Leasehold properties have always been a bit of a taboo subject for those buying property or working within the property industry, and sometimes it comes down to a lack of knowledge about what leasehold properties entail. Like anything, weighing up the pros and cons can sometimes help. If you’re like us, it is easier to hear the bad stuff first, so let us start with the cons.
If a leasehold property has caught your attention, there are things you should consider before taking things any further. The estate agent dealing with the sale of the leasehold property should have the information required to make an informed decision. You’ll need to know how long is left on the lease. Anything between 99 years and 999 years is generally a good start. However, anything with a lease of 80 years or less can be problematic. Mortgage lenders are less likely to lend on the property, and even if they do, you may struggle to sell it in the future, as you may be required to extend the lease which may be costly and lengthy. Other ‘cons’ include;
- When buying a leasehold property, you pay service charges and ground rent to the freeholder, potentially increasing over time.
- If you plan on making changes to the property, you would need permission from the freeholder, which may not be easy to obtain.
- You may not be allowed to have pets or run a business from home. You would need permission from the freeholder for this.
- Conveyancing fees may be more expensive when buying a leasehold.
We know what you’re thinking. Is there anything good about leasehold properties? The answer is yes! See below for the pros.
- Leasehold properties are often cheaper and a first step on the property ladder.
- If you’re new to buy-to-lets, a leasehold flat can be a great place to start, as they are cheaper to buy with good rental yields.
- The freeholder pays the building’s insurance.
- The freeholder is responsible for any maintenance required in the building.
As you can see, the pros and the cons are fairly equal, just like if you were weighing up whether to buy a new build or an older property. As long as you have everything you need to make an informed decision and your mortgage lender is comfortable lending, there is no reason why you shouldn’t offer on a property just because it is leasehold. Knowledge is power!