What is a Residential Property Lease Agreement? And What Does it Cover?
Your Residential Property Lease Agreement (the lease) is an important document and is quite unique to you and your property.
The lease sets out exactly what you have bought, what is exclusively yours and what is shared, what services the landlord must deliver and what proportion you must pay. The wording of leases can vary from property to property and you will always need to refer to the specific wording of your own lease, which details what you have agreed. Some typical things to look for within a lease are:
Length of Lease
This is known as the term. The same lease is passed on every time the flat is sold, so the length of the lease keeps reducing.
Most mortgage companies will only lend on a lease that has more than 80 years remaining. Leaseholders (in most instances) have a legal right to purchase an extension to their lease but it is important to seek professional advice on this.
Financials
There are a number of financial aspects to your lease and it's imortant that you understand what they are. Some of the questions you'll find answers to within your lease are;
Payment of Ground Rent. How much are you required to pay and when? Does it increase every few years?
Service Charge – what does it cover and when is it due? How is your proportion of the service charge calculated e.g on a percentage, or square footage of the whole building?
Interest Charges and penalties for late payments.
How are surplus and deficit payments dealt with following the service charge year end?
Is there a reserve fund or sinking fund?
Whose Responsibility?
Because all leases are quite unique, within your lease, you'll find that responsibilities are clearly defined. You need to know things like;
Who is responsible for insuring the building?
Who is responsible for utilities (electricity, gas, water etc.)?
Window Frames/Balconies – who is responsible for maintaining and replacing?
Are there any other restrictions?
One residential property lease agreement can vary quite dramatically from another, when it comes to any restrictions defined within them. Your lease agreement will define other restrictions that may apply across a wide range of areas, including;
Noise / musical instruments.
Pets.
Sub-letting.
Number of persons who can live at the property.
Flooring within the property.
Alterations within the property.
Use of the property.
Hanging of washing and signage.
Other things to look for
Whilst not an exclusive list, there are other things that apply to some lease agreements and it's good for you to have a good understanding of what these are and how they may apply to you.
Of course, it's far better to become aware of all of these things before you buy the property, rather than finding out afterwards. Some of the questions you might like to ask include;
Is there a communal heating system? If so, heating may only be provided during certain times.
Requirements when you sell e.g. Deed of Covenant/Transfer Notice required?
Can you carry out alterations or improvements? Is a licence required?
When are external and internal decorations due?
As I said when I started this article, every lease is quite unique and these are just some of the things you should look out for and some of the questions you should be asking.
We would always advise obtaining a copy of a residential property lease agreement and reading it through, before you agree to buy a property. More importantly, it's important to ensure that you understand the contents of the lease.
We're always happy to help on this count, so please do contact us if you have any questions and wouldvalue an informal chat.
Best wishes,
Jamie
Jamie Fisk
BW Residential Ltd
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