Buying a leasehold flat: what to check before you commit

Leasehold, freehold and share of freehold

With a freehold, you own the building and the land it stands on, with no end date. Most houses are freehold. With a leasehold, you own your flat for the number of years the lease sets, and the lease also sets your obligations: paying the ground rent and your share of the running costs, keeping to its rules, and asking the freeholder’s consent for some things.

Share of freehold means the flat owners together own the freehold of their building, usually through a company, and each still holds a lease of their own flat. It gives you a say in how the building is run, but the lease still matters: its length, its rules and the charges are checked in the same way.

How many years are left on the lease

A lease runs down every year. Leases are often granted for 99, 125 or 999 years, so the question is not how long it was, but how long is left today. The title register and the lease show it, and we confirm it in our report.

A short lease matters for two reasons. Lenders set their own minimum number of years left, and some also look at how many will be left when your mortgage ends, so a short lease can limit who will lend on it. It also affects value: a shorter lease is usually worth less and harder to sell, and it costs more to extend as it gets shorter.

When to raise a lease extension before you buy

If the lease is getting short, raise it before you agree the final price, not after. Under the current rules, once the lease is down to 80 years or less, the premium for a statutory extension includes “marriage value”, which usually makes it noticeably more expensive. The Leasehold and Freehold Reform Act 2024 will remove marriage value once that part of it is in force; it is not in force yet.

• Ask the seller to extend the lease before completion.
• Ask the seller to start the statutory extension by serving the formal notice (a section 42 notice), and to assign the benefit of it to you at completion, at the same time as the flat itself.
• Or extend it yourself after you buy: you no longer need to have owned the flat for two years first, so you can start once you are registered as the owner.
• Negotiate the price to reflect what the extension will cost you, once you have a valuation.
• Check with your lender first: it may insist on a longer lease before it lends.

• Extending the lease on a flat

Ground rent, service charge and major works

Ground rent is a yearly sum you pay the freeholder under the lease. Read how it can rise, not just what it is today: some leases fix it, while others increase it at set dates, double it periodically or link it to inflation. A ground rent that rises steeply can make a flat harder to mortgage and to sell. Most new long residential leases granted since mid-2022 can charge no more than a nominal “peppercorn” ground rent, but that rule does not reduce ground rent under existing leases.

The service charge is your share of the cost of insuring, running and repairing the building, and it can go up and down from year to year. Before you commit, look for:

• The service charge accounts for recent years and the current budget.
• Whether there is a reserve fund (sinking fund) for future repairs, and how much is in it.
• Any major works planned or already demanded, such as a new roof, lift or windows. For larger works the landlord (or the management company) usually has to consult the leaseholders first.
• Any arrears or disputes. Where works are known, who pays for them can be negotiated with the seller before exchange.

The management pack: who runs the building

The leasehold information comes from the freeholder or the managing agent, in what is usually called the management pack: answers to a standard set of leasehold enquiries (the LPE1 form), with supporting documents. The seller’s solicitor usually orders it and the seller usually pays for it. It shows who the freeholder and the managing agent are, the charges, the insurance, planned works and any disputes. It does not come from the solicitors, so it is often what slows a leasehold purchase down.

The lease may require you to give the freeholder formal notice of the purchase and of your mortgage after completion, usually for a fee. Some leases also require you to sign a deed of covenant or to become a member of a residents’ management company. We tell you what your lease requires.

What the lease stops you doing

A lease can limit how you use the flat. Check the rules against your plans before you buy, not after:

• Letting: some leases need the freeholder’s consent to sublet, and some forbid short or holiday lets. Your lender has its own rules about letting too.
• Pets: some leases forbid them or need consent.
• Alterations: structural changes are often forbidden or need consent, and some leases also control flooring.
• Use: many residential leases limit the flat to use as a private home, which can rule out running a business from it.

Building safety in taller buildings

In England, for flats in buildings of at least 11 metres or at least five storeys, the Building Safety Act 2022 limits what many leaseholders can be charged for fixing historical safety defects. Whether the protections cover a particular flat depends on the building, on the lease and on who owns the freehold, so we check the landlord’s certificate and the seller’s leaseholder deed of certificate. Those protections do not apply in Wales, where the position is different, and we check what applies to your building. Some lenders also ask for evidence about the external walls, such as an EWS1 form, before they lend.