What is a defective lease and what does it mean?

As a leaseholder, you only own the property for a set period and do not own the building itself or the land it sits on. 

The person you’ll have a lease with is the freeholder. They own the land but have little control over your leasehold day-to-day. Your relationship is outlined in a lease, which acts as a contract between you both.

The lease essentially lays out the responsibilities you both have. However, sometimes some of the responsibilities or terms can be deemed unfair or unclear. There may also be some elements of the lease that need to be changed because the requirements of lenders have changed since the lease was first granted.  In these situations, the lease may be defective.

The contract between the leaseholder and freeholder is a legally binding agreement, which must specify all the terms and conditions that apply throughout residency.

However, now and then, either you as the leaseholder, a new potential buyer, or even your conveyancer might look at those terms and think that something isn’t quite fair, practical, or clear.

There are a lot of reasons why a lease could be deemed defective, including:

• The length of time left on the lease
• Escalating ground rents
• No rights to get repairs or services done when needed
• Not having proper access to all areas of the property
• Confusion around who’s responsible for insurance
• The property plan in the lease doesn’t match the actual layout/facilities
• Restrictive rules around things like pets, noise levels, renovations etc.
• Service charges that seem excessive or unreasonable
• The freeholder trying to make you cover costs that you shouldn’t have to

The key is to remember that the lease is a legal agreement. So, if parts seem off or unfair to you, there are ways to clarify and potentially renegotiate those conditions.