If you own or are thinking of buying a flat or leasehold house, there are a number of rights and responsibilities to being a leaseholder you need to be aware of:
- Leaseholders DO NOT actually own their property, just permission, subject to conditions, to live there for the time left on the lease. In other words, leaseholders buy a time period, not the property itself.
- The property owner is known as the freeholder or landlord, with their own tasks and responsibilities.
- Leaseholders pay the freeholder for the upkeep of the building.
- The less time left on the lease, the less it’s worth because it has to be returned (free of charge) at the end of the term to the freeholder, who is then able to create another lease to sell.
- As time passes, maintenance of the building and services may tend to cost more as items such as roofing comes to the end of their life. The leaseholder (you) will need to pay for this maintenance to be undertaken but it will be the freeholder who supplies the works orders.
- Lawyers sometimes refer to leasehold as a ‘legal fiction’. By this, they mean that it is possible to separate ‘ownership’ of a building and ownership of the land on which it is built but that physically, this is impossible. On paper however, a lease and a freehold can actually be sold to different people. The freeholder buys the land and the leaseholder buys a lease on part of the building erected on it. As it is the freeholder’s building, they have the power to engage experts, decide on contractors, fix administration fees, engage a managing agent and charge the costs of doing so back to the leaseholder.
- The system is extraordinary and the UK is only one of a few countries in the world that uses it. However, once it is acknowledged that the building does NOT actually belong to the leaseholder and it is only the lease that belongs to the leaseholder – hence the name “leaseholder” – the legal position is established.
As a leaseholder, you are entitled to:
- An annual statement of accounts
- The proposed budgets set by the agent on behalf of the freeholder for the coming year
- Use the services for the Leasehold Valuation Tribunal (LVT)
- Extend your lease
- Create a right to manage (RTM) company under the right conditions