As an investor, especially if you are an international investor you should get to understand what a leasehold means in the UK. A leasehold in England is very different to that which you may be accustomed to so some new investors make bad decisions with freeholds and leaseholds.
Firstly, in England, most property is leasehold, with most of the major cities including London, Manchester & Birmingham having over 90% of the property being leasehold.
So why are UK property owners so keen on leasehold?
It’s less a case of preferring a leasehold, but more than in England a leasehold is almost identical to what other countries would call a freehold or a virtual freehold.
In England, if you are buying an apartment or condo it’s almost always a leasehold, the logic being that the UK you can not all own the land that the property sits on, so we split the property up, have a management company and all the owners get a leasehold each.
What’s more, most new buildings have 250-year leases, which you are entitled to extend by an additional 100 years over and over again. This means that unless you let it, there is no reason the lease would ever run out.
In addition to this, this year the UK government is expected to change the rules so that you can extend your lease to 998 years as often as you like.
What this means is that most modern investors have little to no interest in a property being leasehold or freehold, so long as the lease is good and the building will give a great return.
A leasehold in England on new properties is generally 0.1% of a property value, so a £200,000 property would pay £200 per year.
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