I want to buy a new build house, but many seem to be sold leasehold rather than freehold. I'm confused as I thought houses were usually sold freehold. What will it mean for me if I buy a leasehold house?
In England, our system of land ownership is based on the concept that the owner of the 'freehold' interest owns the land, the soil below, the air above and any buildings that might happen to be erected upon it.
With leasehold properties, most commonly apartments, the 'owner' in fact only owns the residue of a lease that was previously granted by the owner of the freehold land i.e. their ownership is impermanent and at some future point their lease will come to an end. Leases will generally make provision for who maintains and insures the property and also call for a certain sum to be paid each year to the freehold owner to keep the lease in existence. This sum is called a ground rent and can range from a peppercorn (the legal equivalent of zero) to hundreds, or thousands of pounds.
There has been coverage in the media of new developments where developers have sought to sell houses by granting a 999 year lease rather than transferring the freehold to the buyers. Here the terms of the ground rent have come under scrutiny as sometimes they are set to increase by reference to the Retail Prices Index or there may be a multiplier by which it increases at regular intervals. As the years pass, the amount of rent could rise almost exponentially.
It's vital that you understand the terms on which you are buying any new property and your solicitor should be able to explain that in detail.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.