7 Questions to Ask Before Buying a Leasehold Flat in Newington Green
If you are buying a flat or apartment in Newington Green the chances are you will be buying the leasehold. A leasehold gives the purchaser the right to occupy the property for the period specified in the lease.
Buying a leasehold can be tricky; here are our shortlist of questions to ask before you make an offer.
1. How long is left on the lease?
When you buy a leasehold property, you purchase the right to possess the property for the remainder of the lease period. When first drawn up, leases can run from anything between 99 and 999 years, as time goes on the lease period reduces.
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When the term of the leasehold reaches zero years, the property reverts to the freeholder. The value of properties with short leases rapidly reduces as the lease period decreases. A residential lease with less than 80 years left to run constitutes a short lease.
At the moment, leaseholders have a legal right to extend their lease but only after living in the property for two years. The costs of extending a lease are significant and comprise the premium payable to the freeholder as well as legal costs and taxes.
Mortgage lenders tend to require at least 90 years left to run so that there is time to extend the lease.
New government reforms will make it easier and cheaper for leaseholders to extend their leases. The government says leaseholders will be given the right to extend their lease by a maximum term of 990 years, and that an online calculator will be introduced to make it simpler for leaseholders to find out how much it will cost them to buy the freehold or extend their lease. This would potentially stop freeholders quoting inflated prices.
2. How much is the ground rent?
Ground rent is traditionally a token fee paid to the freeholder in exchange for renting the land the property sits on. Increases in ground rent must be detailed in the leasehold document, so make sure you look at this carefully.
The leasehold scandal saw many freeholders inserting clauses into the lease stating that the ground rent will increase periodically, for instance, double every 25 years. This has left many homeowners facing spiralling costs. The new government reforms effectively abolish ground rent by giving all leaseholders the right to extend their lease at zero ground rent.
3. How much is the service charge and what is included?
Most leaseholders will pay service charges to the freeholder or company responsible for managing the property. This covers all the activities that are needed to maintain the building including, buildings insurance, maintenance and repairs and provision of leisure facilities, concierge services or additional security.
Service charge could be anything between a few hundred pounds and thousands of pounds per year for luxury apartment blocks. Ensure you understand when and how you have to pay the service charge to the managing agents and exactly what it covers.
4. What restrictions and consents are there in the lease?
Make sure you find out any restrictions or consents that are stipulated in the lease. For instance, pets may not be allowed, or you may need permission to undertake home improvements or to run a business from your property.
5. Who are the managing agents?
Find out as much as you can about the managing agents as it is their job to make sure the property and the facilities and communal areas are kept in good repair. Try to find out their reputation either by internet searches or by asking other residents in the building.
6. Are there any major expenditures coming up?
Find out if there is any major work planned, such as a new roof. Significant costs would be shared between the leaseholders and would add a premium to your service charge.
7. How many of the leaseholders are in arrears?
If many leaseholders are in arrears the standards of service you receive may deteriorate. You should also check any arrears owed by your seller as they will become your responsibility following completion.
For more information about leasehold property for sale in and around Newington Green contact M&M Property today.