Things to know before you buy a leasehold flat

If you're looking to buy a leasehold flat, it's important to know how many years remain on the lease. The remaining years are known as the term of the lease.

When buying a leasehold flat, it's important to understand what is included in the demised premises. The demised premises are the parts of the property that you own under the terms of the lease.

This is usually defined in the lease and will typically include the interior of the flat, including the surface of the interior walls, up to the ceiling above and the joists below. The demised premises do not usually include structural or external walls or the roof, although you should always check the wording of the individual lease.

Some areas, such as a loft space, may sometimes be included in the demised premises and sometimes not.

Parts of the building that are not included in the demised premises normally form part of the landlord’s retained property. This usually includes the external and structural walls of the building and the roof.

If you want to carry out alterations or improvements, the lease must be examined carefully to check what is included in the demised premises. For example, if you want to add an extension and this involves cutting into an external wall owned by the landlord, the landlord may refuse permission or require payment as a condition of granting consent.

Before buying a leasehold flat, it is important to establish whether any alterations have been made and whether the correct consent was obtained.

If a previous owner carried out alterations without the landlord’s consent, you may be required to pay the costs of obtaining retrospective consent.

To check whether alterations have been made, you should review the original lease plan and compare it with the current layout of the flat.

Once your offer is accepted, the seller’s solicitor should provide a contract pack that includes a Property Information Form completed by the seller and a Leasehold Property Enquiries form completed by the landlord or managing agent. These forms should disclose any building works and confirm whether consent was granted.

You should also check that building regulations approval was obtained for any alterations. If approval was not obtained, your solicitor may request an indemnity insurance policy from the seller. This insurance protects you, and future owners, if the local authority takes enforcement action.

Some leases require a fixed amount of ground rent, while others allow the ground rent to increase over time.

Ground rent can be a small amount or a more substantial annual sum. In some cases, it can increase significantly over relatively short periods.

If the ground rent changes, the basis for the increase should be clearly set out in the lease. This might be by reference to inflation, such as the Retail Price Index (RPI) or Consumer Price Index (CPI), or by another mechanism.

Some lenders will only offer mortgages on properties where ground rent increases are index-linked. Lenders may be reluctant to lend on properties with high or escalating ground rent because of the risk of non-payment and potential difficulties selling the property in the future.

Your solicitor or conveyancer should advise you on whether the ground rent terms may cause problems.

Service charges are usually payable by leaseholders as a contribution towards the cost of managing, repairing and insuring the building.

The lease should set out both your obligations to pay service charges and the landlord’s obligations to manage and repair the building.

Service charges commonly cover the cost of general maintenance and repairs, buildings insurance and, where provided, services such as central heating, lifts, porters, and cleaning and lighting of shared areas. They may also include management costs and contributions to a reserve or sinking fund.

As part of the service charge, you may be required to contribute to a reserve fund or sinking fund. These funds are built up to cover the cost of irregular and expensive works, such as external decoration, structural repairs or replacing a lift.

Some leases specify how much must be paid into the fund each year, but often the amount is left to the landlord’s discretion. If the lease makes no reference to a reserve fund, the information may be available in the leasehold information summary (LPE2 form).

Reserve funds exist to ensure that all leaseholders contribute to the cost of major works and to spread the cost over time, avoiding large one-off bills.

Before buying a leasehold flat, you should check whether any major works are planned and whether funding is already in place.

Major works can result in significant service charge demands. Your solicitor should ask the landlord or managing agent whether there is a reserve fund and whether it is sufficient to cover future works.

Before buying a leasehold flat, you should check whether there are any historic fire safety defects (like unsafe cladding).

You should ask your solicitor to check and raise any concerns with them.

Find out more: buying a flat with historic fire safety issues

Administration charges are fees that a landlord may demand for granting approvals under the lease, providing information or documents, dealing with breaches of the lease, or handling late payment of ground rent or service charges.

You should check whether administration charges apply, what they cover and how much they are. If you have concerns, your solicitor or conveyancer can review the lease and advise you.

Leases usually contain covenants that bind both the leaseholder and the landlord.

Positive covenants require something to be done, such as contributing towards a reserve fund. Restrictive covenants prevent certain activities, such as keeping pets, running a business from the property, or carrying out alterations.

Before buying, you should consider whether any restrictions might be unattractive to future buyers. Your solicitor or conveyancer should review the lease and advise you on the implications.

Yes. We recommend that you have a survey done on the flat. Matters to do with the inside of a flat are just as important as those in a house, and the survey should also cover the building the flat is in.

The owner of the building (the landlord, or freeholder) usually maintains the shared parts of the building. This is often done through a professional managing agent, and the landlord will recover your share of the cost through the service charge.

Usually the landlord or freeholder is responsible for building insurance and the landlord will charge you your share of the cost as a service charge. You will be entirely responsible for insuring your contents within the flat.

You will usually need written permission from the landlord before making any structural changes. They may charge a fee for this.

If agreed, you will also need to have the necessary planning, building control and other necessary permission.