Recent headline grabbing reports about owners of million dollar properties around One Tree Hill abandoning their homes highlight the potential pitfalls of buying a leasehold title. In these instances the annual rent has suddenly risen, sometimes by 800% or more, as a result of rent reviews which are carried out at set times under the lease.
As lawyers we regularly get asked about the difference between leasehold and freehold titles (a wise question to ask during due diligence). The main difference is that as a lessee you are strictly bound by the contractual terms of the lease, which will affect your use and enjoyment of the property. These obligations are in addition to all local council requirements and your obligation to adhere to the terms of any encumbrance registered on the title.
If you are looking to purchase a leasehold property you will need to be aware of the following:
- What is the current rent and how often is this reviewed? Also what is the rent review formula and do you have a say in the process?
- Is there a requirement to refurbish during or at the end of the lease and what is the likely cost of this?
- When does the term of the lease expire and do you have the right to renew the lease?
- What are the maintenance requirements and the likely cost of maintaining?
- What outgoings are charged to the lessee (in addition to rent)?
- Any other hidden costs?
- Do you have to get consent from the lessor to carry out any building works/renovations to the property (in addition to any building/resource consents from local council)?
The above is not an exhaustive list and every situation and lease will be different.
As property lawyers, we identify both the main terms of the lease as well as any hidden costs and those further provisions which will prohibit you from achieving what you want from your property.
Give us a call
Please feel free to give one of our property team a call if you are in the market for a property and wish to discuss leasehold agreements in more detail.