What is Ground Lease (Erfpacht) and does it Affect My Mortgage?
What is ground lease (Erfpacht) and does it affect my mortgage?
Ground lease is one of those words that you have actually heard gone by from time to time and as long as you do not have to deal with it, you rapidly forget again. But what if your dream home does have ground lease? Then it's valuable to understand how that impacts purchasing your home and closing your mortgage.
What is ground lease?
To understand this, we first need to know what ground lease really indicates.
In simple terms, ground lease is the right to use a piece of land and the associated housing thereon.
The land containing the residential or commercial property remains the residential or commercial property of the ground leaseholder, or owner. These might consist of the municipality, a housing association or the Forestry Commission. For this right of use, you pay an annual cost to the owner. That charge is called a canon.
If a seller wishes to sell a residential leasehold residential or commercial property, he should clearly state that it is leasehold. Therefore, homes for sale websites plainly specify whether it is leasehold or not.
The deed that the notary will draw up when the sale is made (the "deed of transfer") will likewise specify whether the residential or commercial property is leasehold. And, obviously, it will also be clearly specified in the purchase contract.
What should I keep an eye out for myself if I desire to purchase a residential or commercial property with a long lease?
If you wish to buy a ground lease residential or commercial property, it's helpful to examine the following things thoroughly so there are not a surprises.
- Is it leasehold for an indefinite or set term? In the latter case, when does the leasehold right expire and is there a right to renewal?
What is ground lease (Erfpacht) and does it affect my mortgage?
Ground lease is one of those words that you have actually heard gone by from time to time and as long as you do not have to deal with it, you rapidly forget again. But what if your dream home does have ground lease? Then it's valuable to understand how that impacts purchasing your home and closing your mortgage.
What is ground lease?
To understand this, we first need to know what ground lease really indicates.
In simple terms, ground lease is the right to use a piece of land and the associated housing thereon.
The land containing the residential or commercial property remains the residential or commercial property of the ground leaseholder, or owner. These might consist of the municipality, a housing association or the Forestry Commission. For this right of use, you pay an annual cost to the owner. That charge is called a canon.
If a seller wishes to sell a residential leasehold residential or commercial property, he should clearly state that it is leasehold. Therefore, homes for sale websites plainly specify whether it is leasehold or not.
The deed that the notary will draw up when the sale is made (the "deed of transfer") will likewise specify whether the residential or commercial property is leasehold. And, obviously, it will also be clearly specified in the purchase contract.
What should I keep an eye out for myself if I desire to purchase a residential or commercial property with a long lease?
If you wish to buy a ground lease residential or commercial property, it's helpful to examine the following things thoroughly so there are not a surprises.
- Is it leasehold for an indefinite or set term? In the latter case, when does the leasehold right expire and is there a right to renewal?