Surrey Leasehold Properties Lawyer
Buying a home that is located on leasehold property can present a unique set of challenges that require legal expertise beyond a regular home purchase. We can help you navigate those challenges and explain the differences associated with owning leasehold property in a manner that is easy to understand and assist in the buying process in a timely and cost effective manner.
Differences between Freehold and Leasehold:
Freehold ownership is the typical way that we own real property. You own the land and the buildings on it in perpetuity.
Leasehold ownership is where you own the buildings on the property but you lease the land that your building is located. You do NOT own the land – just the buildings.
Examples of leasehold properties within the lower Mainland are Vancouver’s West End, False Creek, Fairview Slopes, and Point Grey.
Who owns the Leasehold Land:
The owners of the leasehold properties are usually a municipality, a corporation, a First Nations band or a private individual(s). What typically occurs is that a developer will secure a long term lease (around 99 years or so) with the land owner, build a development of homes, townhouses or condominiums on the leasehold property and then sell the development to the public.
Read the Lease:
Before you buy leasehold property, a key point is to ensure that you read and understand the lease. We recommend that you seek out legal advice to assist you in reviewing the lease. Some key provisions of the lease are:
- Who is the landlord? A private individual(s) can be more of a challenge in negotiating the terms of the lease.
- The length of the lease and how much time is left before the lease expires.
- What are the renewal terms when the lease expires? Does the landlord have the option NOT to renew the lease? What are the terms, if any, regarding adjusting the rental amount for the renewal period?
- Is the lease prepaid in advance or are there regular payments of rent required? If so, what is rental amount?
While the length of the lease may not be an issue for someone buying near the start of the lease, it can be a large risk for the person buying near the end of the lease. At the end of the lease, the landlord can choose not to renew or renew but at much higher price.
As well, your leasehold property may have prepaid rent or require regular payments of rent. If the rent is prepaid for the length of the lease, then you do not have to worry about an extra cost. However, if your leasehold property requires regular payments (monthly, quarterly or annually), that is an extra cost that you must consider in your finances.
Financing challenges for Leasehold Properties:
Leasehold properties can be difficult to arrange financing. Lenders are cautious about the fact the ownership of your building is subject to a lease with a third party. If you are buying a leasehold property near the end of the lease term, a lender may not finance you for the reason the length of your loan may exceed the time left on your lease.
Practical Challenges with Leasehold Properties:
Finally, leasehold properties may not appreciate in value the way that freehold properties do. Related to this issue is that leasehold properties may also be more difficult to sell as the longer your own your leasehold property, the less time remains on the lease for a potential buyer.
As you can see, leasehold properties come with unique legal and practical issues that are not present in freehold properties. Therefore, with such complexities, you can expect that closing costs can be substantially higher than those associated with freehold properties.