Are you thinking of buying a leasehold property? If so, it’s important to note that you won’t technically own the property outright. The freeholder will be the person who owns the building but by purchasing a lease, you will gain the right to live in the property for a set number of years.
If your heart is set on buying a leasehold property, a conveyancing solicitor (conveyancer) will guide you through the leasehold conveyancing process. We discuss the ins and outs of this below.
What is a conveyancing solicitor?
A conveyancing solicitor is an expert that manages the legal process of buying a new home which is referred to as ‘conveyancing.’ The process is slightly different depending on whether you are buying a freehold or a leasehold property, but it’s something you shouldn’t do alone.
Whether you’re a first-time buyer or a regular home mover, you should hire a conveyancing solicitor to handle each aspect of the legal process on your behalf. It is their job to manage the transactions between you, the landlord (or managing agent), and the seller’s solicitor, to make sure everything is done according to the law.
When looking to hire somebody, check for reviews online, and only choose somebody who is authorised and regulated by the Solicitors Regulation Authority.
What is Leasehold Conveyancing?
If you are buying a leasehold flat or house, your conveyancer will look through the terms of the lease and will carry out all the necessary legal work on your behalf before the sale is complete. This is known as leasehold conveyancing.
Unlike traditional conveyancing, the legal processes can often be more complicated with a leasehold purchase. As such, there will be an extra cost to you because the conveyancing solicitors will have more work to do. The conveyancer will have to deal with the management company or landlord to fully understand the ground rent and any maintenance charges you are committing to. They will also have to manage contracts that are more complex than those associated with a freehold.
Depending on the property it may be worth considering a form of leasehold specialist solicitors
What is the Leasehold Conveyancing Process?
The conveyancing process for a leasehold can take several weeks to complete. Below is a step-by-step guide so you can understand what is involved in the process.
Step 1: Conveyancer instruction
After finding a conveyancing solicitor, you will be provided with an estimated rundown of their fees and expenses and a letter detailing the work they will carry out on your behalf. If you are happy with these, you will be asked to sign and return the letter, along with your proof of mortgage deposit and identification documents.
Step 2: Conveyancer checks
When you have made an offer on a property, your conveyancer will be sent a draft contract from the seller’s solicitor. This will include information on the length of the lease and various terms and conditions. Your conveyancer will check the contract, and inform you of the relevant details, such as the ground rent and service charges that will be payable by you.
The conveyancer will check to see whether there are any planned improvements to the building and whether or not you will be expected to pay for a share of these. If buying a leasehold flat, you might be asked to contribute to improvements to the communal areas, for example.
The landlord or managing agent will send your conveyancer a copy of the building’s insurance policy. This will also be scrutinised and your conveyancer will inform you of its contents and your maintenance obligations.
Step 3: Conveyancer searches
As with any property purchase, the conveyancer will carry out a number of searches. After carrying these out, your conveyancer will alert you to anything you need to be aware of before you sign a contract.
- Land Registry searches
- Local Authority searches
- Water Authority searches
- Environmental searches
- Location-specific searches
Step 4: Management Pack and your requirements
The landlord or management company will send your conveyancer a Management Pack, which will include various pieces of information that relate to the property. Such information will include:
- The last 3 years’ accounts
- Insurance details
- Fire risk assessment/asbestos report/health and safety report
Included with the pack will be a list of requirements that you will need to comply with before the Property Account is transferred to your name. Your conveyancer will explain these to you and will ask for clarification from the seller if there is anything you or they aren’t sure about.
Step 5: Signing of the mortgage deed and contract
When your conveyancer has received a copy of your mortgage offer, this will be sent over to you for signing. You should return this as soon as possible to prevent any delays in the transaction.
When you, your conveyancer, and the seller are happy to go ahead, you will need to sign and return the contract you have been given. You will also need to pay the deposit and return any other documents that you have been asked to sign.
Step 6: Exchanging contracts
Before contracts are exchanged, a completion date will be agreed upon by you and the seller. This is the date when you finally get the keys to your home.
Before the completion date, your conveyancer will draft a completion statement and inform you of any payable charges due to the seller before or on the completion day. When you and the seller are happy to proceed, the Exchange Of Contracts will take place between both conveyancers. This will make the sale legally binding so if you decide to pull out after this point, you may incur penalty fees.
- Learn the detailed process of what happens between exchange and completion.
Step 7: Completion Day
On completion day, which is usually 1-3 weeks after the Exchange Of Contracts, your conveyancer will send any monies owed to the seller’s conveyancer. When this has been received, you will receive the keys to your new home.
Your conveyancer will also:
- Make the Stamp Duty payment and submit the relevant forms to the HMRC
- Receive the Transfer Deed from the seller’s conveyancer
- Deal with any post-completion requirements for the landlord or management company
- Register the change of ownership
Meanwhile, you will…
- Pay any other fees that are asked of you
- Consult with your conveyancer on the paperwork you need to check
- Make yourself a well-deserved cup of tea and enjoy your new flat or house!
What Fees Occur with Leasehold Conveyancing?
The fees payable by you will vary, depending on the conveyancer you choose and the accommodation you are planning to move into. Therefore, the following are estimated figures.
- Legal fees: £850-£1500
- Search pack fees: £280
- Land Registry fee: £200-£300
- Bank transfer fees £20-£30
- Stamp Duty Land Tax: Dependant on the price of the property
- Help to Buy Supplement: £200-£300 (if this applies to you)
- Notice of transfer £150
These are just some of the fees involved but there may be others. Your conveyancer will explain these to you.
How Long Does Leasehold Conveyancing Take?
The process can take between 8-10 weeks but in some cases, there could be delays which can make the whole process longer.
Delays can happen if the conveyancer has to wait for the money that you owe or if the landlord takes a long time to reply to messages. If you are in a chain, further delays can arise, for a variety of different reasons. And as a range of different complications can arise with leases, there could be other reasons for a delay. As such, the whole process could take as long as six months in a worst-case scenario.
Should I Make A Leasehold Purchase?
When choosing where to live, you could consider a freehold property. You would then own your property outright and as such, you would be responsible for such things as buildings insurance and maintenance costs. Despite these expenses, many people prefer to own a property rather than lease it. But as leases span for long periods of time, a leasehold could still be a viable option.
Leases generally span between 99 and 999 years but you could also buy a property with a short lease (usually under 80 years).
You can extend your lease once you have been in your home for two years, so provided you keep to the terms that have been laid out in your agreement with the freeholder, you are unlikely to lose your property. When leases are extended, leaseholders can sometimes buy their home so this is something you might consider.
It’s important to bear in mind that if you are buying a leasehold property with a short lease, and it is under 70 years, you may have difficulty getting a mortgage as lenders often require a minimum lease length of 70 years or longer. However, the team at YesCanDo Money can advise you further so arrange a meeting with us to discuss your options.
In terms of costs, leasehold properties are often cheaper than freehold properties. If you’re a first-time buyer trying to get on the property ladder, this could be quite appealing to you. The number of leasehold houses has grown in recent years due to the increase of new builds being developed, so it shouldn’t be too hard to find a place to call home.
You could also consider a leasehold flat, especially if you don’t need a larger home, as this is an even cheaper way to get on the property ladder.
But while the property you acquire might be cheaper, you will have to cover the ground rent and service charges that will be laid out in your agreement. These are usually fixed but they can change year by year. These charges cover the upkeep of the building, such as repairs to communal areas and maintenance of the exterior, so there is a valid reason for paying these fees.
These extra charges can be costly but on the flip side, you won’t have to pay for buildings insurance as this will be covered by the freeholder. Where costs are concerned then, there are pros and cons so it’s advisable to research these before making a decision on a purchase.
How YesCanDo Money Can Help
It’s been our experience as a mortgage broker that it is important to get a conveyor that specialises or at least has plenty of experience with leasehold properties. When you are buying a leasehold property it is easy to only concentrate on the purchase going through as quickly as possible. Our opinion is it is even more important that the lease on the property will con cause you problems or even become a nightmare for you in the future.
If you are thinking about buying a leasehold property, get in touch with our expert team. We are authorised and regulated by the Financial Conduct Authority and as such, can give you honest and impartial advice to help you with your mortgage. By getting your mortgage sorted early, you can speed up the leasehold process.
We know which mortgage lenders are leasehold friendly so we can contact these on your behalf. It’s important to note that mortgage rates can sometimes be higher on leasehold properties but as we search the mortgage market for you, we will look for the lowest rates available for your particular set of circumstances. We can also give you further advice on how to bring down the cost of your mortgage to offset the expenses associated with a lease.
Of course, we can also get you a great mortgage on a freehold property too, so regardless of your preference, we are here for you.
To learn more, book an appointment with one of our advisers and we will give you all the advice and support you need. As all of our services are FEE-FREE, you won’t have to pay the fees that certain other mortgage brokers might charge you during your house move.