Property Investment in the UK
The UK’s decision to leave the EU, following the referendum on 23 June 2016 is commonly known as Brexit, the UK is due to depart on 29 March 2019. Brexit has heavily influenced the property investment market, in the UK. The backlash of the event has generated low interest rates across the UK, deterring investors to focus on the London market and to look for new areas across the UK to build and invest. It has been predicted that we face a slow growth back to better interest rates over the next 5 years. The North has shown stronger signs of growth for development and investment, this was highlighted at the Savills Residential Development Seminar on 2 November 2017.
From a tax perspective, there has been multiple changes to taxation attempting to limit investment to prevent rising prices, but investment is still being fuelled by low interest rates, together with a weak British Pound.
This article touches on some key areas that need to be considered when embarking on a project to own property in the UK. Whilst the UK consists of England, Scotland, Wales and Northern Ireland, each territory (particularly Scotland) has devolved powers regarding legal charges over land and taxation powers.
This article has been prepared for investment in England but will highlight areas where some rules may differ. If you require more information about investment outside of England, please contact your local MHA member firm and they will be able to give you more information.
Real Estate Interest
There are two ways which you can purchase an interest in land in the UK, either by purchasing a freehold or by purchasing a leasehold. Making sure you know what you have purchased will be a conversation you need to have with your professional adviser. Different rights over land can apply in Scotland.
What is Freehold?
The most common form of absolute ownership is by purchasing the freehold of the property. Whilst this is usually possible when purchasing houses in the UK, if you are making an investment in an apartment building, it is common that the freehold is owned by a third party and you will only be purchasing a leasehold interest.
When purchasing a freehold interest, what you are purchasing includes in many instances, the rights and boundaries that are contained in a title deed which is filed with the UK Land Registry. This will also contain ownership details about the purchaser which is held on public record in the UK.
What is Leasehold?
A leasehold interest is where you purchase the property for a specified period, after which it reverts back to the freeholder. The length of time will be detailed in the lease document and can be as long as 999 years or as short as a few months. When purchasing an apartment, common leaseholds last for between 99 and 150 years from when the freeholder first leased out the property and you will usually only take on the remaining balance. Extending the leasehold often costs money depending on the length of the remaining lease.
- As buyer you will be the real owner.
- The rights, title, interest and ownership will transfer to you.
- You can choose what to do with the property, including renting it out.
- You are fully responsible for repairs, maintenance and upkeep.
- You do not have to arrange things like buildings insurance, building repairs and maintenance for the communal areas.
- Absolute ownership rests with the lessor.
- Annual ground rent and maintenance charges are normally due (NB: The ground rent rules could be changing, however the decision is still with the Governemnt).
- In order to rent out your leasehold property, permission may be required from the lessor.
If you have any questions or if you would like to discuss this in more detail, please contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with a member of our Construction & Real Estate team.