Bought a Flat? Why You Don't Actually Own It. The 'Leasehold' Trap & Ground Rent Scandal
 |
| Bought a Flat? Why You Don't Actually Own It. |
You finally saved up for a deposit and bought a flat in London or Manchester. You hold the keys, thinking you are the king of your castle.
But in the UK, you might just be a "glorified tenant."
If you bought a Leasehold property (which applies to almost all flats and some houses), you do not own the land or the building. You only own the "right to live there" for a set number of years. And lurking in the fine print—especially of older leases—are clauses that could make your home unsellable.
Freehold vs. Leasehold: What is the Difference?
Before you sign the mortgage deed, you must understand the two types of ownership:
| Type | What You Own | Control |
|---|---|---|
| Freehold | You own the house AND the land it sits on forever. | Total control. No annual fees to a landlord. |
| Leasehold | You own a "lease" (contract) for 99 to 999 years. The "Freeholder" owns the land. | You pay Service Charges and (sometimes) Ground Rent. You need permission to renovate. |
The "Doubling Ground Rent" Scandal
This is the trap that has snared thousands. While the Leasehold Reform (Ground Rent) Act 2022 reduced ground rent to zero (peppercorn) for new leases, millions of existing (resale) properties still have toxic clauses.
❌ The "10-Year Doubling" Clause (Watch Out!)
If you are buying a second-hand flat, check the contract. Some say the Ground Rent doubles every 10 years.
- Year 1: £300/year
- Year 11: £600/year
- Year 21: £1,200/year
- Year 51: £9,600/year
The Result: Most UK lenders will REFUSE to grant mortgages on properties with these doubling clauses. You cannot sell the flat because no buyer can get a mortgage. You are trapped.
The "80-Year" Trap & The New 990-Year Right
A lease is a wasting asset. As the years tick down, the value of the property drops.
Historically, if a lease dropped below 80 years, extending it became incredibly expensive due to "Marriage Value."
The Good News (2024/2026 Reforms): Under the Leasehold and Freehold Reform Act 2024, leaseholders now have the right to extend their lease by 990 years (up from 90) with zero ground rent. The act also aims to abolish Marriage Value, making extensions cheaper. However, until these reforms fully settle in the market, banks remain cautious about short leases.
Service Charges: The Hidden Mortgage
Ground Rent is just the start. You must also pay Service Charges for the maintenance of the building (cleaning, insurance, lift repairs).
The problem? The Freeholder decides the cost. There are horror stories of service charges jumping from £2,000 to £6,000 a year overnight. Unlike Ground Rent, Service Charges are not capped, though you can challenge them at a Tribunal if they are unreasonable.
Conclusion
Buying a Leasehold isn't always bad (it's often the only way to live in a city centre), but you must read the lease.
The Golden Rules:
- Ensure the lease is long (ideally 125+ years or a "Share of Freehold").
- If buying a resale flat, check the Ground Rent clause. It should be "Peppercorn" (zero) or linked to RPI (inflation), NEVER doubling.
- Ask your solicitor explicitly: "Are there any onerous ground rent clauses that will affect my mortgageability?"
Disclaimer: This article is for informational purposes only. UK Leasehold laws have recently changed (2022/2024 Acts). Property law is complex. Always instruct a qualified Conveyancing Solicitor to review the Management Pack and Lease terms before exchanging contracts.
0 Comments