Buying a Freehold property

What is a freehold?

The freeholder of a property owns it outright, including the land it’s built on.

If you buy a freehold, you’re responsible for maintaining and insuring your property and land, so you’ll need to budget for these costs.

Most houses are freehold, but some might be leasehold – usually through shared-ownership schemes.

Benefits of having a freehold

You don’t have to:

• Worry about the lease running out, as you own the property outright.
• Deal with the freeholder (often known as the landlord).
• Pay ground rent, services charges or any other landlord charges

Buying a Leasehold property

What is a leasehold?

You own the property, but not the land, for the length of the lease (a written agreement) with the owner of the land (“Landlord”)

When the lease ends, ownership returns to the owner of the land, unless you can extend the length of the lease (“the lease term”)

Most flats and maisonettes are owned leasehold, apart from in Scotland where there are very few leasehold properties.

When you buy a leasehold property, you’ll take over the lease from the previous owner and will be obligated to observe and perform all of the conditions on the part of the tenant in the lease.

So before making an offer you’ll need to consider:

• How many years are left on the lease?
• How you’ll budget for any ground rent, service charges and related costs payable under the terms of the lease?
• How the length of the lease might affect getting a mortgage and the property resale value?

How important is the length of a lease?

If the lease term is for less than 80 years, you might struggle to get a mortgage.

Lenders will normally need it to run for 25-30 years beyond the end of your mortgage.

This means if you want to get a 25-year mortgage the lease needs to have at least 50-55 years before it ends.

As a result, it can also be difficult to sell a property if the lease is for less than 80 years.

If you eventually want to sell a leasehold property you’re buying, think about how many years will be left on the lease.

Extending the lease:

• You can ask the landlord to extend the lease at any time.
• And once you’ve owned your home for two years, you have the right to extend your lease by 90 years, provided you are a qualifying tenant.
• Usually, you will be a qualifying tenant if your original lease was for more than 21 years.
• The freeholder will charge for extending the lease.
• The cost will depend on the property.
• If you and the freeholder can’t agree on the cost of extending the lease, you can appeal to the Leasehold Valuation Tribunal.
• You might need to hire a solicitor and surveyor, which will increase the cost.

Find out more about extending the lease or buying the freehold of a house or flat on GOV.UK. and the costs of extending a lease on https://www.lease-advice.org/topics/?topic=lease-extension 

Additional expenses on purchase of leasehold property

We will update you on the specific fees upon receipt and review of the lease from the seller's solicitors but they could include:

• Notice of Transfer fee – This fee if chargeable is set out in the lease. Often the fee is between £50 and £75 plus VAT.
• Notice of Charge fee (if the property is to be mortgaged) – This fee is set out in the lease. Often the fee is between £50 and £75 plus VAT.
• Deed of Covenant fee – This fee is provided by the management company for the property and can be difficult to estimate. Often it is between £150 and £250 plus VAT
• Certificate of Compliance fee - To be confirmed upon receipt of the lease, as can range between £50 and £75 plus VAT.

You should also be aware that ground rent and service charge are likely to apply throughout your ownership of the property. We will confirm the ground rent and the anticipated service charge as soon as this we receive this information.

Conveyancing charges And disbursements on purchase of registered land or property

Our fees cover all of the work required to complete the purchase of your new home, including dealing with registration at the Land Registry and dealing with the payment of Stamp Duty Land Tax (Stamp Duty) if the property is in England, or Land Transaction Tax (Land Tax) if the property you wish to buy is in Wales.

“Disbursements” are costs related to your matter that are payable to third parties, such as Land Registry fees. We handle the payment of the disbursements on your behalf to ensure a smoother process.

Registered or Unregistered?

The vast majority of properties in the UK are registered at HM Land Registry which provides reliable evidence of the Sellers ownership with relevant documents and plans readily available for inspection. An 'unregistered' property is quite simply one that has not been registered with the Land Registry yet. Historically documents/deeds of ownership would have been required to be produced whenever there was a “dealing” with the property, for example, a change of ownership.

If the Title to the property you are to buy has not been registered at the Land Registry, then this may prove to be a more complicated process depending on what documentation you produce to evidence ownership, and we would need to consider the likely fees on a case-by-case basis.

 Our fees assume that:

 

1. this is a standard transaction and that no unforeseen matters arise including for example (but not limited to) a defect in title which requires remedying prior to completion or the preparation of additional documents ancillary to the main transaction
2. this is the assignment of an existing lease and is not the grant of a new lease
3. the transaction is concluded in a timely manner and no unforeseen complication arise
4. all parties to the transaction are co-operative and there is no unreasonable delay from third parties providing documentation
5. no indemnity policies are required. Additional disbursements may apply if indemnity policies are required.

Some fees and disbursements vary from property to property and can on occasion be significantly more than the ranges given above. We can give you an accurate figure once we have sight of your specific documents.

Stamp Duty or Land Tax (on purchase)

This depends on the purchase price of your property. You can calculate the amount you will need to pay by using HMRC's website . HMRC stamp taxes calculator UK:

https://www.tax.service.gov.uk/calculate-stamp-duty-land-tax/#/intro

How long will my house purchase take?

How long it will take from your offer being accepted until you can move into your house will depend on a number of factors. The average process takes between 8-10 weeks.

It can be quicker or slower, depending on the parties in the chain. For example, if you are a first-time buyer, purchasing a new build property with a mortgage in principle, it could take 8 weeks. However, if you are buying a leasehold property that requires an extension of the lease, this can take significantly longer, between 2 and 6 months. In such a situation additional charge would apply.

Stages of the process

The precise stages involved in the purchase of a residential property vary according to the circumstances. However, below we have suggested some key stages that you may wish to include:

• Take your instructions and give you initial advice
• Check finances are in place to fund purchase and contact lender's solicitors if needed
• Receive and advise on contract documents
• Carry out searches
• Obtain further planning documentation if required
• Make any necessary enquiries of seller's solicitor
• Give you advice on all documents and information received
• Go through conditions of mortgage offer with you
• Send final contract to you for signature
• Agree completion date (date from which you own the property)
• Exchange contracts and notify you that this has happened
• Arrange for all monies needed to be received from lender and you
• Complete purchase
• Deal with payment of Stamp Duty/Land Tax
• Deal with application for registration at Land Registry