Taking the next step and 'moving out' is a significant moment in your life.
Getting your first step on the property ladder is an exciting time for anyone. However, it’s not a decision that should be rushed and you will need to take time to understand what you want from your first home. Whether that’s buying a home which needs renovation or moving into a new-build property, making the right decision for your needs is crucial for a happy home. We’ve drawn on our 20 years of Property Management to assist you with key information when purchasing your first leasehold property.
When purchasing your first property there are two main types of ownership: freehold & leasehold. When you purchase a freehold property, this means you own the property outright including the land that it’s built on. When purchasing a leasehold property this means you own the property for a fixed term but not the land upon which it stands. The land it stands on generally remains with the freeholder or landlord, who along with a solicitor would write the terms of whats known as a lease. A lease will outline to you what you can do and cannot do to the property. To live in a leasehold property you must agree and sign to the terms of the lease via the landlord. In most instances across England & Wales most houses are sold on a freehold basis and most flats through leasehold.
Before purchasing your first leasehold property it’s important to understand what a lease is and understand the covenants of your lease before you go through with the final purchase, taking time during this process will allow you to understand exactly what you can expect throughout the terms of your lease. One of the most common disputes between landlords and leaseholders is around service charge payments. Landlords charge service charges to recover the costs of providing services to a building including; general management, maintaining communal areas, insuring and repairing any aspects of the property which may need altering including internal redecorations. Understanding what your service charge covers is a key aspect when purchasing your first property as you need to know what you are paying into in order to maximise your living potential in a leasehold environment. The lease will contain details of exactly what the landlord can and cannot charge for and the proportion of the charge you will have to contribute to. Knowing how often your service charge is paid should be one of your main priorities when you first move in. Amid excitement at being on the property ladder where finances are often already stretched, avoiding late payment fees is important to make sure your finances can go that little bit further. Late payment fees can quickly become an issue and if left unpaid can be taken to court.
A proportion of your service charge payments will also contribute to what is known as the sinking fund which is set up to cover the completion of major works or if needed in an emergency e.g. carrying out structural repairs to your building or replacing a lift. Collecting a sinking fund means that if major works do need to be carried out then the spread of the cost has been evenly distributed across those living in the development rather than just demanding one off payments from current residents. However, the sinking fund does not always cover the entirety of the cost of the major works and if this is the case you as the leaseholder will likely have to make up the difference through an increase in service charge. When you are occupying your leaseholder home for the first time you will need to have a full understanding of what is covered in your lease before you purchase your property, including what you can do and what is considered as a breach of lease. This will include things like; owning pets, smoking, sub-letting, what alterations you can make to aspects of your property. As a lease is a two-way contract breaches of lease can involve legal action being taken.
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