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Question: I am looking to buy a flat in London for around the £500,000 mark. Some flats are share of freehold and others are of course leasehold. The leasehold ones are generally slightly cheaper. But my worry is that I have seen so much negativity about leasehold. Should I rule it out of my thinking altogether, or consider it if the right flat arrives. Is a leasehold flat with a long lease, no service charge in a Victorian conversion, for example, as bad as a new-build with high fees?
Answer: Leasehold has become a dirty word – and sometimes rightly so.
But ruling it out completely could mean missing good opportunities, particularly in London, where it dominates the flat market.
The key point is that leasehold isn’t just one thing. It’s a legal structure, and the risk is in the detail of the lease itself and perhaps more importantly, in the behaviour of whoever controls the freehold. Buying is a gamble and you don’t hold all the cards.
This is why many buyers prefer a share of freehold. It usually means the leaseholders collectively own the building, giving more control over costs, management and major works. Lease extensions should be simpler and cheaper. But it’s no guarantee of bliss – if other owners are disorganised or unwilling to spend, you can still face delays, disputes with your neighbours and a poorly maintained building.
Not all leaseholds are equal. A Victorian conversion with a long lease and minimal shared space is a very different proposition to a new-build with lifts, a gym and sky-high service charges.
If you’re considering a leasehold flat, check four things.
First, the lease length. Once it starts edging towards 90 years, alarm bells should ring.
Second, the costs. Low or even zero service charge can be fine, but it may also mean repairs are handled ad hoc, often reactively. Think how major works are funded and what happens if another owner can’t pay.
Third, the freeholder and managing agent. This is where problems usually start. A reasonable, responsive set-up is one thing but an absentee investor or poor agent you suspect is “questionable” is quite another.
Fourth, the restrictions. Clauses on subletting, pets or alterations can affect both your lifestyle and resale value.
Be wary of price. If a flat looks cheap, assume there’s a reason until you can prove otherwise. Speak to neighbours if you can. Read reviews online about the agent and freeholder. Check out the accounts too.
When you view, check noticeboards or even the current owner’s fridge door. They can reveal information about ongoing disputes – arguments about bins or parking are petty and annoying, a notice of a meeting about a major problem with the building or management company would be a red flag for me.
But do remember that leasehold isn’t inherently bad, but poor leases and bad management are. Do your own research and rely on a good surveyor and solicitor before you commit.
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