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| Long Leases For the practical purposes of buying a flat or house, Long Leases are not that dissimilar to buying the house/flat freehold. Under a long lease, the tenant usually pays a small annual ground rent to the landlord. Often in the case of flats, there is also a maintenance fee for the upkeep of things such as shared corridors, stairs, lifts, drainage and the roof. These maintenance charges should be properly detailed in the lease contract to avoid any future disputes as to whether the landlord or tenant pays. Long leases can be bought and sold as if they were a freehold. In reality the value of a long lease for a property is very close to the value of a freehold providing that there is a long period of time left before the lease contract expires. The value of the lease does however decrease towards the end of the life of the lease to finally being worthless when the lease expires and the property reverts back to the owner of the freehold. The value of the lease is also affected by the same general house price increases when buying freehold. It is not unknown for long leases to be bought and sold for a higher value a few years later. For the prospective tenant wanting to purchase an existing long lease, obtaining finance is more difficult than when obtaining a mortgage for a freehold. Generally speaking, if there is more than 55 years remaining on the lease before expiry, it is possible to obtain a typical 25 year mortgage. If there is less than 55 years remaining on the lease, mortgages are still available though your mortgage options will be limited: the repayment term may be shorter and the amount you can borrow may be less. In some circumstances, the leasehold property does not necessarily have to revert back to the freeholder. Numerous acts of legislation over the years have given tenants more security of tenancy - making it possible for tenants to extend the lease for up to 50 years or to remain in occupancy. The security of tenancy is governed by a very complex set of legal rules and if this issue affect you, you are strongly advised to seek expert legal advice.
Background Information on Long Leases Long leases were very popular in the 19th century, particularly in urban areas and especially in London. During this time major landowners developed their land. They wanted to retain ownership of their land while selling property on them and enhancing the value of the freehold. This was done by selling long leases. There are a few very well known major landowners in London like the Crown Estates which owns much of the land in and around Regents Park. These leases were granted for a range of expiry periods with 99 years being the most common. It is not unknown for leases to be up to 999 years in length. Long leases are still being created nowadays. Long leaseholds are normally created when a landowner wants to develop a piece of land and sell the property on the land but retain ownership of the land itself. New leases are not necessarily created between the land owner and the tenant. It is quite common for there to be a long chain of sub-letting's between the landlord and the occupying tenant. In the simplest case, a landowner has sold a lease to a house to a tenant, that tenant subsequently sub-lets the house to another tenant. Alternatively, the original tenant could have divided up the house into flats and sub-let the flats to other tenants.
Further Information Office of Deputy Prime Minister: Your right to buy your home HMSO: COMMONHOLD AND LEASEHOLD REFORM ACT 2002
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