Leasehold Properties: What to Watch…

The skylines of our regional towns and cities have changed dramatically in recent years. The main routes into Plymouth, Exeter and Truro all have the tell-tale yellow signs letting the driver know of exciting, fresh named, new developments. The property pages bulge as tall cranes and heavy equipment pave the way for massive regeneration, often in the form of new luxury flats.

For some people, the new housing stock starts a thought process of purchasing for investment, and for others, such flats may offer a welcome opportunity to purchase more affordable property. Travelling to the North of England recently, I smiled to see the local property press advertising the relaxed and attractive quality of life, attained through the purchase of a South West flat. Whatever the reason for buying a leasehold property, here are a few reminders about what to consider

Unlike a freehold, the leasehold property is an ever reducing asset. Some leasehold interests start at 125 years long, and others are 999 years long, depending upon the original legal draftsman.

A key factor to consider is the position of your lender when deciding to purchase a leasehold property. Most lenders generally require a minimum remaining term on the lease, and each will have their own criteria. If you are buying for investment purposes, with a view to a quick turnaround, spend some time confirming that there is enough of a residual term for another buyer.

A leasehold property has a landlord, and frequently a management company, to ensure the smooth day to day running of the development. There are a number of excellent local management companies running leasehold properties, and these are often more convenient than the larger national management companies.

Is there anything I should look for in the lease?

Leases tend to follow similar structures. Many people are outfaced by leases of fifty to sixty pages, but in fact the basic information they contain may be no different to a lease of a tenth that size.

Typically, the lease will describe who the parties are (landlord, tenant, and often a management company) and the obligations of each. For a tenant, these might include paying rent and service charge. For a landlord, these might include repairing the structure of the building and insuring it.

The lease normally has a number of schedules describing the property actually being sold, the rights granted, the rights kept back for the landlord and other flats, and restrictions on what can and cannot be done by the tenant. It is well worth spending some time in reading restrictions closely- it would be no use if a pet lover purchaser is prohibited from bringing their dog to the new flat. Is there a wetsuit store or bike common area for the active South West tenant?

 
If you carry out your usual searches on the purchase, and review the lease thoroughly, there is no reason why your new flat shouldn’t be a great investment. You too can have that modern lifestyle, overlooking a sunny South West harbour that appears so endearing on a rainy Saturday morning…