Understanding leasehold

What does leasehold mean?

Leasehold means you own the property, but not the building or land it sits on. Instead the freeholder (or landlord), often a housing association or developer, owns it and there's a lease agreement in place that means you have the right live in the property for a set number of years - known as the lease term.

Once the lease term has been reached, ownership of the property goes back to the freeholder unless the lease term is extended.

Shared ownership leases

When you buy a shared ownership home, you'll usually own it on a leasehold basis. This is an important part of how the scheme works and understanding it will help you decide whether its right for you.

In shared ownership, the lease term is typically 99 years or more and you’ll sign a lease agreement which will explain your rights and responsibilities as the leaseholder.

What does the lease agreement cover?

Your lease will explain:

• How much rent you'll pay on the portion of the property you don't own.
• Any service charges for maintenance, insurance, and looking after communal areas.
• If you'll need to pay ground rent and how much.
• Rules around repairs, alterations, and subletting.
• How you can buy more of your home over time (known as staircasing).
• What happens if you want to sell your portion of the property.

It’s a legal contract, so it’s important to read it carefully and get advice from your solicitor before signing.

How leasehold affects your mortgage

When you take out a mortgage for a shared ownership home, your lender will look at the lease agreement. Most shared ownership leases are designed to meet lender requirements but they’ll generally want to know:

• The length of the lease (the longer the lease, the better).
• Whether the lease includes reasonable charges and terms.
• If there are any restrictions that could affect your ability to sell or buy more of the shared ownership property.

Thinking about buying a shared ownership home?

Leasehold isn’t something to worry about when looking to purchase a shared ownership home. It’s basically the legal bit that makes the scheme possible, but it’s important to understand your lease, ask questions, and get professional advice to make sure it works for you and your needs.