If you are buying a flat, this guide should help you understand the lease you are buying and help you avoid many of the problems leaseholders ask us about.
This leaflet is not meant to describe or give a full interpretation of the law, as only the courts can do that. And it does not cover every case. If you are in any doubt about your rights and responsibilities, you should get advice from a solicitor who specialises in this area of the law.
Landlord: Typically, this is the freeholder but there are situations where your immediate landlord is the ‘head leaseholder’, not the freeholder. A ‘head leaseholder’ will be the leaseholder with the longest lease, who has leased your flat to you and who pays ground rent to the freeholder.
Right-to-manage company: The right to manage is a way for leaseholders of a building to take over managing that building. If the leaseholders have exercised their right to manage, a right-to-manage company (RTM company) will be responsible for managing the building. If you need the landlord’s permission under the lease, for example, to carry out alterations, sublet or keep pets, you should ask the RTM company for this permission. The RTM company will then need to give the landlord notice that you have applied for permission.
Do you have a copy of your lease?
If you do not have a copy of your lease you may be able to get one from your solicitor or mortgage lender. Usually the Land Registry will also keep a copy. Before buying a leasehold property, you should make sure you understand the main clauses of your lease.
Which area of your lease would you like to learn more about?
- Parties to the lease
- The property
- Rights granted with the property
- Lessee’s obligations
- Landlord’s obligations
- Length of lease
Parties to the lease
‘Parties’ to the lease means the people or companies involved in the contract. Your lease will usually show the names of the original parties to the lease on the first page. If you have bought the lease from someone else and are not the first leaseholder, it won’t be your name that appears in the lease. However, your solicitor will have registered you with the Land Registry as the lease owner. The parties to a lease will usually be you and the landlord, but can also include a management company. This could be a management company made up of the leaseholders in the building. It is very important that you understand who the parties to your lease are. If you are buying a flat make sure your solicitor explains this to you.
Your lease will usually have a description of the as well as any other areas such as a basement. This is often referred to as the demised premises. The description will normally be described near the beginning of your lease or later on in a schedule. It may also refer to a plan. Example text you might see in your lease: ‘All that ground floor flat known or intended to be known as Ground Floor Flat 4 Wilson Road, London … edged red on the plan annexed hereto.’
This usually refers to your rights relating to access over shared areas or other parts of the building. It may include rights of way. Rights granted to a leaseholder are usually called easements in a lease. For example, you may need to walk down a path you don’t own and up a staircase you don’t own to get to your flat. It is clearly sometimes necessary for leaseholders to have rights over property they don’t own, otherwise they may find they are unable to access or use their own property. Your lease must provide you with a right of way for access. The right will often be specific about which kinds of transport you can use, for example, ‘on foot only’ or ‘on foot or using a private motor vehicle’. Your landlord cannot simply obstruct your right of way or take it away. If your landlord tries to do this, you may be entitled to compensation or possibly even an injunction to protect your rights.
The regulations section usually contains the things you should and should not do when living in your flat. Some examples of common regulations are set out below.
There may be a requirement to keep the floors carpeted. This is particularly common in houses that have been converted into flats. Example text you might see in your lease: ‘the leaseholder covenants to keep the floors of the demised premises carpeted at all times’. Sometimes this is varied slightly to allow for other materials to be used, for example, ‘the leaseholder covenants to keep the floors of the demised premises carpeted or covered with some other suitable sound deadening material at all times’. Even if you buy the freehold of your building, you must still keep to any requirement in your lease to keep the floors carpeted.
If your lease does not say that the floors must be carpeted, you can lay wooden or laminate flooring. However, you need to make sure that you do not need to get your landlord’s permission before carrying out any alterations (consent for alterations). You also need to make sure this would not break any nuisance clause in the lease.
Your lease may restrict you from keeping pets or state that you need the landlord’s permission to do so. There are several common variations on this restriction. Some allow the landlord to withdraw their permission if the pet causes a nuisance.
Example text you might see in your lease: ‘not to keep any bird, dog or other animal in the Demised Premises without the previous consent in writing of the Lessor… such consent to be revocable by notice in writing at any time on complaint of any nuisance or annoyance being caused to any owner tenant or occupier of any other flat in the building’.
If there is an RTM company you should ask them for any permission that you need.
Most leases have a clause relating to nuisance. This is to stop you from causing problems for other leaseholders in the building.
Example text you might see in your lease: ‘not to use the Flat nor permit the same to be used for any purpose… other than as a private dwelling house in the occupation of one family only nor for any purpose from which a nuisance or annoyance can arise to the lessor or the owners lessees or occupiers of other flats in the building…nor for any illegal or immoral purpose’.
These spell out what you are responsible for. Some examples of common obligations are set out below.
Ground rent is a payment generally made by the leaseholder to the freeholder under the terms of a lease. It is called ‘ground rent’ because the freeholder owns the ground which your leasehold house or flat sits on, and you have the right to live in the house or flat for the length of the lease. In the past, many ground rents were set at a ‘peppercorn’ to save the landlord having to collect the rent. However, it is also common for the lease to allow the yearly ground rent to increase at regular intervals until it reaches a fixed amount. For example under a 99-year lease, the initial ground rent may be £100 per year, going up after 33 years to £150 per year and increasing again after 66 years to £200 per year, before remaining at that level for the rest of the term of the lease.
Ground rents which increase in line with a set formula are more problematic, as it is difficult to predict with certainty what future ground rent could be and large increases are possible. Some of these ground rents may increase in line with a recognisable and published formula such as the retail prices index. More concerning is where, for example, the ground rent increases to a percentage of the open market value, or doubles every 10 years (or more frequently). The resulting yearly ground rent may make it more difficult to sell or mortgage the property.
If you are considering buying a leasehold property with ground rent, you should insist that your solicitor or conveyancer (a professional who deals with the legal process involved in buying a property) draws to your attention the implications of any terms in the lease which allow the ground rent to increase over the life of the lease.
Event fees are paid under residential leases if certain events happen (for example, the property is sold or sublet). This is very common with retirement properties. Event fees may be given a variety of names in your lease, including exit fees, transfer fees, deferred management fees, contingency fees and selling service fees.
Research has shown that:
- these fees can be hidden in complex leases;
- they may be triggered unexpectedly, for example, if your partner or carer moves into the property;
- they are often revealed too far into the process of selling a property for the buyer to take them into account; and
- the terms of the lease may mean that the amount of the fees is difficult to anticipate, even if the buyer knows about the fees.
Some event fees may be used towards the sinking fund (see below) of a development or to make sure that service charges are not too expensive. Your lease should make a distinction between those fees and any fees which are not linked to a benefit or service provided by the landlord and so are purely for the landlord’s profit.
If you are considering buying a leasehold property, particularly in a retirement development, you should ask your solicitor or conveyancer about the implications of any terms in the lease which allow an event fee or exit fee to be charged.
These are payments you make under the terms of the lease towards the landlord’s costs of running and maintaining the building, for example, the costs of arranging building insurance, maintaining the lift, cleaning the shared areas, repairing the roof or redecorating the outside of the building.
Example text you might see in your lease: ‘pay the lessor a fair and reasonable proportion of the costs and expenses incurred by the lessor in the performance of the lessor’s covenants herein contained…’.
- Summaries of rights and obligations – Service Charges (England)
- Summaries of rights and obligations – Service Charges (Wales)
Reserve or sinking fund
Under some leases, you may pay into a sinking fund each year. This is a way to build up a fund (known as a reserve or sinking fund) that is used to cover the cost of major repairs, for example, replacing the boiler or the roof at some time in the future.
These are payments you make under the terms of your lease towards various expenses the landlord has to pay. Your lease may include the right for your landlord to charge interest on unpaid service charges, or their right to recover any legal costs they face as a result of the action they take to make sure you meet your obligations under the lease.
Example text you might see in your lease: ‘to pay all costs and expenses that the lessor may incur by reason of any breach of the lessee’s covenants whether or not proceedings are started in a court or tribunal’.
There are three different ways that a lease may affect your right to make alterations.
- The lease may not mention alterations, in which case you can make any alterations you like as long as they do not damage the building or reduce the value of the flat.
- The lease may contain a clause which bans all alterations. It is important to know whether this ban applies to alterations in general or just structural alterations. For example, your lease may say, ‘not to carry out any structural alterations or make any structural additions’, which means you cannot carry out any structural alterations. However, if it says, ‘not to carry out any alterations or make any additions’, this is much more extensive and means your landlord can refuse permission for any alterations without giving any reason. They are also allowed to charge a fee for giving you permission.
- The lease may state that you need the landlord’s permission before making any alterations. As in 2 above, this could apply to all alterations or just structural alterations. Example text you might see in your lease: ‘not to make any structural alterations or structural additions to the property or any part thereof without the previous consent in writing of the lessor’. If there is an RTM company, you would need to ask them for permission to make the alterations. If the parties to your lease are you, your landlord and a management company, you may need the management company’s permission to carry out alterations. It’s very important to know the difference between structural alterations and more general alterations. Structural alterations usually involve work to the load-bearing parts of the property, but can include non-load-bearing parts if the work would alter the essential appearance and shape of the property. Non-structural alterations are work to the fixtures and fittings in the property. If your lease does not completely ban all alterations, you will need your landlord’s permission, but your landlord is not allowed to refuse permission unreasonably if the alteration would improve the property. Your landlord may give you permission but set certain conditions that you must meet, for example, the need for a formal ‘licence’ to make alterations. Your landlord can charge a reasonable fee for giving you permission to cover their legal and valuation expenses.
There are usually three different ways a lease may restrict your ability to sublet, or there may be no restrictions at all. (Please note that whatever your lease says about subletting, there may still be restrictions on the use of the flat.)
- If the lease contains no restrictions on subletting, you can assume that you do not need permission to sublet.
- The lease may ban subletting altogether. Example text you might see in your lease: ‘not to underlet the whole of or any part of the demised premises’. This usually applies to shared-ownership leases where you own less than a 100% share of the flat. Your landlord does not have to be reasonable when refusing permission. This means you will not be able to challenge them in a tribunal on this point. You will only be able to sublet if your landlord gives you permission.
- The lease may ban subletting only part of the flat. Example text you might see in your lease: ‘not to assign, underlet or part with possession of part only of the demised premises’. If this restriction appears, you are not allowed to sublet anything less than the whole flat, for example, you cannot just let a bedroom.
- The lease may contain a qualified restriction against subletting, which allows you to sublet the flat as long as you get your landlord’s permission first. Example text you might see in your lease: ‘not to underlet the demised premises without first obtaining the landlord’s consent in writing’. If there is an RTM company, you should ask them for permission. If your lease says that you need permission to sublet your flat, your landlord cannot unreasonably refuse permission. For example, it would be reasonable to refuse permission if you are a commercial tenant and are likely to break the terms of the lease. Your landlord may give you permission but set certain conditions that you must meet, such as applying to them for a licence to sublet. They can also charge a reasonable fee to cover their costs in relation to giving you permission to sublet.
Use of the flat
Whatever the lease says about subletting, there may still be restrictions on how you can use the flat.
Such a restriction would, for example, prevent you from subletting your flat to a group of unrelated students.
Most leases will also ban you from using the flat in a way that would cause a nuisance to or annoy other occupiers in the building.
Your landlord will usually have the right to access your flat for certain purposes. Example text you might see in your lease: ‘the lessor and the lessor’s duly authorised Surveyors or Agents may with or without workmen upon giving forty-eight hours previous notice in writing enter the demised premises for the purpose of (x)’. Your landlord will usually have the right to access your flat to check the state of repair of the flat and to carry out repairs to other parts of the building. Your landlord has to be careful not to abuse this right, as you always have a right to live in the flat without lawful interference by your landlord. If there is a management company, the management company may have the right to enter your flat.
Your landlord must respect your right to use (enjoy) the property without any disturbance from them or anyone who works for them. In practice, other obligations might come before this one in your lease, for example, your landlord may have to carry out repairs that may cause some disturbance to tenants.
Example text you might see in your lease: ‘the lessee paying the rents hereby reserved and performing and observing the several covenants on the lessee’s part and the conditions herein contained shall peaceably hold and enjoy the Flat during the said term without any interruption by the Lessor or any person rightfully claiming under or in trust for the lessor’.
Although you will usually be responsible for repairing the non-structural parts of your property, responsibility for repairing the structure (including the roof and outside of the building) depends on the terms of the lease. In blocks of flats, the landlord will usually be responsible for maintaining and repairing the outside and structure of the building.
This is not always the case. For example, in a house that has been converted into two flats, the leaseholders might be responsible for repairing and maintaining the structure. Or, the leaseholder in the lower flat might be responsible for repairing and maintaining both the inside and outside of the building up to the first-floor level, and the leaseholder of the upper flat is responsible for everything above the first-floor level. In those circumstances, the lease should state who is responsible for maintaining any shared parts and how the costs should be split between the leaseholders.
Example text you might see in your lease: ‘the lessor will maintain and keep in good and substantial repair and condition the main structure of the Building including the foundations and the roof thereof with its gutters and rainwater pipes’.
What is considered a structural repair will depend on your particular building.
Example text you might see in your lease: ‘the lessor will at all times during the said term insure and keep insured the building against loss or damage by fire or such other risks (if any) as the lessor shall think fit in some insurance office of repute’.
In some leases, usually where there are just two flats in the building, each leaseholder may be responsible for insuring part of the building themselves. This is most often the case where the lease is ‘self-repairing’ and the leaseholders own both the inside and outside of their own flat. If this is the case, you are likely to be responsible for the cost of insuring your part of the building yourself.
Another possibility, again usually where there are just two flats in the building, is that the leaseholders are responsible for insuring the whole building. If this applies, the cost of buildings insurance is usually shared between the leaseholders.
This will usually be shown on the first or second page of your lease. It is very important that you know how many years remain on the lease. If you are thinking of buying a property, it is important to know this from the start. The value of your property reduces as the term (number of years remaining) of the lease gets shorter. If the lease runs out, the flat becomes the property of the landlord. If your lease has less than 99 years remaining, you might think about extending the lease. This is particularly important if your lease has just over 80 years remaining, as it is much more expensive to extend a lease which has less than 80 years remaining. Get more information on lease extension, or use our lease extension calculator to get a rough idea of the cost of extending your lease. Example text you might see on your lease: ‘125 years commencing 1st May 2003’.
We hope you have found this guide useful. Now you have read it you could try the Understanding your lease quiz again and see how much your score has improved!