What happens if your lease runs out?
Most flats in England and Wales are purchased as leaseholds because flats share common land that needs to be maintained. However, there are some houses that are leasehold too because historically many houses were built on large estates where respective landowners were reluctant to sell their land for freehold house building.
Houses can also be leasehold if they are purchased through a shared ownership scheme. So, being a leaseholder means that you only own the property for a fixed period of time and you have little control over how the property is managed and maintained.
The length of the lease can vary, but once the lease drops to below 80 years, alarm bells should ring because it will reduce the market value of the property and it may make it difficult to get a mortgage on it if you try to sell it. Historically, leases have tended to be between 99 to 125 years, but there are many exceptions to this rule. For instance in the North, in Manchester and Liverpool, terraced houses can have 999-year leases with a “pepper-corn” or very low ground rent.
Leasehold Title
Unless the leaseholder makes arrangements to extend the lease, once it expires, ownership of the property returns to the freeholder even if you have paid for your flat or house outright. So, if the lease runs out you do not have to leave the property and the tenancy continues on exactly the same conditions as before unless you or the landlord decides to end it. This is because the land and building will revert to being freehold instead of leasehold and the ownership will go to the freeholder.
When this happens you will have no legal rights to oppose it although there are steps you can take if the lease does run out. It’s therefore very important that you make sure you know how long there is on any leasehold purchase. This is usually stated by the estate agent when a property is put on the market. But, a better option would be to look at the Land Registry and, for a small fee, get a copy of the Leasehold Title which will state exactly when the term expires.
Options when the lease ends
You do not need to do anything if the term of the lease expires unless you receive a notice from the landlord to end the agreement under the lease. For the lease to end formally, either you or the freeholder will have to take specific steps to end it:
- You can voluntarily surrender the tenancy.
- The freeholder serves a notice on you and gets a court order to gain possession of the property.
- The freeholder serves a prescribed notice on you which is proposed as an assured periodic tenancy where you could pay a monthly rent.
If none of these options take place, you can continue to live in the property as a tenant, and you may be able to extend the lease. As this is a complex and costly process, it is highly advisable to get expert legal advice.
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