LEASEHOLD PROPERTY
I own a leasehold house. How do I buy the freehold or extend my lease?
Formal Route: The freeholder and the leaseholder need to follow a procedure and strict timescales set out in the law. This route offers more protection to a leaseholder if the parties cannot agree on the terms and/or the price. Leaseholders can apply to the Tribunal to decide on the issue if this is the case.
Informal route: Under this route, a leaseholder can approach the freeholder and ask whether they are interested in selling them the freehold. There is no obligation on the freeholder to agree to sell. If the freeholder agrees then both parties will have to negotiate.
It is advisable to start the process informally first as it could save time and money. If negotiations fail, then leaseholders who comply with the criteria can use the formal route to try and purchase. There is also the option of Tribunal if no agreement on the price or terms can be reached.
How can I find out if my property is leasehold?
If you own a flat or a house which has a lease then this is an indication that you own a leasehold property.
A lease document should have been given to you with your purchase. You can also ask the mortgage lender who will have information on your title.
Alternatively, you can go to the Land Registry website and search for an entry for your property. Most property is registered and you should be able to obtain a copy of your title which will confirm whether the property is freehold or leasehold.
I own a leasehold house. How much will the freehold cost?
You will need to enlist the help of a chartered surveyor who should be able to calculate the value of the freehold for you.
The calculation depends on a number of factors including:
- The rateable values of the house at different dates
- The ground rent
- The number of years left on the lease
- The value of the house today.
You may be required to obtain the rateable value of the house on the first day of the lease and in 1990. These rateable values will help your chartered surveyor obtain an accurate value.
Can my landlord increase the ground rent?
You will need to check the lease as the ground rent provision will be stated there. The landlord cannot insist that you pay more than the rent set out in the lease or change the provisions in relation to ground rent as the ground rent should either be fixed in the lease or increase at fixed times and amounts.
For example, at the beginning of the lease, the ground rent may be £50 every year. Then it can increase after 33 years to £100 per year and so on. Or it may increase in accordance with a formula such as a percentage of the rental value of the property.
Alternatively, any increase may be based on the retail prices index.
What happens if I breach the terms of my lease?
A lease is a contract between you as a leaseholder and the landlord. So if you breach the terms of your lease, you would be breaching the terms of such contract.
If you are found by the court to be in breach of the lease, the court could order you to pay damages, legal costs and/or ask you to put right any breach if it is possible to do so.
The landlord may also seek possession of your property, which is referred to as forfeiture.
If your landlord takes action against you for breach of the lease, you may require the services of a solicitor.
How can a leaseholder enforce the terms in their lease against another leaseholder?
At the first instance check the lease as it should set out how the terms can be enforced. Usually, it is the landlord who has the power to make sure that the lease terms are adhered to. The leaseholder must ensure that the landlord enforces the terms of the lease against. Usually, this will require the leaseholder who makes such a request to cover the costs of the landlord for doing so.
The lease may allow a leaseholder to take direct action against another leaseholder for breach of the lease. There is no need to ask the landlord to take action for breach of the lease terms as the leaseholder can do so himself. However, this right is available only if the lease has such a term.
It is always best to try and solve the matter amicably first leave litigation action as a matter of last resort.
I have a shared ownership lease. How is the rent that I pay calculated?
When the lease is first issued the rent that the leaseholder pays is generally calculated at 3% of the part-owned amount.
This means – if the property is worth £100,000 and the landlord’s share is 50%, the rent paid by the leaseholder will be 3% of £50,000 which equals £1,500 per year (or £125 per month).
The lease may also state that the rent will increase every year by a percentage or a fixed figure.
Do I qualify for a lease extension?
Generally, you should qualify if your lease was more than 21 years when originally entered into and you have owned your property for 2 years or more. However, even though you may be a qualifying tenant by law, there may be other restrictions that may prevent you from extending your lease.
This would be the case if your freeholder is
- The Crown
- National Trust
- Part of a building within a cathedral precinct.
If you believe that this is your case, then it would be advisable to get some specialist advice before you proceed.
What happens when the term of my lease runs out?
The terms of the lease coming to an end does not mean that you need to leave the property. Unless you or your landlord have taken steps to end the agreement under the lease or you receive a notice from your landlord, it will continue on exactly the same terms.
For the lease to actually come to an end either:
- you surrender the tenancy
- the landlord serves a notice on you to gain possession of the property (the landlord will need a court order to gain possession of the property)
- the landlord may serve a notice proposing an assured periodic agreement, where you pay a monthly rent.
If none of the above have occurred you are still holding over as a tenant and it may still be possible to extend the lease or buy the freehold.
What information should the summary of service charges contain?
The law states that a leaseholder has the right to request a summary of service charge accounts at the end of the year.
If requested, the landlord must set out the costs in a way which shows either how they have been demanded or how these costs will be charged in future demands.
The summary should show;
-
- Any bills that were paid by the landlord but accrued before the accounting period began
- Any items for which a demand was received and no payment was made during the accounting period
- An outline of any bills which are unpaid at the end of the accounting period
- Any bills which accrued and were paid during the accounting period
- Any of the costs relating to works for an improvement grant has been/is to be paid
- The amounts received by the landlord down to the end of the accounting period
- Any interim service charges paid by the leaseholders to the landlord by the end of the accounting period in respect of the service charges costs for that year.
If the landlord fails to provide this information within the time limits, they will be committing an offence, which is punishable by a fine.
I am a leaseholder of a flat and have received an invoice for a share of the building insurance premium – do I have to pay it?
You should refer to your lease to establish who is responsible for insuring the building, what the cover should include and how the cost can be recovered.
Usually, the lease states that the landlord should arrange the insurance of the building and charge the cost as a service charge. The cost of the insurance may be challenged before or verified as with other service charges.
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