How can the lease start before you buy your lease?

Lease advice

A question that comes up regularly relates to the start date of the lease and your obligations when buying a leasehold property. I guess your first thought might be why is this important?

Roger J Southam, Non-Executive Chair of Leasehold Advisory Service

If I start with the development process it will give a context on the matter.

A development finishes with what is called practical completion. This is when the contractor has finished his work and the developer can complete sales and collect in the purchase prices. This triggers the start time for snagging, warranties, NHBC certificates and completing leases. Anyone who has made a reservation on a property prior to practical completion will complete their purchases at this point and then move in accordingly.

If there are any homes not sold, they will sit empty until they are sold, obviously. However, the date of practical completion will trigger the start date for the lease, the start date for warranty periods, for snagging periods, for NHBC, or similar. It is therefore important, when looking for your home, to be aware of this and what impact,
or effect it could have.

You may find yourself with a tight timeline to get any snagging items dealt with that occur. If there are any sort of review periods based on the start date of the lease, then these will mean the impact of that review will be closer when you buy, than the full review period if you had bought at the start of the lease.

So, as an example, a block of 50 flats is built and practical completion is on 3 April 2015. The term of the lease typically runs on dates that are called quarter days, which are either 25 March, 24 June, 29 September and 25 December, or 1 January, 1 April, 1 July and 1 October. So, with our example, the start of the term would be set as 25 March 2015. The start of the term cannot be after the date the lease is completed on, with there being an Agreement to Lease – a technical point, but it is the reason.

If 30 of the 50 flats are pre-sold before the practical completion, those 30 homeowners will get their leases and the terms will start on 25 March 2015. For the other 20 flats, as and when they sell, their term will also start on 25 March 2015 – even if the flats take a long time to sell and someone were to buy in April 2017.

So, it is possible you can find yourself buying a home, where the first two years of the lease have already passed by. The challenge of this can be in relation to any snagging items, which need dealing with, or protection from NHBC. It is essential that all new homeowners know what they are taking on and understand their rights and responsibilities. A key part to that is making sure your lawyer gives a clear report on title that explains all matters.

It should especially make clear when the lease starts and what the impact and effect of that is. One thing to remember in all your dealings with property when buying and selling; the estate agent is there for the seller, while it is your solicitor. So, if you want something explained, then ask your lawyer. If anything is not clear, then get your lawyer to clarify and explain.
Looking for ways that you can find out about a leasehold home can be invaluable to understanding your commitments and making sure you are comfortable with them. The Leasehold Advisory Service has a wealth of guides and information on their website and is there to help you, and our advisers are always on the end of the phone to answer your specific query.

Buying your home is likely to be one of the most exciting things in your life, so ensuring that you do all you can to be well informed is by far the most sensible thing to do. Of course, seeing past the excitement to the practicalities can be challenging, but, as dull as it sounds, it is absolutely essential.

So, when searching for your home, make sure that you know the right questions to ask, obtain the basic details and make sure you are comfortable with the rights and responsibilities you are taking on. Good luck in your searches and remember, if you are prepared, then unforeseen challenges should be avoided.  Finding out all you can in advance will pay dividends in the long run.


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