If you’re buying leasehold apartment, the estate agent you deal with should share any information they have regarding the property and the lease. This could include however, it is not only:
The ‘term of lease’
The “demised premises”
Are any modifications or made to the house?
What is the amount of the ground rent?
Does the rent for ground change?
What are the Service cost?
Do you have a’sinking fund or a reserve fund is there one?
Is there any major project being planned for the structure?
Are there any “administration charges are there any administration charges?
There are any rules on the way you can live and use the property?
The lease’s term
If you’re planning to buy a leasehold property it is crucial to be aware of the length of time remaining in the lease. The remaining years remaining on the lease are called the lease’s ‘term which is important because a shorter lease could affect its value and raise the cost of extension. If the property is on an unsatisfactory lease, it could also be difficult to obtain a mortgage because the property will be less appealing for mortgage companies.
Leasehold property decreases when the duration of the lease becomes shorter. If the lease period ends, you will have rights in the event that you reside in the house. If you plan on living in the home, you’ll likely be required to pay rent on a market basis.
If you’re considering buying leasing a leasehold apartment that has a lease term under 99 years then you must consider the possibility of the possibility of extending the lease. It is crucial if the lease has under 80 years left because it’s more costly to extend. If the duration of the lease is less than eighteen years old, the expense to extend it rises since the ‘marriage value’ will be due. The marriage value is the rise that is incurred by the flat that results from the renewal of the lease.
The law allows you to apply to extend your lease once you’ve been the owner of the property for a period of two years. In order to exercise this option, you must follow a legal procedure is required that requires you to send an express notice to your landlord. If you’re buying a home, and the lease is due to be extended in any way, it is feasible that the buyer (if they’ve held the lease for at least two years) to initiate the formal process of extending your lease and then carry it on once you have bought the leasehold property. This means you do not be required to wait for 2 months to renew the lease. This must be completed in conjunction with purchasing the house goes through.
If you find yourself in this circumstance, it’s advised to seek out professional assistance by a skilled lawyer.
What do you mean by “demised premises”?
If you’re planning to purchase a leasehold apartment it is essential to know the contents of the “demised premises”. What is the “demised premises” are the premises that are included in the leaseholder’s title under the terms of the lease. It is usually specified in the lease and typically includes an interior portion and exterior of the floor (including the surfaces of the internal walls) and the ceiling above and below the joists. It is not typically inclusive of the exterior walls, the structural walls or the roof, though every lease must be reviewed for specifics. For instance loft spaces can sometimes be included in property being leased, but it is not always.
A building’s areas that do not belong to the leaseholder’s demised property are usually part of the tenant’s kept property which forms part of the freehold. Examples include the exterior wall and the structural part of the structure, as well as the roof.
If you want to make alterations or enhancements in the lease, it must be carefully scrutinized to determine what’s included in the demolished property. For instance, if you plan to build an extension to your property, and the work involves cutting into an exterior wall which belongs to the landlord the landlord could deny the modifications or demand for a fee as the condition of giving permission to you.
For advice around leases, get in touch with the experts at Leasehold Services.
Have there been any modifications or made to the house?
If you’re planning to purchase a leasehold apartment it is essential to go through the lease to find out whether any changes were done to the building. In the event that the prior owner altered the property without getting consent you could be required to cover the cost of getting retrospective permission by the tenant.
To determine if the property is in need of a change, look over the original lease’s plans and then compare it with the plan that the property is. If you offer for the property that is accepted by the seller, their solicitor will send you the contract package, which includes an ‘Information Form for Property which is filled out by the seller, and the ‘Leasehold Property Inquiries form which is filled out by the owner or their managing agent.
These two forms must disclose any building work on the property. Additionally, the managing agent or landlord must inform if approval was given for modifications or additions for the house. It is also important to confirm whether building regulations approval was granted for any modifications. If no approval was received, your solicitor needs to solicit an indemnity insurance plan that is provided by the seller. Indemnity insurance protects you (and the subsequent owner) against civil action in the event that the local authority is able to take enforcement actions.
What is the cost of ground rent?
Like all charges, you must determine what the cost of ground rent will cost before you make a decision to purchase leasehold property. If you have to pay the ground rent the amount will be specified in the lease, along by the date when the rent is due to be paid.
Does the rent for ground change?
The lease could initially require users to contribute a predetermined sum of ground rental. Ground rent is the sum that leaseholders pay annually towards their tenant. It could be a modest amount (PS10) or even a significant amount (PS200) annually. In some instances the ground rent may rise significantly over short durations. The conveyancer or lawyer of your choice will be able to advise you in this scenario, however, it’s recommended to inquire in advance what your ground rental is and and if it is changing (and when) and also the implications of any increase.
If the rent for the ground does change, the reason for the change should be laid out in the lease for instance, as percentages, or as a using an inflation-measuring index such as RPI or CPI.
In the majority of leasehold properties, the ground rent is adjusted in line in accordance with Retail Price Index (RPI). In certain leases the ground rent will increase with time, without regard to inflation.
Certain lenders will only provide mortgages to properties that have an index-linked ground rental or comparable. Some lenders may not lend a loan to leasehold properties with a high ground rent in order to avoid the issue of non-payment later on and to guarantee future possibility of selling the property.
What is the cost of the service costs?
Service charges are usually paid by leaseholders as part of the costs of managing and maintaining the building. Service charges permit the landlord to pay for the cost of offering these services in the lease.
Your obligations in relation to service charges as well as the landlord’s obligations in managing and maintaining the building must be laid within the lease. The charges typically cover the costs of services such repair and general general, building insurance, and, in the event that they are available central heating elevators, porters and lighting, as well as cleaning of shared areas, and the list goes on. These charges could also cover the costs for management services offered by the landlord, or an expert managing agent, as well as contributions to the reserve fund.
Is there a’sinking’ or a reserve fund?
For cost of service as part of the service charges, you could be asked to contribute to the ‘reserve fund’ or a ‘sinking fund’. The aim this fund serves is accumulate funds to pay for costly and irregular work, such as painting the outside of homes, making repairs to the structure or replacement of the lift.
Leases may specify how much is required to be deposited into the reserve fund every year, but most of the time they don’t, and it’s up to the landlords to decide the amount of contributions. If the lease does not make provision for any reserve fund, you might be able to locate the details on the summary of the leasehold information provided by the buyer (LPE2 Form).
There are two main reasons to keep a reserve account. The one is to ensure that every tenant contributes to the expense of major repairs and not only those who reside in the building at the time that work is being completed. The second goal is to make sure that the monthly costs, to avoid large one-time costs, and also to assist tenants budget for these expenses.
Are there any major projects planned for the structure?
If you’re looking to purchase a leasehold apartment it is important to find out if there are major construction projects being planned for the building, and what the work will be. Also, ask whether the work already has the financing set up (e.g. or through an emergency fund) or if you’ll be responsible for the costs associated with the construction in the near future.
It is essential to confirm this information, since the cost of service for large-scale projects could be substantial. Your solicitor must inquire with the freeholder or managing agent to see if they have already established an account to fund the future construction of major projects. Sinking funds can be useful because they make sure that unexpected major work or large costs are paid for.
Are there any “administration fees are there any administration charges?
The term “administration charge” refers to Administration charge is any amount the landlord requires from the leaseholder to grant approvals to the lease for the supply of documents or information, the purpose of resolving a breach from the renter to cover the ground rent or service charges or as a result of the breach of the lease.
If you’re considering a leasehold property, it’s essential to determine whether there are administrative charges and what they cover and the amount. If you have concerns regarding the administrative charges for the property you’re thinking of purchasing, your lawyer or conveyancer will be able review the lease and give you advice.
There are any rules on the way you use and live in the property?
If you’re considering buying a leasehold apartment It is crucial to consult your solicitor or conveyancer to thoroughly review the lease and identify whether there are any “covenants’. When you become a leaseholder, both you along with the landlord have to abide by the covenants.
A covenant is an obligation due by one party to the other. “Positive Covenants” are the obligations to perform a task like contributing to the sinking fund. “Restrictive covenants” basically prohibit certain activities from taking place for example, keeping pets, or making use of the property for business reasons.
If you’re considering buying a leasehold property be sure to consider whether any clauses could not be appealing to a potential buyer when you are ready to sell it. For instance, a clause against extensions or modifications could dissuade prospective buyers.
If you are worried about any covenants contained in the lease you need to speak to your conveyancer or solicitor for guidance.
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