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When buying a property, it’s important to understand how your purchase will affect you in the future. Owning a property is an investment and a way to build equity, but it also comes with responsibilities. So, are there any big differences between buying a flat and buying a house?

Leasehold vs. Freehold

The key terms here are ‘leasehold’ and ‘freehold’. When you buy a house, the property is likely to be freehold because you own the whole property and the land it is built on.

Flats, on the other hand, are typically sold as leasehold, meaning that you have the right to live in the property for a certain number of years and rent the land on which it is built. This could be between 30 and 999 years depending on the property. When purchasing a flat it’s essential to understand that you own everything within the walls of your home, but not the outside or the communal areas, which usually includes the roof and the foundations. A freeholder will own these parts.

Time left

The time left on the lease is of paramount importance when deciding to buy a flat, as it can significantly affect the value of the property. Mortgage lenders will usually not lend on leases with less than 80 years remaining.

Extension of Lease

Under government legislation, once you have owned a property for 2 years, you can start the process of extending the lease.However, if you are buying a leasehold property and the current owner has already started the process, you can effectively inherit and continue that process.Once the notice to extend has been successfully lodged with the landlord, they can accept your offer, negotiate or reject your offer.If they do the latter, you can challenge them in court.You will be required to pay a premium, which can be quite costly.

You can also extend your lease by private arrangement with the landlord on terms to be agreed between you.In these circumstances, you would not automatically be entitled to an additional 90 years’ term or a reduction in ground rent.

The Leasehold Advisory Service has a lease extension calculator on their website which will help you work out how much extending your Lease is likely to cost.Lease extension valuations are quite complicated so we recommend you seek the advice of a specialist valuer to help you with this.

Maintenance

Buying a leasehold property does have one advantage: you will not be responsible for the maintenance of the communal areas of the property. In contrast, owning a freehold property means that you would be responsible for organising builders, electricians and gas engineers for those areas.

Although as a leaseholder you won’t have to arrange maintenance in communal areas, you will have to pay a service charge once a month, which will be stipulated in the Lease. Paying a service charge means you have the right to a summary showing how the charge is worked out, what it is spent on and the evidence of spending such as receipts.

Ground rent

You also may have to pay ground rent (for the land the property sits on), but only if the freeholder has sent you a written, formal demand for it. They can recover unpaid ground rent going back 6 years and they can ask you for this amount in one go.

Costs of buying a flat

In general, flats tend to be more affordable than houses, making them a popular choice for first-time buyers. Some flats may offer access to communal facilities such as a gyms and gardens which could save you the money of a membership and the upkeep of a garden. However, it is essential that you thoroughly check the ‘hidden costs’, such as the payment of ground rent, service charges, contributions towards buildings’ insurance premiums and administration fees charged by the freeholders or managing agents.

Personal preference

It’s important to consider the pros and cons of living in a flat, as what works for some may not work for others. It is important to remember that in buying a flat, you are buying into a lifestyle that in some ways involves living as a community. In the end it comes down to personal preference and circumstances.

No matter whether you’re thinking of buying a freehold detached property or a leasehold apartment, it is important to speak to an expert. Please do not hesitate to contact our expert property team free on 0808 1685 643 or email us on getmoving@ramsdens.co.uk.