You can own a home in different ways. Normally, you can buy your home on a freehold or leasehold basis.
- Freehold means you own your home and the land it’s built on.
- If you are buying a home on a leasehold basis, you will own the home for a period of time. At the end of the period, the property will return to the landlord, sometimes known as the freeholder, unless you decide to renew the lease. Most flats are leasehold. But some houses are leasehold, too.
This article looks at the financial implications, particularly ground rent, of buying a leasehold home in England and Wales.
Is a leasehold purchase more expensive?
You might meet with extra costs if you buy a leasehold property, for example management company fees and additional legal fees.
There might also be regular ongoing costs. For example, you might pay a service charge to maintain the property. It can be difficult to forecast how much those charges will increase over time.
You will also need to pay ground rent, a fee to the landlord. If you don’t pay the ground rent charge, the landlord might repossess your property.
What do I need to know about ground rent?
If you are thinking about buying a leasehold flat or house, make sure you can afford the ground rent – now and in the future. Ground rent can go up over time – a little or a lot. Ground rent has been known to double every 10 years, quickly becoming unaffordable. Your lawyer should explain ground rent to you, including how quickly it will increase and by how much.
The Government is looking at changes to the law on ground rent. Meanwhile, if you are thinking of buying a leasehold property, make sure you
- can afford to pay the regular ground rent on top of your other costs
- understand how much the ground rent will increase, and how quickly
- will be able to afford the regular ground rent charges in the future.
Your lawyer should tell you about the type of property you are buying and the charges you will pay.
What if I’ve already bought a leasehold home?
If you’ve already bought a leasehold property, your lawyer should have explained what leasehold means and the ground rent charges you will pay. Contact them if they didn’t or if you have any questions. If you have any concerns about the information that was provided to you, see how to complain about your lawyer.
Also see our housing legal issues page.