If you own a Freehold interest in your property then you have escaped the responsibility of paying rent! You have a fairly absolute right to occupy and use the property as you so wish, subject to planning and environmental law, any mortgage arrangements you might have made and the criminal law.

Many people think that when you buy a property you always buy the Freehold but this is not the case.

Many properties, especially flats, are not sold to occupiers ‘Freehold’ but instead by way of a long leasehold interest. This is usually 99 years to 999 years but to some extent this is of little relevance as most owners of residential property also have the legal right to either extend their lease or buy their Freehold (in the case of a house) or extend the lease and buy a proportion of the Freehold of the entire apartment building in the case of a flat should they so wish.

Peppercorn Rent

Many properties are sold leasehold and subject to a ‘peppercorn rent’. This is effectively a notional rent that isn’t demanded or paid. It is purely a legal requirement of any contract (i.e. the payment of consideration). The reasons for selling leasehold can be varied, but in many cases it is so that the owners of housing are protected from anti-social behaviour by their neighbours. Restrictions on external decor, maintaining gardens, restrictions on parking caravans and commercial vehicles on driveways. All these things might be included in the lease of your new leasehold home. Your solicitor should advise you on this when you are making your purchase.

However, some occupiers of flats and houses will be required to pay more than a peppercorn in Ground Rent. This is usually a small amount of money paid annually, but it can be any amount, dependent on the terms of the ground lease. In simple terms, you still own the rights to occupy the building, alter and amend it, sell it or mortgage it, subject to the terms of the lease, in return for the payment of a ground rent.

This rent might be just £99 per annum in which case the leasehold interest you own is still likely to be relatively valuable. After all, how much would you pay to in a house for £2 per week and still have the ability to sell your interest at any time? But if your lease has only 30 years or so left to run, you might find selling it or remortgaging the property difficult. This is where legal advice should be sought so that you can determine what rights may exist to extend the lease or buy the Freehold.

If a ground rent is payable then you must make sure you pay it. Failure to do so is a breach of your lease terms. You should also be aware that Ground Rent is not the same as an insurance rent or service charge which relates to services rendered by the owner of the Freehold or superior interest on behalf of the leaseholders and is usually payable in addition to the Ground Rent.

For more infomation or to speak to a mortgage adviser contact us on 01628 507477.

What is the difference between Leasehold and Freehold?

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