Colchester leasehold properties have traditionally been flats or commercial premises but that’s changing as the percentage of leasehold properties increases. There are 23.36 million properties in England and Wales. 64% are owner occupied and 36% are rented from a private landlord, local authority or housing associations. Over 90% of English and Welsh owner-occupied properties are a whole house or a bungalow and most people would assume they would be freehold but this is a case of buyer beware you may not have considered.
What’s the Difference Between Freehold and Leasehold Properties?
When someone owns the freehold of a property they own it outright, including the land it is built on. A leaseholder of a property has to pay “ground rent” to the freeholder and only owns the property for the length of the lease agreement, after which ownership of the property returns to the freeholder. Leaseholders may be able to extend the lease, buy the freeholder out and be subject to other fees and there are many established rules and regulations covering leasehold flats.
Logically, and in general, it makes sense for houses to be freehold and flats to be leasehold (because not all the flat owners can own the land) and generally that is the case. However, some houses are sold leasehold, traditionally through shared ownership schemes, but the goalposts are moving!
At the last count the figures in the Colchester CO1 postcode area there were 9,108 properties. Since 1995, 10,101 properties in CO1 have changed hands and been sold. Looking closer at those 10,101 transactions using data from Land Registry and solicitors practice My-Home-Move, 24% were sold leasehold – which is higher than the 15% national average.
The law offers good protection for leasehold flat owners but the same level of protection is not available to owners of leasehold homes sold privately. There’s an unsettling small, but growing, trend among some new home builders to sell homes (not just flats) on a leasehold basis. The new home builders claim it helps make new housing developments more financially viable.
Whatever you feel about it (I don’t like it) the important point I want to highlight is the legal protection for leasehold flat owner compared to leasehold house owners.
In England and Wales, the “right of first refusal” to buy the freehold is written into law which protects flat leaseholders. If a freehold owner wants to sell their freehold they must offer it to the leaseholders of all the flats in the building first. This protection does NOT apply to leaseholders of homes which means the freehold owner (for example, a new homes builder) can legally sell the freehold to anyone they like (for example to an investment company), without even informing the leaseholder – now that is a game-changer!
To anyone buying a new home (a house, not a flat) make sure you know whether it’s being sold freehold or leasehold. If it’s leasehold, make sure you fully understand your (lack of) rights and that they are different to the rights which protect flat leaseholders. Although this new trend currently only affects a small number of property sales it could potentially cost thousands of pounds to anyone affected.
If you’re interested in Colchester leasehold properties or any aspect of the Colchester property market get in touch. I offer a free, no obligation, opinion to Colchester Property Blog subscribers. After you have subscribed please send me the link to any property on Rightmove or Zoopla and I’ll get back to you, often within 24 hours. I am also available to undertake free pre-purchase visits to your shortlist of potential properties to provide valuations. Alternatively you can ring 01206 862288, in office hours, to discuss any aspect of the Colchester property market, email firstname.lastname@example.org or add your comments below.