Disadvantages of Buying a Leasehold Property Explained
If you’re buying a leasehold property, it’s important you know exactly what it is you’re signing up for.
Unfortunately, many people get caught out by issues with their lease term or ground rent that can have a damaging impact on the value of their property. And quite often, these problems could have been avoided if leaseholders had been correctly advised by their Conveyancer.
If you’ve suffered financial loss because of an issue with a short lease term or rising ground rent clause, you might be eligible for compensation. Get in touch with our Professional Negligence Solicitors for a free initial chat.
What is a Leasehold Property?
When you buy a leasehold property, you are essentially a tenant who will own the property for a set lease term. You’ll own the property for as long as the lease is valid, but when it runs out, ownership will automatically return to the freeholder (landlord).
Leasehold properties can be a great option for some, as they’re generally less expensive and can give you more flexibility if you’re only looking to stay somewhere for a short amount of time. It can also be much easier to resolve issues such as noisy neighbours and property maintenance, as your landlord will usually be responsible for looking after any communal areas.
Before Buying a Leasehold Property
There are a few things you should check before buying a leasehold property:
- Is the lease term below or close to 80 years?
- Does it come with a rising ground rent clause?
Let’s look at some of the possible disadvantages of these.
Disadvantages of a Short Lease Term
Once the lease on a property falls below 80 years, the value of your property can decrease. This can then make it harder for you to get a mortgage and sell the property in the future. So you should always check the current lease term on a leasehold property before you commit to buying it.
To prevent the risk of this happening, you should hold off going through with the sale until the freeholder (landlord) agrees to extend the lease first. Ideally, your Conveyancer should explain the risks of a short lease term to you and advise you accordingly.
If you’ve fallen trap to a short lease term, and you were never advised about this by your Conveyancer, then get in touch today to see if you’ve got grounds for a claim.
Disadvantages of a Rising Ground Rent Clause
Another thing you need to be aware of is whether or not the property comes with a rising ground rent clause.
Ground rent needs to be paid to the freeholder annually, and this usually won’t cost you too much if it’s a fixed amount. But if there’s a clause written into the contract that causes the ground rent to increase or even double over time, then this can have serious repercussions for you later down the line.
For example, if you purchase a leasehold property with a ground rent of £250 in the first year, and there’s a ground rent clause that causes it to double every 10 years, then by year 50, the rent will be £8,000 a year.
And if you then decide to move, you’ll probably struggle to sell your property as potential house buyers will be put off by the ground rent clause.
Unfortunately many people have been caught out by an increasing ground rent clause because of the negligence of their Conveyancer.
Here are some examples of clients we’ve helped with a ground rent claim:
£9,000 Compensation for Rising Ground Rent
A couple were compensated £9,000 in compensation after they bought a leasehold house with an annual ground rent that increased by 40% every 10 years.Read the Full Case Study
£13,000 Compensation for Rising Ground Rent
We helped a man secure £13,000 after a rising ground rent clause affected the value of his property and his ability to sell it.Read the Full Case Study
Some other potential disadvantages of buying a leasehold property include:
- Less flexibility with house renovations – if you’re wanting to make significant changes to your property, you’ll probably need to get permission from your landlord
- More restrictions e.g. not being allowed pets
- Extra costs to pay such as maintenance fees and annual service charges
If you’ve been affected by a short lease term or onerous ground rent clause, and your Conveyancer never explained the risks to you, get in touch with our Professional Negligence Solicitors for free, no-obligation advice.
If you’ve been caught out by your leasehold property, we understand that you’re probably feeling frustrated and let down, so we’ll work hard to get the fair outcome and compensation that you deserve.
For free legal advice call our Professional Negligence Solicitors
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