Leasehold Properties in the UK and the Effects of COVID-19

Leasehold properties are among the most common type of properties you can find in the UK. Unlike other types of properties, with leasehold, you don’t physically have ownership of the land upon which that property is located. However, a person rents the said property for the stipulated period, it can range from just years to decades. They are mostly long-term contracts between a landlord and a tenant.

Differences between Leasehold and Freehold properties

These two types of properties differ in so many ways. Some of these differences are:

• A leaseholder does not hold an absolute title over a property like it is a for freeholder.
• As a leaseholder, you are expected to pay an annual ground fee to the landlord.
• Depending on the agreement or contract, in most cases a leaseholder is not subject to similar maintenance responsibilities as a leaseholder.
• The responsibility of maintenance mostly falls on freeholders unlike for leaseholders who transfer the responsibility to the landlord.
• For leaseholders, the ability to sublet the premises or have pets may be restricted.
• If a leaseholder wishes to carry out some work on the said property, the leaseholder is obliged to obtain permission from the landlord.

Approximately 4.3 million homes all over England are leaseholds, this is according to the Ministry of Housing. Furthermore, about 69% of these leasehold properties are flats whereas the remaining 31% are standalone homes. This is a quite interesting fact because seemingly that property seekers in the UK find leasehold properties more appealing.

Advantages and Disadvantages of Leasehold Properties

Among the primary reasons why leaseholds are more appealing to buyers is the fact that these properties tend to be cheaper when compared to freehold properties. However, there are a few things to consider :

• They are mostly the ideal options for individuals looking for short-term accommodation options.
• Depending on the terms of a lease, the landlord may well cover deep cleaning including fumigation in case of an outbreak like coronavirus.
• The responsibility of repairs and maintenance on things like roof replacement often falls on the landlord and not the leaseholder.
• It is possible to buy such properties in future through enfranchisements among other schemes.

Nonetheless, it is only wise to highlight some of the possible disadvantages of owning leaseholds. They may include :

• Sometimes the service charges vary depending on the landlord.
• There may be usage limitations sometimes.
• The landlord is under no obligation to grand a lease renewal upon its expiry.
• If you have a short-term lease, it may not be sufficient to represent collateral in case you wish to apply for a loan.
• Many leasehold properties don’t contain a force majeure, which means that tenants may not claim a rent reduction when unable to use the premises like in hard times like during the COVID-19 pandemic.

What to take into account when contemplating a leasehold property

The period allotted for a lease is arguably the most important variable when it comes to considering a leasehold. You can easily determine this by taking the time to speak to the owner and carefully reading the terms and conditions of the leasehold. This is a very important fact to consider especially now when the COVID-19 outbreak is putting a lot of strain on leasehold premises occupiers. It is important to know what happens in case such events occur.

In some cases, short-term leases can make it challenging to sell the property in future. If a lease has decades left to its termination are not always appealing to buyers. This is because buyers can have a challenge of having their mortgages approved. Even if you argue that the lease of property is frustrated and you cannot use the property because of COVID-19, you will have to portray that there is a form of intervening illegality. You may also have to show that there may be some failure of common purpose that makes the lease performance impossible. This may be a long shot because the threshold test to prove frustration is high.

You may also need to closely examine if there are any lease associated service charges, any financial obligations or responsibilities you may be under. If you have a limited budget, these charges can eat you up. You can always look for other options if these variables are not expressly stated.

Final Thoughts

You have to understand that most leases favour the landlord. This means even during the coronavirus pandemic, the contracts may not favour you as a tenant. It is, therefore, very important o consider all the terms of the contract. It is also important to make sure that the terms are expressly stated. Nevertheless, these are some of the important variables when examining a potential leasehold property. In case you have any questions, feel free to get in touch with us.