There are 23.36 million properties in England and Wales with
64% being owner occupied and 36% being rented either from a private landlord,
local authority or housing association.
Over nine out of ten of those English and Welsh
owner-occupied properties are a whole house or bungalow. Now, most people would
assume they would be freehold - however, of those renting nearly half of rental
properties, 44% to be precise, lived in other leasehold apartments and flats.
It might be wise to quickly explain the difference between
freehold and leasehold. When someone owns the freehold of a property they own
it outright, including the land it is built on, whilst with a leasehold
property the leaseholder owns the property for the length of their lease
agreement. Leaseholders must pay the person who owns land (the freeholder)
ground rent and other fees. When the leasehold ends, ownership returns to the
freeholder although the leaseholder can extend the lease or they can buy the
freeholder out, but there are rules and regulations with regards to doing that.
Therefore, it would be safe to assume that houses are
freehold and flats are leasehold .. wouldn’t it? Not necessarily! Most houses
are freehold but some might be leasehold - usually through shared-ownership
schemes – but more and more new homes builders are selling houses on a
leasehold as well. The protection of the law afforded to leaseholders who own a
flat is massive, but sadly lacking to leasehold houses sold privately.
Looking specifically at the figures for Southampton, at the
last count in SO14 there were 12,842 properties. Since 1995, 10,261 properties
in SO14 have changed hands and have been sold. Looking further at those 10,261
transactions in SO14 since 1995, using data from Land Registry and solicitors
practice My-Home-Move, 46.39% have been leasehold (higher than the national
average of 15%).
However, I am concerned about a few new homes builders
selling new houses (not flats - houses) as leasehold. There has been a growing
(yet small) trend for new-build houses to be sold as leasehold in recent years.
While not all house builders use this model, those that do maintain it helps
make developments financially viable.
The issue comes when builders sell the freehold separately
to an investment company without informing the lease holder – which they are legally allowed to do
without telling the leaseholder. In England and Wales, the "right of first
refusal" to buy the freehold is written in law to leaseholders of flats i.e.
the freeholder must offer it to the leaseholders of all the flats of the
building first), but not leaseholders of houses.
.. and this is the point I am trying to get across. If you
are buying a new home and it’s a house (i.e. not a flat) – please check very
carefully indeed whether its freehold or leasehold. If it is a leasehold,
whilst you do have rights, they are not as strong as for those people buying a
leasehold flat. I appreciate I am only talking about a very small percentage of
the property market, but potentially this could end up costing thousands of
pounds to those affected.
If you are looking for an agent that is well established, professional andcommunicative, then contact us to find out how we can get the best out of your investment property.
Email me on brian.linehan@belvoirlettings.com or call on 023 8001 8222.
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