In a leasehold arrangement the buyer purchases the right to occupy the property for the term stated in the lease, commonly anywhere from 99 to 999 years, while the freeholder retains ownership of the land and the building's structure. The leaseholder typically pays ground rent and a service charge to the freeholder or a management company, and must follow the rules set out in the lease, which may restrict alterations, subletting or keeping pets.
The remaining lease length is one of the most important factors a buyer and their lender will consider. Mortgage lenders often decline to lend against properties where the unexpired term falls below a certain threshold, and that threshold varies between lenders. Extending a lease is a legal right for qualifying leaseholders in England and Wales, but the process involves specialist solicitors and a valuation, and the cost depends on the property and the lease terms at the time.
Before exchanging contracts, a solicitor will review the full lease document during conveyancing and report on ground rent clauses, service charge history, any planned major works that could result in a large one-off bill, and any restrictions that might affect how the buyer uses or eventually sells the property. For a flat in a large London development, for example, annual service charges can vary considerably, so reviewing several years of accounts is standard practice.
As an overseas buyer managing a property remotely, pay close attention to the unexpired lease term, service charge history and any subletting restrictions before committing, as these directly affect both rental viability and future resale to mortgage-dependent buyers.