If you're buying flat, the chances are it's leasehold property.
A lease gives you the exclusive right to the use, occupation and enjoyment of the lease while it lasts, and provided you comply with the terms of the lease.
The length of the lease is known as its term. A lease can be for any time. A lease of rented property is frequently for 6 months. If you are buying a long lease of residential property then the term will usually be 99 years or more.
At the end of the term, the freeholder or landlord or lessor (the terms mean pretty much the same) gets the property back. Yes, really. So if you are thinking about purchasing a leasehold property, the length of term remaining is crucial.
As the lease nears the end of its term, its value to the freeholder increases while its value to the leaseholder (or lessee or tenant - yes, the terms are pretty much interchangable) diminishes.
It's not just that the market value diminishes. Once the term remaining gets below about a certain length, the property becomes increasingly unmarketable. Lenders tend to require a term remaining of about 25 or 30 years plus
the proposed length of the mortgage. So about 50 - 55 years on a 25-year mortgage. If you can't raise a mortgage on the property, it's going to be seriously difficult to sell.
In practice, buyers and their solicitors are increasingly nervous about terms of less than about 70- 80 years
Why do people buy leasehold property? And what is the answer to this point about the diminishing term?
The answer to the first question is that it actually makes good sense if a property is being spit into a number of units in separate ownership - such as a block of flats. It provides a mechanism for ensuring that all the occupiers pay their fair share of the administration and maintenance costs in respect of the common parts of the building and the communal areas, and for enforcing anti-nuisance provisions against recalcitrant occupiers.
If a flat-owner breaches the terms of his/her lease then, ultimately, the freeholder can forfeit the lease. That is usually a sufficient incentive to encourage compliance with the lease.
The freeholder may be a company, or a private individual. In the case of purpose-built leasehold property, the freeholder is frequently a company owned jointly by all the flat-owners.
The answer to the second question is that it's usually possible either to extend the term of the lease or to purchase the freehold - but at a cost. As you'd expect, that cost increases as the number of years left of the lease decreases.
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