10 essential checks before buying a leasehold flat

1. Understand the lease and how it affects your lifestyle

For a leasehold flat, the lease is effectively the rulebook for owning the property. It establishes your rights, your financial responsibilities and what you can and cannot do in your own home. The time remaining on the lease is crucial to check and could affect your ability to get a mortgage. Most lenders won’t offer mortgages on properties with less than 70 years left on the lease and some will want over 80 years. If you purchase a diminishing lease, it can become expensive and problematic to extend, which could impact future buyers considering the property.

In addition to the lease length, check whether the lease contains restrictions related to:

• Pets
• Subletting
• Short-term lets
• Wooden flooring
• Structural alterations
• Use of balconies and communal areas
• Parking - particularly for commercial vehicles
• Running a business from home

Your conveyancer should make you aware if any of the above are stipulated in the lease, but make sure they understand how you intend to use the property so nothing is glossed over. For example if you have pets or intend to put up privacy screening on the balcony, you might find the lease prohibits these.

High-traffic services (salons, dog grooming), noisy trades (music teaching, repairs), storage of heavy stock/equipment, or short-term holiday lets like Airbnb are the kinds of things worth flagging to your conveyancer, so they can review the lease with that context in mind. Tell them how you intend to use the property and ask them to explain anything that could interfere with those plans.

2. Look beyond the advertised service charge

The annual service charge contributes towards maintaining and managing the building. Depending on the development, it could cover buildings insurance, underground parking, cleaning, gardening, lifts, communal heating, lighting, security or concierge services.

Knowing this year's figure isn't enough. Ask for several years of service charge accounts and look at the direction of travel. A £2,000 annual charge that has remained relatively stable tells a different story from one that was £1,200 two years ago.

Service charges can affect resale as well as your monthly budget. A future buyer may be able to afford your asking price, but decide that the ongoing charges make the property too expensive to own.

Nestee tips:

• Ask for several years of service charge accounts. If you are buying a new-build flat check our guide on how to protect yourself from service charge complications.
• Compare the budget with what was actually spent.
• Find out exactly what is included and what you will have to pay separately for. Such as parking or estate charges, reserve-fund contributions, communal heating, ground rent or other building-related costs.
• Ask whether an increase is already expected.
• Include service charges and ground rent when calculating affordability, not just your mortgage payment.

3. Check the sinking or reserve fund

A sinking or reserve fund is money collected from leaseholders and saved towards larger future expenditure.

It might eventually help pay for:

• Roof repairs
• Lift replacement
• External decoration
• Communal windows
• Structural repairs
• Major mechanical or electrical work

If significant work becomes necessary and the reserve fund cannot cover it, leaseholders may be required to contribute additional money according to their leases.

Reserve funds can be used towards major works, but their use and purpose depend on the terms of the lease. Consider the fund in the context of the building. A small block with no lift may reasonably need less money in reserve than a large development with several lifts, extensive communal areas and an ageing roof. Ask how much is currently in the fund, what it is intended to cover and whether any major expenditure is expected over the next few years.

4. Ask whether a Section 20 notice has been served

A Section 20 consultation is the process a landlord must follow before carrying out certain major works, where any individual leaseholder is expected to contribute more than £250.

Major works could include:

• Replacing a roof
• Renewing lifts
• External decoration
• Replacing communal windows
• Structural repairs
• Fire-safety improvements

The seller should inform you early in the purchase process if a Section 20 has been served. If they don’t, rest assured that your conveyancer should pick this up during legal enquiries. By purchasing the property, you will be taking on the liability for the lease's share of the costs for the work. It’s important to ensure your conveyancer establishes:

• Whether any Section 20 notices have been served and are consultations underway
• What work is proposed
• The estimated contribution for your flat
• Whether the sinking fund will contribute
• Whether any payment is already outstanding
• If there are any major works being considered that have not yet reached the Section 20 stage
  

If significant works are already known about, your conveyancer can advise whether responsibility for the cost needs to be addressed with the seller before exchange. It’s common practice to reduce the purchase price by up to the full cost for which you will become liable.

5. Understand EWS1 and external wall issues

If you're considering a flat in a block with cladding or certain external wall systems, you may encounter the term EWS1 (External Wall System 1). The main purpose of this form, is to give mortgage lenders and valuers a standard way to establish whether a building’s external wall system had been assessed by a suitably qualified professional, and whether remediation might be needed.

An important distinction is that an EWS1 is not a general building safety certificate, and not every building requires one. Recent lender data cited by RICS showed EWS1s or equivalents being requested in about 48% of valuations for buildings of 7+ storeys, 26% for 5–6 storeys, and only 2% for 1–4 storeys.

The key impact to buyers, is whether an EWS1 is already available at the start of the purchase process. If there isn’t an EWS1 readily available, the freeholder or managing agent may have to arrange an assessment by a suitably qualified professional, which can significantly delay the purchase process. Particularly if investigations of the external wall construction are needed.

6. Investigate the freeholder and managing agent

The condition of the flat is only part of the picture, it’s important you understand who controls and manages the building and this is explained clearly by your solicitor. Establish who the legal freeholder is and whether day-to-day management has been delegated to a managing agent. If the freeholder is a company, Companies House is a useful starting point. You can check its company status, filing history, accounts, directors, registered charges and insolvency information.

You're looking for warning signs that deserve further investigation:

• Repeated late filings
• Insolvency information
• Proposals to strike the company off
• An unusual turnover of directors
• Significant registered charges
• Unclear ownership or control

You can also search the name of the freeholder and managing agent online and look through published First-tier Tribunal Property Chamber decisions. Leasehold disputes can involve service charges, administration charges, building insurance, management and breaches of leases.

One dispute doesn't make somebody a bad freeholder, particularly if they manage thousands of properties. A pattern of disputes over the same issues deserves more attention.

What if the freeholder gets into financial difficulty?

Service-charge money should not simply form part of the freeholder's everyday finances; there are legal protections around how leaseholders' service-charge funds are held. But an insolvent, absent or dysfunctional freeholder can still make owning the property more complicated.

Think ahead to situations where you may need their involvement:

• Extending the lease
• Applying for consent to renovate
• Selling
• Remortgaging
• Resolving building repairs
• Dealing with insurance

A freeholder who is impossible to contact can turn relatively straightforward processes into months of additional administration and legal expense. If you're concerned about the freeholder, don't simply ask your solicitor are they OK? Ask what their financial or organisational position could mean for you in practice.

7. Find out what existing residents think

If you happen to meet a resident while viewing, politely ask what the building is like to live in. Useful questions include:

• Are any flats in the building holiday lets? If so do the guests disturb the residents?
• Is the managing agent responsive?
• Does the managing agent take good care of the building? Do repairs get completed quickly?
• Have service charges increased significantly?
• Are there any major works coming?
• Is the building generally quiet?
• Are there any recurring problems?

The quality of management can have an enormous emotional impact on homeownership. Continually chasing repairs, querying unexplained bills or arguing over building maintenance can turn what should be your home into an ongoing administrative problem.

8. Check the buildings insurance

Buildings insurance for a leasehold block is normally arranged for the building rather than separately by each flat owner, with the cost commonly recovered through service charges.

Your conveyancer should review the arrangements, but it is worth understanding them yourself. Look at:

• The annual premium
• What the policy covers
• The excesses
• Any unusually large exclusions
• Whether claims have affected premiums

Pay particular attention to the excess for escape-of-water claims. A leaking washing machine in a house might damage your kitchen. In a flat, water can travel into the property below, involving multiple owners, insurers and potentially the management company.

9. Visit when people are actually at home

The best time to visit is early evening. Listen for:

• Footsteps from the flat above
• Televisions and voices
• Communal doors
• Lifts
• Plumbing
• Traffic
• Trains
• Pubs and restaurants
• Communal terraces
• Bin collections

Consider the position of the flat too. Being next to a lift shaft, beneath a roof terrace or above a late-opening commercial unit could affect daily life even if an identical flat on another floor would be quiet. Persistent noise will have very little effect on a property's survey or valuation, while having an enormous impact on your experience of living there. If noise is the only negative factor, but the flat otherwise ticks all your boxes, consider how easily you could install soundproofing. This can make a huge difference to noise levels and be relatively easy to install.

10. Make sure the parking space really belongs to you

If the flat is advertised with parking, storage, a garden, terrace or other valuable feature, make sure the legal documents support what you have been shown. There is a considerable difference between:

• Owning a parking space
• Having an allocated space under the lease
• Having a right to park somewhere
• Using communal unallocated parking
• Simply parking in a particular space because the previous owner always has

A common oversight is when the parking space is not explicitly tied to the flat's deeds, meaning management companies can change rules, reallocate bays, or withdraw parking rights entirely

Final thoughts

The biggest mistake when buying a flat is concentrating entirely on the flat. A new kitchen, beautiful view and second bedroom are easy to value because you can see them. The harder questions concern everything around the flat and the legalities associated with its purchase.

The key to buying a leasehold flat is to establish the costs, risks and compromises upfront, so you can make a more informed decision.

Final suggestion - choose a well regarded solicitor with experience dealing with leasehold flat purchases. Don’t be afraid to ask them any of the questions mentioned above, so you feel confident all bases have been covered.