Leasehold properties are a popular choice for many individuals in the UK. It allows them to own a property for a fixed period. But why would anyone buy a leasehold property when there are too many disadvantages?
If you have the same question in your mind, then you come to the right place. In this article, we discuss why some people love to buy a leasehold property.
Key Takeaways
- Leasehold properties are a popular choice for affordability and prime location.
- Understanding the leasehold property system.
- Exploring the advantages of purchasing a leasehold property.
What is a leasehold property?
When a person owns a property for a fixed period of time is called leasehold property. In the leasehold system, a legal arrangement is made between the leaseholder and the freeholder. The freeholder owned the land where the property was constructed. Usually, the leasehold properties are flats or apartments.
Why would anyone buy a leasehold property?
Property ownership comes in two from. They are freehold and leasehold. While freehold property gives you complete ownership of the property, leasehold property offers ownership for a fixed period of time. It is typically between 99 and 999 years. Despite this, there are many benefits to buying a leasehold property.
1. Affordability
The allure of leasehold properties lies in their affordability. Leasehold property is a good option in a prime location where freehold properties are too expensive. Most leasehold properties are flats and apartments. So it offers an opportunity for first-time buyers to get on the property ladder.
2. Tax benefits
One of the biggest benefits of buying a leasehold property is the potential tax savings. Because the purchase price of leasehold properties is lower than freehold properties. That means you will pay less money in the Stamp Duty Land Tax (SDLT). Also, First-time buyers may not need to pay SDLT when buying a leasehold property.
3. No insurance amount to Pay
Another benefit of leasehold property is you don’t need to buy insurance for the property. The freeholder is responsible for buying insurance for the building.
4. Access to communal facilities
Leasehold properties often come with access to communal facilities. Like gardens, gyms, and swimming pools. Getting a membership for these facilities can be expensive. But as a leaseholder, you’ll only have to pay a small fraction of the cost.
5. For Buy to Let
Buying a leasehold property can be a good option for buy-to-let investors. Because the purchase price is low and the rental income is high in a prime location. That means the return on investment can be greater than with a freehold property.
6. No More Ground Rent
Ground rent is a fee that leaseholders have to pay to the freeholder each year. However, recent changes to the law mean that ground rents on new leasehold properties are now set to zero. Now the leasehold owner didn’t need to pay ground rent to the freeholder.
7. Car parking
Leasehold properties often come with allocated parking spaces. It can be a big advantage if you live in a busy area where parking is difficult to find.
8. Shared responsibility
As a leaseholder, you are only liable for maintaining the inside of your property. Building’s exterior and communal areas maintaining responsibility come under freeholder. Communal areas include gardens, corridors, stairways and many more.
Potential pitfalls and How to avoid them
Like any other property, leasehold property also has drawbacks.
Leasehold Scandals
In recent years, there have been many leasehold scandals in the UK. Some developers include exorbitant ground rents and other hidden fees in their agreements. That causes financial hardship for homeowners. To avoid such scams, you must read the leasehold agreement. Seek legal advice from a solicitor if you don’t understand the leasehold agreement. You should also check the developer’s reputation and previous projects.
Limited Ownership Rights
A major disadvantage of a leasehold property is the limited ownership. It can range from a few decades to several centuries. This means the homeowner has limited control over the property. So, make sure to review the lease terms before purchasing a leasehold property, which may include ownership restrictions.
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Tips for a wise leasehold purchase
If you want to ensure a smart leasehold purchase, I recommend you follow these tips.
- Research the developer’s reputation and previous projects.
- Read the leasehold agreement carefully and seek legal advice, if necessary.
- Understand the terms of the lease, including any limitations on ownership rights.
- Check the service charges and other fees associated with the property.
- Consider the length of the lease and whether an extension is possible if necessary.
- Be aware of any potential future costs, such as repairs or maintenance.
Conclusion
So there you have it, the real reason why people love to buy a leasehold property. Leasehold properties offer affordability, communal facilities, and low maintenance responsibility. Leasehold properties can be an attractive option for first-time buyers. Because it can help them to get on the property ladder at an affordable price.
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FAQ
What are the advantages of buying a freehold property instead of a leasehold property?
Freehold properties are more valuable than leasehold properties. Because the buyer fully owned the property. This means the owner has complete control over the property. He can make any changes or improvements on the property without seeking permission. Additionally, freehold property owner does not need to pay service charges to anyone.
What are the associated costs of buying a leasehold property?
The associated costs of buying a leasehold property are mainly service charges and legal fees. These costs can vary depending on the lease’s length, the property’s value, and the lease’s terms.
Is it possible to extend the leasehold of a property?
Yes, it is possible to extend the leasehold of a property.
How can I find out how long is left on the leasehold of a property before I buy?
Before buying a leasehold property, it is important to check the length of the lease. It can be found in the leasehold documents and in the Land Registry.
