• Leasehold Ownership
• Buying the Freehold
• Commonhold

Leasehold ownership of an apartment gives the property owner the right to occupy and use the apartment for the 'term' of the lease - usually 99 or 125 years. When the lease expires, the apartment reverts to the landlord.

Lease Length

When buying a leasehold apartment, the most important consideration is the length of the remaining lease, particularly if it has less than 50 years to run, in which case you may have difficulty obtaining a mortgage. Experts advise against buying a property with less than 75 years to run.

Extending the Lease

The majority of leaseholders now have a right to extend their lease by 90 years and have their ground rent abolished. To qualify, you must own a lease which was at least 21 years long when it was first granted (this is termed a 'long lease') and you must have owned your flat for a minimum of 2 years.

The leaseholder usually owns everything within the four walls of the apartment, but not the external or structural walls.

The structure and shared parts of the building and the land it stands on are owned by the freeholder, who is responsible for the maintenance and repair of the building.

The Leasehold Reform, Housing and Urban Development Act became law in 1993, allowing leaseholders the right to buy the freehold between them. This is known as a joint freehold. As this scheme has been running a number of years now, it is becoming more common to see apartments sold with a share of the freehold, rather than with a lease.

The formal procedure (known as Collective Enfranchisement) can be long and complex, and it is recommended that you obtain advice from an experienced solicitor before proceeding. However, the basic requirements are as follows:

• The building must contain 2 or more flats and should normally be self-contained
• No more than a quarter of the internal floor area to be in non-residential use
• At least two thirds of the flats must be owned by qualifying leaseholders who:
• Must not be a business or commercial leaseholder
• Must not own more than two flats in the building
• Must have a long lease (at least 21 years long when it was originally granted)
• At least half of the qualifying leaseholders must be prepared to participate. However, where there are only two flats in the building, both leaseholders must participate

For example, in a building of 60 flats, two thirds (40 flats) must be owned by qualifying tenants. At least half of all the flats must agree to participate; in this case 30.

Leaseholders have the right to buy the freehold and establish a commonhold association to manage the common parts of a property. This new type of ownership for apartments (known as commonhold) allows freehold ownership of individual apartments, houses and non-residential units within a building or an estate. Unlike a leases, ownership is not limited by time.

It is thought that commonhold developments could become the preferred way in which newly constructed or converted buildings are sold in the future.

Buying a Commonhold Unit

The procedures for purchase of a commonhold unit are often simpler than for a leasehold apartment; there is no ground rent or diminishing term to consider and much of the necessary documentation is readily available to the purchaser through the Land Registry and Companies House. However, all the documentation will still require careful examination and, in most cases, professional advice from a solicitor.

• Check that the Commonhold Association is registered properly as a company.
• Examine the Commonhold Community Statement carefully (the document setting out how the building is managed and what rules are in place relating to the use and occupation of the units and the common parts).
• Find out if the unit you intend to buy has any outstanding arrears to the Commonhold Association; you may become liable for them on completion of purchase.

Although buildings insurance in leasehold properties should be provided by the freeholder, you will be required to have third party insurance for any damage you may cause to other apartments, for example, from a flood or fire.