child mortarboard gbp briefcase bath coffeecup tree twitter search crosshair fax house papers sort house-pound brochure list-items notes printer video-camera video virtual-video bath bed camera floorplan heart-empty heart-filled heart-empty-thin heart-filled-thin sofa calculator compass share clock list map-pen map-pin pencil save business-card letter phone heard people pointer cross linkedin google-plus facebook arrow-right close triangle-down my-wink my-wink-thick house-circle loading-spinner bell close-circle dog link pinterest school transport wardrobe arrow-up one two three four five six seven tick

Buying a Leasehold Property: Important Factors to Consider

Buying a leasehold property can come at a cost. We speak to Prosper Marr-Johnson,Partner at Marr-Johnson and Stevens LLP for some expert advice.

When considering a new property purchase it is important to be aware of the fact that there are two very different types of legal property ownership in the UK; either leasehold or freehold. With the majority of flats in the UK and, increasingly, new build properties being sold as leasehold properties, understanding what you're buying is imperative. It can make the difference between an excellent investment or a very expensive mistake. In 2015, 90% of all property transactions in London were leasehold properties, mostly residential flats, and 50% of all property in London is leasehold.

A leasehold property means that you do not own the land the property is built on, you own the property but only for the length of time remaining on the lease. If your property has a lease of under 85 years you could see its value deplete, even if the price of property in your area is rising. Properties with shorter leases can also be harder to secure a mortgage on. A lease with approximately 130+ years unexpired is worth about 99% of its value. Therefore a statutory lease extension (a 90 year extension added to an existing unexpired lease term) is a good way to achieve near maximum value.

Owning a leasehold property comes with additional costs that should be factored in when purchasing. Service charges, maintenance charges, ground rent, buildings insurance and major works funds can all add to the outgoings associated with owning your home and you must also check that you can do renovation works once you own the lease, as some freeholders prevent this. When considering a leasehold property pay attention to the amount of ground rent and in particular the rent review clauses (if any), a doubling ground rent every 25 years is the equivalent to a compound RPI growth but shorter review patterns are far more punitive. A statutory lease extension automatically reduces the ground rent to a peppercorn, as the capital value forms part of the premium.

If you have owned your property for more than two years and it was originally leased on a 'long lease' (normally over 21 years) you are legally entitled to extend your lease by 90 years and this will be in addition to your unexpired remaining years, however this can prove expensive. Another option to consider if you've fallen for a property with a short lease is to get the seller to serve the relevant notice for a lease extension between exchange and completion and then assign the benefit over to the buyer. The buyer should not overpay for the lease as this will not make the cost of the lease extension cheaper! If you are not mortgage dependent, then buying a shorter lease followed by a lease extension can reduce the overall SDLT. This particularly applies to higher value properties. There are opportunities for a lower purchase price where there is a short lease and this should apply in the current weaker market.

Questions to ask when considering a leasehold property

  • - What's the remaining length on the lease?
  • - What is included in the service charge (ask for a summary showing how the charge is worked out and what it's spent on)?
  • - Is there a sinking fund and are any major works planned?
  • - Is the vendor up to date on all payments?
  • - What are the ground rent implications in the future?
  • - Check what restrictions there are in the lease about home improvements, pets living in the property etc to ensure you don't get any nasty surprises.

Interested in investing in a leasehold property? We've rounded up a selection of some of our leasehold properties currently on the market in our area...

Avonmore Road, West Kensington, W14

A substantial three bedroom, two bathroom maisonette arranged over the upper floors of a red brick Victorian house.
£875,000 Leasehold

Lakeside Road, Brook Green, W14


A superb two bedroom flat with private garden on the lower ground floor of a mid-terrace Victorian house.
£599,950 Leasehold

Edith Road, West Kensington, W14

A fantastic two bedroom flat on the raised ground floor of an end of terrace Victorian house. with the additional benefit of a private garden.
£570,000 Leasehold

If you're considering a leasehold property and require some advice please do not hesitate to get in touch with the team at Marr-Johnson & Stevens LLP.

Are you looking to buy, sell, rent or let in our area?

Book your free market appraisal

Related posts

Lettings fee changes: What it means for you as a tenant

Claudia Green, Head of Lettings at Winkworth shares the ins and outs of what the Tenant Fees Act 2019 means for both landlords and their tenants.

Read post

July 16, 2019

Everything you need to do before moving house

Find out what you need to do and who you need to tell when you're moving house with our definitive checklist.

Read post

June 25, 2019

Brexit relief brings back buyer confidence

Following developments at the end of March signalling a softer exit from the EU, Winkworth has seen a significant increase in buyer interest, with 26.8% more applicants registering* since 22nd March.  Winkworth also reports a 23.5% rise in sales agreed** over the same period, putting this down to a surge in confidence now that a softer Brexit is more likely and people are deciding to...

Read post

May 10, 2019

Find your Local Office

Find your Local Office

Speak to people who, quite simply, love their patch and love what they do.

Get a Free Valuation

Get a Free Valuation

Thinking of selling or letting your property, or just interested to know what it is worth nowadays?