a £10k charge right now. Due to years of under-spending the exterior of the block is crumbling and needs serious remedial work & new super-duper cladding to protect it – it’s on the coast and effectively gets a light sandblasting every time there’s a bit of wind. A lot of the residents are elderly / retired and simply do not have £10k. It’s a major headache.

You’ve got a very long lease, sometimes referred to as a ‘virtual freehold’. You will probably have a right to enfranchimsement but I’d need to see how the lease was drafted.

I’m a property lawyer. Not sure if you can PM it to me but I’ll have a look through if you’ve got the document.

It’s quite common to have the ground rent stated to be ‘a peppercorn’, so effectively nothing due.

It will also depend on whether the lease is classed as a ‘full repairing and insuring’ lease, or whether the landlord retains any obligations.

Too much to point out here but I’m quite happy to talk things through.

Ignore Ironmaiden.

You need more partially informed advice from people who can finish any posts they do make with IANAL.

IANAL.

If the lease is 999 years its probably fine, just check what the ground rent is, normally a nominal or ‘peppercorn’ payment of a few pounds a year. After 999 years the land returns to the freeholder – they may chose to extend the lease again or may decide to take the land away, however this is not going to be an issue for you or the next few generations of buyers and sellers.

However there are sometimes covenants in the lease that you need to look out for, specially around changes to the building. Its another hoop to jump through and they’ll probably want an ‘Administrative charge’ to cover the work they do. You’ll probably only get visibility of these once you’ve had an offer accepted.

We bought a house with an 85 year lease and ended up having to buy out the freehold when it came to sell. In hindsight we should have told the purchasers to do one as it cost £6k to purchase but we were in a chain so didn’t really have any choice.