True freehold is the gold standard.
All homes should ideally be freehold however apartment freehold ownership can only be obtained as part of a commonhold association development – just like we are doing. A relatively new concept to England but used all around the rest of the world. Hopton Build are liaising with The Law Commission, we are the only builders currently offering freehold apartments. Our buyers also own part of the Commonhold Association which owns the common areas and larger development freehold.
i.e. the exterior of the building, gardens etc are jointly owned between the unit / apartment owners.
You don’t have to pay annual ground rents or permission fees. Savings are also often made due to sharing building insurance and maintenance charges. Importantly our owners themselves control the overheads and can even self manage, garden, or appoint a property manager of their choosing.
The Commonhold Association has rules for management and voting escribed in law. Its a code of good practice.
Unlike leasehold you own it for time immemorial and don’t have to hand it back at the end of a set time.
It should therefore maintain its value relative to the rest of the freehold housing market.
Applicable only to:- Leaseholders – who importantly also own a share in the freehold.
Its second best to commonhold. Importantly the owners can still manage their own overheads. Unfortunately the management, rules and regulations vary immensely from quite good to the ridiculous. There isn’t a set format and this has allowed for a lot of badly constructed, often expensive clauses in recent developments.
The Law Commission are currently reviewing how they can enable Leaseholders to convert to Freehold within a Commonhold Association scheme.
Applicable to:- Leaseholder managed, third party freeholder charging annual ground rent less than 0.1% of the property value with no more than inflation increments.
Someone else owns the freehold land / building, mortgages available if over 90 years it. It’s a long term tenancy agreement!!!
As a lease reduces, especially less than 80 years, it becomes unmortgageable, the contract value reduces prior to having to hand the apartment back £0 or alternatively pay £££££ for an extension. The nearer £0 handback, any applied extension will cost more. Often to sell a leasehold, if the buyer wants a mortgage, you have to buy a lease extension to above 100 years.
You also have to pay an annual charge called ground rent without any benefits, usually can’t modify or alter without the landlords permission, have to pay maintenance charges despite not owning the building, and on top of that it has to be handed back at the end of the lease.
The only slightly redeeming thing here is its leaseholder managed, usually with a RTM (Right to Manage) company, again there isn’t a set standard. Considerably cheaper to buy than purchasing freehold within commonhold, or leasehold with a share of the freehold.
It’s also a depreciating asset, losing real term value, as it nears 0 value hand-back date. Alternatively it will cost more to either buy the freehold and or extend the lease.
Check out the details carefully, get your solicitor to explain in detail what the annual charges are, how much the maintenance can be – despite promises from sales staff there are often clauses enabling unlimited charges – if you don’t pay you lose the home but may still have a mortgage.
How much the permission fees are to make any alterations, even minor. How much to even get a sales agreement – yes you will need one if you ever want to sell the lease.
Above all realise you are buying a long term tenancy agreement and not owning the property, although you are responsible for paying for the maintenance.
Recent owners of apartments with some cladding are regretting ever buying a lease as they now have costs higher than the lease.
And at the end of the lease you have to hand the property back. A bit like leasing a car.
Read the information from The Leasehold Knowledge Partnership.