Leasehold v Freehold

[rcrayner]

Property Purchase: How does leasehold work. when you have finished paying the mortage, and later the 99 years (or whatever is left on the lease is up) do you have to give it back. to whoever owns the lease, or what, can someone enlighten me. Should buying leasehold ever be considered?

[themidge]

When you buy a leasehold property, you are basically paying up front for the right to occupy that property, for the unexpired term of the lease at a cheap rent (the ground rent). At the end of the term, you have to give it back in good condition. As the unexpired term gets shorter and you are closer to handing back the property, the value of the lease begins to drop. That is why a leasehold property with 60 years on the lease will be worth much less than the identical property with an 80 year lease. You can usually pay to extend the lease say when it gets short (70 years is considered short) Extending leases with less than 70 years begins to get very expensive, so don't leave it too long. Freehold houses are preferable to leasehold houses, but flats really need to be leasehold. Sometimes flats are sold as "leasehold with a share in the freehold interest" which is exactly what it says. I would always prefer this to just "leasehold", as you are safe from the excesses of rogue freeholders, and you can extend your lease to whatever term you want. One big problem with leasehold properties is "absent freeholders". This occurs when the freeholder can no longer be contacted (they may die, go bust etc) If this happens to your flat it can be difficult to sell your flat to anyone who requires a mortgage. One further peril with leasehold properties is the terms of the lease. If the lease says you must clean your windows every three months, and you dont, you could forfeit the lease and have to hand the flat back to the freeholder before the end of the lease!