- August 7, 2018
- By Peter Mantell
- 0 comments
Rent for leasehold flats- what’s all that about?
If you have a lease you pay rent, that is the money you pay the Freeholder to rent the space; think of renting a car – or anything else. It’s easy to understand if you are renting a flat for a year because the landlord provides the property and you pay a sum every month to use it; at the end of the term you have to leave, and you stop paying. Its also clear that if you don’t pay the rent you don’t have a right to remain.
Leasehold flats are the same concept, it’s just the numbers that are different, for example: –
Short lease: –
Term 1 year at £1,000 per month and no premium.
Term 125 years at £100 per year and a premium of £350,000
A long lease means you are paying for a long time in the property, so long that you will probably die before it expires and so long that you can sell it on to someone else. The premium is like all the rent you would have paid had you stayed for a very long time on a short lease – discounted because you paid it all up front. You then usually pay a nominal rent each year, £100 in this example, to keep the lease alive.
Because your term is so long it’s very easy to think you own rather than rent the property and, in many ways, you do, you can sell it, mortgage it, share it, redecorate it and treat it pretty much as your own.
BUT, if you don’t pay the rent, then in certain circumstances, just like a short lease you don’t have good title and you take the risk your lease could be forfeited. This rule is so draconian that much legislation has been enacted to restrict forfeiture, but it is still the law so when someone says does Leasehold rent matter – yes it does!