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Leasehold – When is a long lease a problem?

Long leasehold properties have recently been on the receiving end of negative publicity in the wake of the leasehold house scandal. The Leasehold Knowledge Partnership Campaign believes that there are 100,000 families trapped in houses that are virtually unsellable because of rising ground rents.

In December 2018, 21,044 leasehold properties were sold [1] and submitted for registration at Land Registry which was 24% of all properties sold that month so, despite the recent focus, leasehold property is common, and likely to stay for the foreseeable future.

 Holding a leasehold interest is not, in itself, a problem: Flats, in particular, are usually leasehold to enable covenants imposed on ownership to be enforceable against subsequent owners. Restrictive covenants governing noise, nuisance and upkeep of shared facilities are essential in a building containing flats and each flat will be bound by the same covenants.  Problems arise with leasehold when there is no compelling reason for a leasehold structure and where the ground rent payable has moved away from a nominal rent to a level which is or will become unsustainable – such as a ground rent of thousands of pounds annually.

Even where leasehold ownership is desirable, the disadvantage is that a lease is a decreasing asset and will have to be handed back to the landlord at the end of the term, remains. Once a lease has less than 70 years left, many high street lenders will not lend on the property, restricting prospective purchasers to those who are not dependant on mortgage finance.

 A lease can be extended by paying a premium to the landlord. Flat owners who have owned the property for more than 2 years have a statutory right to a lease extension so the landlord cannot refuse to grant it. The lease will be extended by 90 years and the ground rent reduced to zero (a peppercorn) so extending the lease can be a mechanism for getting rid of an escalating ground rent although unfortunately for those properties worst affected by very high and frequently doubling ground rents, the cost of extending may be prohibitive.

If your property is leasehold and you want advice on the terms of your existing lease or options for extending your lease,  or you are considering buying a leasehold property and want to know if the lease is going to cause issues in the future,  then please don’t hesitate to contact SLC Solicitors. We are a law firm for clients with high expectations. We provide specialist services in leasehold law nationwide and combine creativity and flexibility with our unrivalled expertise to deliver results.

Source: HM Land Registry Price Paid Data

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