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Types of purchase

Leasehold costs

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There are three main costs associated specifically with a leasehold property:

Purchase cost

Buying a leasehold property is often not much cheaper than buying a freehold. This may seem a bit bizarre seeing as you don't actually own anything - you pay out a huge single lump sum to take possession of the space within the building. OK, so you can renovate, redesign and refurbish (as long as it is within the terms of the lease), but if the lease were to expire tomorrow, you'd probably have to leave all the fixtures behind.

The difference in market value between a freehold property and a leasehold property is slight Few people nowadays retain a lease until it expires and it's increasingly easy to extend the lease anyway. The cost of the lease reflects current property values and it's quite likely you will be able to buy a leasehold property and sell it a few years later at a profit, even though it has less time to run on the lease. House prices rise and the value of living in a certain home, building or area is seen to be higher.

Ground rent

You are usually required to pay an annual ground rent to the landlord. This is a levy on the building, for occupying the owner's land. It is not usually a particularly large amount. Be wary of escalating ground rents and make sure your solicitor checks the lease does not allow dramatic increase in ground rent.


You will almost certainly be required to pay a service charge to cover the upkeep of the building. This can cover cleaning and repairs to the exterior and communal areas, painting, lighting, buildings insurance as well as a fee for the managing agent. Payment is a condition of the lease and failure to pay may result in you being served notice.

A high service charge is not necessarily a bad thing, as it may mean that a property is well looked after - preserving the life and value of the building. Similarly, low maintenance charges may mean that not a lot gets done to keep the place in a good state of affairs. That said, new conversions may have low maintenance charges as they do not require much upkeep. And if you're buying a high end flat in London, the opposite can be true - how else is the porter going to be paid, the swimming pool kept clean and the lifts kept serviced.

It can be possible for you to get stung for hefty surcharges to cover one-off repairs or maintenance work that is not covered by the buildings insurance. This is usually the responsibility of the leaseholder. Try to find out if the normal payments include some amount that is to be set aside and stored for major refurbishment in the future.

You usually have no say in who does any work on the building - one way in which the system has been abused in the past. Shoddy work is sometimes carried out by affiliate companies of the managing agents at an over-inflated price, with little scope for influence from the leaseholders. On the other hand, some managing agents are great and will provide an extremely efficient value-for-money service that keeps your building in tip-top shape.

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