Things to look out for in your lease agreement

If you’re buying a leasehold property – whether for your own use or as a buy-to-let investment – you’ll need to consent to the terms of the lease document. It’s basically a written agreement between you and the freeholder, setting out the rights and responsibilities of both parties (mostly their rights and your responsibilities).

Leases can be tricky to get your head around. They’re usually couched in legal language, and some may have been drafted a long time ago, while others may simply be badly written (a classic example is the common prohibition on keeping ‘any bird dog or other animal’, which seems an unfair singling out of the gundog group). When it comes to lease agreements, detail is everything. Getting them checked by a solicitor is essential, but you shouldn't rely on the professionals. Check everything thoroughly yourself as well. In particular, you’re looking for clauses regarding the following:

1. Sub-letting

Sub-letting, in the context of leasehold properties, just means letting. Which may be the whole reason you bought the place. Very often you will need the freeholder's written consent, and there will probably be an annual 'administration fee'. It’s tempting to simply not tell the freeholder, but apart from being in breach of your lease, this can have very serious implications for your buildings insurance.

2. Things that might impact on your ability to enjoy the property

There might be specific terms concerning keeping pets, or limited hours in which you can access communal spaces or play music. These tend to be fairly sensible rules aimed at keeping you on good terms with your neighbours, but if you’re a professional musician, for example, they might cause you problems.  

3. Ground rent and service charges

The big one. You'll want to know what they currently are, and what they are likely to be in the future. The lease itself will probably be necessarily vague about service charges, so you’ll require additional information. If it’s a new build, you’ll need to see projections, and if it’s not then you’ll want to see real statements going back a few years. Look for how major works are covered. Are they building up a reserve, or are you going to find yourself with a massive one-off bill when the next cycle of works rolls round? Either way can be fine, so long as you know the score. As for ground rent, the terms can vary wildly, but the rate of increase should be written into the lease. You might pay it once or twice a year, and often you need to remember to pay it whether or not it is requested.


4. Archaic or illegal clauses

Leasehold property is still very under-regulated, but in more recent times there has been a good deal of legislation to try and give leaseholders more protection. Many leases were written up a long time ago, and might contain clauses that are now against the law. Terms that, for example, bar you from extending your lease, are illegal and unenforceable, and it's as well for both you and the freeholder to be aware of this. Old leases may also contain some entertaining references to gramophones, coal, or gas lighting.

5. Hidden clauses

They're not hidden, of course, but they're easily missed, even by solicitors. It’s rare, but occasionally an unscrupulous freeholder will attempt to sneak a whopper past you, especially if you’re renegotiating your lease as part of a lease extension. Earlier this year, there was media interest in a development in Birmingham, where a backdated clause doubling the ground rent every ten years meant some leaseholders were paying thousands a year. Another celebrated (and real) example is the ground rent clause which demands '£100 or two-thirds of the property’s rentable value each year, whichever is more'.

The Leasehold Advisory Service has more advice on understanding your lease


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