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Pros and Cons of Buying Leasehold Properties

Posted by Nulands on July 2, 2024
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It’s a common scenario, especially in urban areas to find leasehold properties But, Before you dive in, it’s essential to understand the pros and cons of buying leasehold properties.

Let’s break them down.

What is a Leasehold Property?

In simple terms, when you buy a leasehold property, you’re purchasing the right to live in a property for a set period, typically 99 or 125 years, but it can be shorter or longer. You don’t own the land it’s built on; instead, you lease it from the freeholder (the landowner).

The Pros of Buying Leasehold Properties

Affordability

Leasehold properties, particularly apartments, can often be more affordable than freehold properties, making them an attractive option for first-time land buyers or those on a budget.

Maintenance

In many leasehold arrangements, the freeholder maintains the building’s common areas, like gardens, hallways, and roofs. This can be a significant relief for leaseholders who might not want the hassle of these maintenance tasks.

Amenities 

Leasehold properties, especially in larger developments, often have additional amenities such as gyms, pools, or concierge services, which the freeholder maintains.

Location

Leasehold properties are often located in prime areas, such as city centers, where freehold properties might be scarce or extremely expensive.

The Cons of Buying Leasehold Properties

Lease Length

One major downside is that as the lease term decreases, the property can lose value. Extending the lease can be costly and sometimes a complicated process.

Service Charges and Ground Rent

Leaseholders are typically required to pay service charges, ground rent, and other fees, which can add up and make the property more expensive over time.

Restrictions 

There can be restrictions on what you can do with the property, such as renovations or even subletting. Always read the lease terms carefully.

Dependence on the Freeholder 

Your property is still subject to the freeholder’s decisions and management style, which can sometimes be problematic if they are unresponsive or mismanage the property.

Pros and Cons of Buying Leasehold Properties-Comparison Table

Pros Cons
Affordability Lease Length
Leasehold properties can be cheaper, especially for first-time buyers. Decreasing lease terms can reduce property value, and extending leases is costly.
Maintenance Service Charges and Ground Rent
Freeholders usually handle building maintenance, relieving some responsibilities. Additional ongoing fees can increase the long-term cost of ownership.
Amenities Restrictions
Many leasehold properties offer shared amenities like gyms and pools. Lease terms may limit renovations and subletting options.
Location Dependence on the Freeholder
Often found in prime, convenient locations. The freeholder’s management affects your living conditions and costs.

Final Thoughts

Buying a leasehold property can be a great option, particularly if you’re looking for something more affordable in a prime location with less responsibility for maintenance. However, it’s essential to be aware of the potential downsides, like the costs associated with service charges and ground rent, and the diminishing value of the lease over time.

Before making a decision, do your homework. Understand the lease terms, know the costs involved, and consider how the lease length will affect you in the future. With the right approach, a leasehold property can be a smart and practical choice for many buyers.

Thinking of buying land in Kenya? Let our expert team guide you diligently through the process. Give us a call at  0708 592177 / 0740212121

 

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