What is a Leasehold?

A leasehold is the right to occupy a space in a building for a set period, but the freeholder owns the land. A long lease (over 21 years at a low rent) grants the leaseholder the right to live in the property, while the freeholder retains ownership of the land and building.

Understanding Leaseholder Obligations

As a leaseholder, you must pay ground rent, service charges, and any taxes linked to the property. The lease also outlines responsibilities like maintaining the property and complying with local authority laws. Service charges typically cover repairs, cleaning, and insurance.

The Reserve Fund: What It Is and Why It Matters

In addition to ground rent, leaseholders may need to contribute to a reserve fund, a pool of money used for large, infrequent expenses like replacing a roof or elevator. A healthy reserve fund ensures that these costs are distributed fairly across multiple leaseholders and can prevent the need for loans or special levies.

The Role of the Management Company

In some leases, a management company is set up to handle day-to-day management between the freeholder and the leaseholders. If the management company fails to perform, the freeholder can regain control. Leaseholders have rights to take over the management of their block under the Right to Manage, with 51% of leaseholders' agreement.

The Right to Buy the Freehold

Since 1993, leaseholders can buy the freehold of their property, provided 2/3 of flats have long leases and 51% of qualifying leaseholders participate. Buying the freehold can eliminate ground rent and increase the property’s value, offering more control over management decisions.

Extending the Lease: Your Rights

If your lease is short, you have the legal right to extend it. Since 1993, changes in legislation have made it easier for leaseholders to extend leases, even if they don’t live in the flat or haven’t owned it for 2 years. Lease extensions add 90 years to the unexpired term and reduce ground rent to a peppercorn.