There are many good reasons for buying a leasehold property and it is not all bad. In this article we go over the reasons so hopefully by the end of the article you are better able to make a decision.
Sometimes, it is not worth buying a leasehold though and there are certainly disadvantages. So it is important to weigh things up carefully.
Practical reasons why someone would buy a leasehold property
When it comes to buying a leasehold property, there are some reasons that make sense logically as to why you should buy a leasehold and then there are others that are more financial.
Below are some of the reasons why a leasehold is a popular choice for some people based on it making sense.
There are incentives for first time buyers
First time buyers are better able to buy a leasehold because leaseholds are commonly new build properties. Why this is important is that new builds are known as being back by the help to buy scheme.
This means buyers can use the scheme to qualify for a government loan which allows them to be able to purchase a property with just 5% down, making it highly affordable for first time buyers who may not necessarily have a large deposit.
On top of this, because developers have this in mind, they often make the features of a leasehold more appealing for someone who is buying for the first time
For instance, they may make some features of the house customisable and ensure that the size of a house is perfect for someone who is single or buying as a couple which is what a lot of first time buyers are.
The leases can last for a long time
Another advantage of buying a leasehold is that the leaseholds are so long that they are effectively the same as buying a house in terms of not having to worry about extending the length of the lease.
For example, if there is a leasehold property that has a length of 999 years, this is known as a virtual freehold which means the wonder of the leasehold is essentially never going to have to worry about expiration or the effects of expiration.
Because you are able to live in a city
There is a good chance that the owner of a leasehold will end up living in a major city in the UK. This is because most leaseholds are in the major cities of the UK such as London, Liverpool, Manchester, Birmingham and Edinburgh.
As a result, owners of leasehold properties can benefit from the amenities that the city brings such as good job prospects, lots of entertainment and being able to be around the best opportunities the country provides.
So, while there are the disadvantages of leasehold property, there are advantages too and if a leasehold is the only property available to someone looking to buy and it isn’t ideal, the perks of living in a big city may just sway their decision.
Building maintenance doesn’t need to be dealt with
Some people like the idea of dealing with the property maintenance in a building they own. For instance, adding in furniture to the right places and dealing with any issues in the property that goes wrong themself.
But this isn’t for everyone and those interested in leasehold property will be able to benefit from this feature. They will simply have to call the freeholder or someone working on behalf of them to deal with issues like this.
However, the exact responsibilities of the freeholder and the leaseholder will be determined in the agreement that has been signed as some leasehold agreements state that leaseholders still have to take care of things like this.
However, a lot of the time, the service charges that are given to a leaseholder cover the costs of this and are able to cover the expense of hiring a building manager who conducts repairs, maintenance and cleaning for those staying in the building.
No gardening maintenance required
In the same way as there being no need for there to be maintenance in the building of the property, there may not be the need to do any gardening work either.
Leasehold properties commonly have a gardener or someone who does activities like mowing the lawn and trimming hedges for the people living in a block of flats.
So if you want to benefit from an outdoor space some of the time but don’t want to deal with the headache that comes with it, this is perfect. It is important to understand that the reasons why someone would buy a leasehold is often to save time.
This time saving aspect as the maintenance of a building is outsourced can be put down to the fact that the leaseholders are often paying service charges that are priced according to the level of service that is available to them.
Monetary reasons for why you would buy a leasehold property
Practically, there are a bunch of reasons for buying a leasehold but it is vital to also remember there are monetary reasons and this is what drives the decision making of most buyers anyway as the decision to buy a property is often so big.
Leasehold properties tend to be cheaper
Leasehold property is in fact cheaper than freehold property because you are essentially only purchasing the right to live in the property for a set period of time, typically 99 or 125 years.
This means you do not own the land on which the property is built, but rather lease it from the freeholder (also known as the landlord) for the duration of the lease.
The value of a leasehold property is therefore determined by the length of the lease remaining so sometimes, when there is a shorter amount of time left on the leasehold, the property is cheaper to buy.
The value of the property decreases as the lease lengthens because the leaseholder has less time to use the property before the lease expires and the property reverts to the freeholder so this is something that will naturally want to be avoided by buyers.
However, this is not the only reason why leaseholds are less expensive as leasehold properties can also be less expensive because they often have additional costs associated with them, such as ground rent, service charges, and administration fees.
These costs vary depending on the lease terms and can significantly increase the overall cost of owning a leasehold property.