A property held by lease for a fixed term is a legal agreement with the landlord who is the freeholder and the tenant who is the leaseholder. When you read, agree and sign the lease you are legally bound for a fixed term. If the lease term comes to an end, you have to vacate the property and return it to the landlord, unless the landlord renews the lease with you. Are you, as a commercial tenant or homeowner concerned with the term or any of the clauses in the lease? If you’re a commercial leaseholder, when you occupy a property, you develop your business at that address and much of the success of your business depends on your customers’ knowledge of your business location.
As a real-life example relating to a commercial lease, there was a tattoo shop located in Albert Road, Southsea for just over 10 years. When the lease term came to an end, the business had to be relocated. Although the leaseholder relocated on the same road only 3 minutes away from the old location, the business suffered a considerable loss because their customers took their business elsewhere when they saw that the shop was closed and going through refurbishment, without any notes or signs redirecting them to the new location. The freeholder did not allow any notes or signs on the shop windows. Here is a classic case of financial loss because the freeholder decided to lease the property to a more profitable business.
As a real-life example relating to a residential lease, a single woman living in a one bedroom flat in Hendon Central, London, for over 5 years was given one month’s notice to vacate the property because the leaseholder was trying to sell the property. The difficulty here was that the woman was not financial prepared to make such a move from what was her home for over half a decade. She had to find suitable accommodation very quickly and ended up moving into a property that fell very short of her needs. The leaseholder was not interested in the welfare of the tenant because selling the property was far more profitable than leasing it short or long term. But the leaseholder had difficulties selling the property, so the property remained a financial burden.
A study has found that ‘leasehold’ is the number one concern for property owners and leaseholders in the UK. It’s impossible to resell property once buyers realise not only that there are unfair clauses included in the lease but also that one aspect of those concerns are spiralling service charges and ground rents. Some property developers have changed the ground rent clauses in leases but it still does not bring the leaseholder any comfort.
Some home buyers and businesses now regard a leasehold as a Victorian property market prison, a financial entrapment rather than a home or business base with expected, reasonable costs. But 9 out of 10 new builds in London are leaseholds so whilst it is a major concern, leaseholds are on the increase. It is like being on the brink of a war, when two countries enter a teasing contest and everyone hopes it doesn’t turn into an actual war. Imagine the lease is the weapon used to wage war or conflict. If the lease is the cause of conflict, then changes can be made to call it a truce. Whether you’re a leaseholder or a freeholder, or even a residential tenant who would like to have a more “peaceable” lease, ring our office for a free consultation and we’ll guide you through your lease and make recommendations to your leaseholder/freeholder relationship. By Sandra Garcao
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