Sep 21, 2021
Although it’s common for people to buy a leasehold property, it can also come with its complications.
First, a leasehold property implies that the owner owns the house/townhouse/condo itself, not the land that that home is built on. Instead, the land is leased to the home owner by the land owner. Leasehold land, on the other hand, is a plot of land that can be rented out to a developer, who then builds on the land and rents the property for extended periods of time (up to 100 years or more). The property is often pre-paid up front, and often belong to either the City or, in many cases, a corporation.
But still, the question remains: What should people know when buying a leasehold property?
Here are 5 things that you should know when buying a leasehold property:
Know What A Lease Is
“A lease is the written agreement that shows your rights and responsibilities, as well as your right to live in and use the property,” says Brenda Wilson, a business writer at PaperFellows and Essay roo. “Whenever that same lease gets passed on every time the property is sold, the length of the lease reduces.”
How Long A Leasehold Property Can Be Owned
When buying a leasehold, you’re essentially purchasing the right to possess that property until:
The end of the lease, OR
You sell the home to someone else
If the lease expires while you’re still in the home, consider renegotiating your leasing terms. Or, when passing the property down from one person to another (i.e. parents passing it on to their children) and the lease is expiring soon, whomever is the current owner would be responsible for renegotiating the terms.
After more than 2 years of owning a leasehold property, then you can extend the lease for another 90 years. If the lease has less than 80 years remaining, you still have this right, but you must pay an increased price to the freeholder (or head leaseholder) for the extension. Whatever the case may be, find out the details of owning a leasehold property before buying.
Depending on how much you’re paying in strata fees and taxes, you may or may not need to pay a monthly lease payment on your leasehold property. You’ll find this out by reviewing the lease agreement.
With a pre-paid lease, the developer has paid the lease payments in advance, so that there’s no extra bill. Non-prepaid lease has the owner gaining one more expense every month, suggesting that the home’s overall value was or is lower upon purchase.
“A residents’ association consists of a group of residents – normally leaseholders – who live in houses or flats which have leases from the same landlord,” says Chelsea Peters, a project manager at Essay help and State of writing. “Recognized tenants’ associations have specific rights by law. And, normally members of such associations will represent their common interests, so that their associations can use those rights to act on their behalf.”
Can You Get Mortgages?
Although there’s no easy answer to this question, leaseholds have challenges of their own. In fact, most lenders will not approve a mortgage for a term or an amortization that’s longer than the lease itself, because the lease’s expiration date can be problematic. In other words, most mortgage companies will only lend you money for a lease that has 80 years or more remaining.
However, before applying for mortgages, always get professional advice on it. Plus, know that lenders will look at everything:
Down payment, AND
The property itself
This goes to show that lenders won’t give you money, unless you sell yourself to them and give them multiple reasons why you deserve a mortgage for your leasehold.
Overall, a leasehold will show that you have ownership of a home for some years. Though, if you choose a leasehold property, you will be limited to what lenders and mortgage rates that you qualify for. However, just like with any home that you buy, there is a lot to thing about when buying a leasehold. And, with house-buying comes lenders, leasing options, and what rights you have with your lease.
Read the fine print when completing the sale.
Know what you’re getting yourself into. AND
Seek out advice from a leasing expert or home-buying consultant.
This is general information and shouldn’t be relied on, in relation to any particular property you want to buy. It’s important to consult your solicitor for advice about any property you have agreed to buy before you commit to buy it – this will usually mean before you enter into a contract to buy it.
Christina Lee is a social media strategist at Write my term paper and Coursework help writing services. She writes about marketing news and technologies for such services, as OX Essays review, and others.