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What you should know when buying a property in the UK

All properties in England and Wales are either freehold or leasehold.

Freehold

This means that you fully own the property. As a freeholder you will have full responsibility for the maintenance and repairs of the property.

Leasehold

This means that you own the property for as long as is specified in the lease; you are granted the right to live there by the freeholder. At the end of the lease the property again becomes the possession of the freeholder. Many leases are originally granted for up to 999 years, but existing leases on properties are usually much shorter. The majority of leasehold properties are flats, although some houses are leasehold as well.

The lease stipulates who is responsible for repairing and maintaining different parts of the property and any other conditions you must meet as a resident. Check these if you are considering buying a leasehold property. You must also pay a ground rent to the owner of the land (the freeholder), usually a small amount paid each year. Your solicitor should check that the seller is up-to-date with ground rent payments before you sign the contract.

You should not buy a property with a lease of less than 60 years, and usually mortgage lenders are very unlikely to lend for a lease this short. Lenders normally want at least 25 years left on the lease after the end of the mortgage term. As a leaseholder you always have the right to extend the lease for 90 years or even to buy the freehold if certain criteria are met, although the application process is expensive and takes a long time.

Commonhold

This is a new system of joint ownership introduced in 2004. It's considered better than leasehold for some types of properties, especially blocks of flats. Under commonhold, a company, known as a commonhold association owns the freehold of the building and is responsible for maintaining the common parts. The owner of each flat is a member of this association and must agree to certain terms and conditions (usually similar to those in the lease).

Costs and fees                                                                                             

If you're buying a property, you should budget for the following costs:

  1. Solicitors fees
  2. Conveyancing fees
  3. Stamp duty:
  • 0% paid at 0 - £175,000
  • 1% paid on properties costing between £175,000 and £250,000 
  • 3% between £250,000 and £500,000
  • 4% on properties costing more than £500,000
  • 5% on properties costing more than £1,000,000 (just for residential properties)
  • 7% on properties costing more than £2,000,000 (just for residential properties