Things to know before buying leasehold - Part 1

We continue to receive a huge number of enquiries from buyers and new owners about leasehold properties. Sadly it seems few people are available to help with the purchase process, and fewer still are willing to have a conversation about potential concerns, pitfalls and problems associated with leasehold ownership. We have therefore prepared a 7-part series to give some more information and insight for those that own, or are considering acquiring, a leasehold property.

Regulations and Restrictions, Covenants and Consents

The leasehold system is based on the historic land ownership structure in the UK and much of Europe, but it remains prevalent in England and Wales. This is largely due to the limited influence of the French Revolution in the UK, when much of Europe shifted to alternative ownership structures.

Considering these medieval roots, it is easier to understand where various rules and restrictions may have come from, and with all of the possibilities, we recommend you have a good read of the lease before signing up, as every lease is different.

Demise

First thing first, the simple way to view a lease is as a contract between a land owner and the person renting a property. One of the key aspects of that contract is to establish exactly what that property includes, and this is why the lease will Demise the property to the leaseholder (I.e. make the leaseholder responsible for the property). This is a fundamental requirement for a rental contract, to clarify exactly what space is being rented and who is responsible for it, and you can read more on this in our article here.

Under-letting

Most leases will prohibit “under-letting” or “sub-letting” a property, without consent from the Landlord. You will probably appreciate that most homeowners wouldn’t be happy for their tenants to let the house to a third party without their knowledge, and the same applies to most land and building owners too. While some view it as a way to make money, it is in fact crucial for the manager to be aware of who occupies each property in order to maintain the safety, finance, maintenance and harmonious living of all residents – not least by knowing who to contact to resolve disputes or urgent repairs. In the majority of cases, this simply means the leaseholder needs to apply for consent – or request permission – from the freeholder, and probably share details of the renter with them. This can be found in your lease, normally under Regulations or Restrictions.

Maintain and keep in good repair

For many it goes without saying, but leaseholders are typically required by the lease to look after the property they own. This is both to protect the value of the property, but also to maintain the integrity, safety and property values of all the connected properties. This is another essential obligation, the specifics of which usually comes under Tenant Covenants in the lease.

Noise, nuisance and damage

Leaseholders and neighbours, in most cases, tend to live happily and harmoniously in close proximity. However, inevitably there is a small minority that cause problems for others. This results in clauses contained within the lease for the property to restrict excessive noise at unreasonable hours, prohibit any nuisance or obstruction by inconsiderate residents and prevent damage to the communal areas and other properties – something equally applicable in medieval times as it is currently. There can be a range of similar clauses in the Regulations in the lease, and it would be worthwhile checking the lease before you buy to ensure there isn’t anything unusual you might be prevented from doing.

Carpets

Apartment buildings have many benefits, but a common downside is the close proximity to other residents and the resulting noise that can travel, particularly with certain types of construction. It is widely accepted that a simple way to minimise the noise of footfall in flats is by ensuring as much as possible is fitted with carpets and underlay – except in kitchens and bathrooms – to dampen excessive noise. While this may feel imposing in your own flat, it undoubtedly provides more benefits than negatives by reducing the number of disturbances to residents across the country. Again, we suggest checking your lease for such Regulations before installing hard floors, or ideally before purchasing the property.

Pets

A more contentious issue in recent times, many leases (especially for flats) might prohibit residents from keeping pets. Such clauses could say anything from “no pets” to specifying all sorts of dog, cat, bird, fish, reptile or other animals. In most cases the intention is less about hamsters and rabbits and more focused on disturbing and potentially inappropriate creatures like dogs, or to a lesser extent cats. Where an animal can reasonably be contained within the flat most freeholders are less concerned, but typically cats and dogs must leave the property at some stage and can cause physical damage, as well as being more likely to cause noise disturbances from within the flat. We suggest you review the lease before committing to a leasehold property if you plan to keep any sort of pet, and if necessary liaise with the building owner or manager before buying to avoid later disappointment.

Storage

Often apartment buildings and even housing estates can have large, enclosed void spaces that appear to have little to no practical use. Despite that, leases frequently prohibit the storing of items (including vehicles) anywhere that is not specifically included in the demised property. This is to prevent buildings and estates becoming dumping grounds for unwanted belongings, as well as to keep the property looking smart and ensure safe access and egress for all residents and emergency services. Generally it is sufficient to simply store all your belongings inside your property and not anywhere outside, but you can usually find more details in your lease.

Right to park

Leasehold properties typically have two distinct options when it comes to parking; either you own the space and it is noted in the Demised Property, or you are granted a right to park there and do not own it.

While the latter may seem silly, it is actually a practical way to maintain uniformity and safety. If you have a car park including 100 parking spaces and 10 of the owners choose not to repair or maintain them, or even to mark the lines and numbers, you can be left with potholes and trip hazards that other residents have to live with. By providing a right to park, and not handing over the space, the freeholder actually retains control to repair and maintain road markings and repair the road surface and any potholes. It also ensures unity by avoiding some spaces using tarmac, others adding block paving and potentially that one person filling their space with gravel or soil!

Not to invalidate insurance

A key matter handled by the freeholder or manager for apartment buildings is insurance. To ensure comprehensive and suitable cover for all residents, the freeholder usually arranges Property Owners (buildings) insurance. Despite that, the insurance is still likely to impose common terms upon the residents that could potentially invalidate the policy, and so to protect the freeholder and other owners the lease will usually prohibit leaseholders from doing anything that may jeopardise the policy. This can be anything from the obvious (don’t store fuel or explosive materials at the property) to the less obvious (turn off the water supply if the property is empty for 30+ days) and so we recommend both reviewing the lease and checking with whoever arranges the buildings insurance if you have any queries.

You should also check what other insurance may or may not be included. Usually you will still need contents and, if applicable, landlords insurance, but it is always worth checking both the lease and with the freeholder / manager before buying.

The above are only some of the questions we see cropping up on a regular basis. It is advisable to ensure you read your lease before signing on the dotted line to buy the property, as you never know what strange and unusual clauses might be included and potentially cause issues in future.