Buying a Leasehold Property

31 July, 2025 5 minutes reading time

Buying a home is a significant life event, often accompanied by excitement and anticipation. For many, a leasehold property provides an attractive and sometimes more affordable way to enter the property market. However, buying a leasehold is fundamentally different from purchasing a freehold. Recognising these differences early is vital for a smooth and informed journey.

When you buy a leasehold property, you are not buying the land beneath the building. Instead, you gain the right to occupy that property for a certain period – the “lease term.” The land itself remains under the ownership of the freeholder, effectively your landlord, for the length of the lease. This unique relationship raises several important considerations that you need to understand.

The Lease Agreement

This is arguably the most important document in a leasehold purchase. The lease agreement is a legally binding contract that clearly states the rights and responsibilities of both you (the leaseholder) and the freeholder. It covers a wide range of details, from how and when you pay ground rent and service charges, to permitted alterations you can make to your property, and your obligations regarding maintenance and repairs. Your solicitor will thoroughly review this document, ensuring you fully understand every clause and its long-term implications. Understanding this agreement is crucial, as it governs much of your ownership experience.

Annual Ground Rent

Ground rent is an annual payment you make to the freeholder for the right to occupy their land. The amount of ground rent can vary significantly between leases, and importantly, the lease will specify how and when it might increase. Some leases have fixed ground rents, while others include review clauses that could cause the amount to rise, sometimes quite substantially, over time. Your lawyer will highlight any potentially onerous ground rent clauses, such as those that double every few years, as these can impact the property’s future resale value.

Service Charges

These charges cover the costs related to maintaining and managing the communal areas of the building and estate. This generally includes tasks such as maintaining shared hallways, stairwells, roofs, and gardens, as well as essential services like building insurance, cleaning, and sometimes even a concierge service. The freeholder or a designated management company usually collects service charges. They can vary each year based on actual costs, and you may also need to contribute to a “reserve fund” for future major works, such as roof replacements or external redecoration.

The All-Important Lease Length

The remaining lease length is a crucial factor that significantly influences the property’s value and your chances of securing mortgage finance. Lenders are often cautious about providing mortgages on properties with very short leases, typically those with less than 80 years remaining. As the lease approaches expiry, the cost to extend it generally increases, and the property’s market value usually decreases. Extending a lease can be a complex, lengthy, and costly process that involves negotiations with the freeholder. It is advisable to consider the current lease length carefully when viewing properties and to account for potential extension costs if the lease is nearing the critical 80-year threshold.

Management Company

In many leasehold developments, a separate management company is appointed to oversee the day-to-day running of the building. This company acts on behalf of the freeholder, collecting service charges, organising maintenance, and ensuring compliance with the lease terms. It’s crucial to know who the management company is, its track record, and how effectively it manages the building. Your legal team will make enquiries with them, requesting service charge accounts, details of upcoming works, and any disputes within the building.

The Role of Your Legal Professional

When you instruct a lawyer for a leasehold purchase, their role goes beyond just handling paperwork; it’s about protecting your interests. They conduct a thorough investigation into all aspects of the leasehold agreement. This careful process involves:

• Detailed Lease Review: Scrutinising every clause of the lease agreement, identifying any potentially onerous terms or hidden liabilities that could affect you in the future.

• Financial Due Diligence: Confirm any outstanding ground rent or service charge arrears that the current owner might owe, to ensure you do not inherit unexpected debts.

• Freeholder and Management Company Enquiries: Making essential enquiries of the freeholder or management company. This includes requesting service charge accounts from previous years, details of planned major works, any known disputes among residents, and information about the building’s insurance.

• Advising on Lease Length and Implications: Clearly outlining the consequences of the current lease duration, including any potential issues with securing a mortgage or resale in the future, and providing guidance on the process and costs involved in a lease extension if necessary.

• Title Investigations: Confirming the property’s title is clear and free from undisclosed encumbrances or restrictions.

Our Advice

While this blog provides a general overview, it is important to remember that each leasehold property transaction is unique. Understanding these key aspects enables you to make well-informed decisions.

If you’re considering purchasing a leasehold property and require specialised legal advice or further information about any element of conveyancing, please don’t hesitate to contact us. Our team is here to help.

Please note that all views, comments or opinions expressed are for information only and do not constitute and should not be interpreted as being comprehensive or as giving legal advice. No one should seek to rely or act upon, or refrain from acting upon, the views, comments or opinions expressed herein without first obtaining specialist, professional or independent advice. While every effort has been made to ensure accuracy, Curtis Parkinson cannot be held liable for any errors, omissions or inaccuracies.

Partnerships & Accreditations