As a London buyer’s agent, Perrygate works with an increasing number of US buyers who now account for approximately half our international clientele. Most are buying in London for lifestyle reasons, not as an investment. However a gradual decline in Sterling coupled with a languishing market has made the capital’s premium postcodes significantly cheaper in real terms than a decade ago.
It’s important US buyers understand the key differences with the property system in England and Wales (Scotland has its own laws) before starting their search. London’s property system comes with centuries of historical baggage which can make the buying process more inefficient than most countries. As a London buyer’s agent for US buyers, a key part of our role is helping clients navigate the pain points in the UK buying system as seamlessly as possible.
If you are a US expat buying in London, here are five key points to consider.
1) Freehold/Leasehold System
The freehold/leasehold system dates back to the Middle Ages when feudal lords allowed peasants to work a plot of their land in exchange for labour, food or services.
Essentially, buying a freehold means you buy the property and the underlying land. This is the typical form of tenure for a house – regardless of whether it is detached or terraced.
If you are buying a flat in London, you will almost certainly be buying a leasehold with or without a Share of the Freehold. You own a leasehold flat for the duration stated in the lease. If the lease is not extended and expires, the property returns to the freehold owner – also known as the landlord. Leaseholders typically need to pay the freeholder an annual ‘ground rent’ as well as an annual service charge for maintaining and insuring the wider building.
A Share of Freehold bears more similarities to a US condo or co-op apartment but the ownership and management structure still differs in subtle ways. For instance a Share of Freehold typically means you own both a leasehold interest in your flat in your own name and a share of the building (including all flats) and underlying land via a limited company owned by all the residents.
Buyers need to understand how the lease length and value of the of the service charge/ground rent affects a leasehold flat’s value. This is something we always consider when negotiating.
Rest assured, you don’t need to be an expert here – your solicitor will give you a clear overview in their final report. We have covered Freeholds and Leaseholds in more detail in this article.
2) Agreed sales aren’t binding
As with most countries, the US’s buying system prioritises a greater amount of certainty and commitment upfront when a sale is agreed with buyers typically paying a significant deposit swiftly after agreeing a purchase price.
In the UK, offers are generally ‘subject to contract’ and are sometimes withdrawn or renegotiated if the building surveyor or solicitor identifies an issue.
There is typically a 1-3 month gap between a sale being agreed and ‘exchange of contracts’ when it becomes legally binding. This allows a buyer to withdraw any time before exchange of contracts but they can also be ‘gazumped’ by a rival offer during the legal process. For high value purchases, certain lock-in exclusivity agreements with upfront deposits can be drafted by solicitors but it is often quicker for all sides to work towards a swift exchange.
Another downside is the lack of upfront information provided about a property. This means buyers won’t have a clearer picture of exactly what they are buying until they’ve already paid a solicitor and surveyor.
The ‘property chain’ is another compounding issue. This is when a house sale is dependent on another. That onward transaction could in turn be dependent on another. It is not uncommon for a single purchase to require 5+ properties successfully transacting across a chain. Less than 25% of our client purchases involve chains.
As buyer’s agents, a key part of our role is mitigating risks which could later cause a purchase to fall through by undertaking significant due diligence on a property and the seller’s circumstances before offering. Since starting the business in 2018 we have a fall-through rate on accepted offers of below 5%.
3) Buyer’s Agent / Realtor System
Typically in the US both seller and buyer are represented by their own agent.
In the UK, buyer’s agents are not the norm and estate agents work for the seller. It is important to remember this during viewings and be careful about disclosing information which could harm your negotiating position.
Unlike the US, there is no multiple listing service. London’s closest equivalent is property portals like Rightmove and Zoopla. However London’s market has become increasingly fragmented and our higher value searches often focus on off market listings. It is not uncommon for us to be in contact with over fifty selling agents for a single client search.
4) Property Taxes
Holding London property tends to incur lower ongoing taxes than most US states but there is significant upfront cost in the form of Stamp Duty Land Tax (SDLT). This is a progressive tax with more punitive rates for higher value properties, there are additional surcharges for non-UK tax residents and non-first time buyers. We often introduce international clients to a solicitor at the beginning of their search to understand what SDLT they will pay and whether this will affect their maximum offer level.
Compared to this upfront purchase tax, ongoing taxes for holding a property are relatively low. The closest equivalent to an annual property tax is council tax which is typically under £4,000 p.a. and often closer to £2,000.
In addition, the UK recently announced it will introduce a progressive High Value Council Tax Surcharge or ‘mansion tax’ for properties valued at £2m and above. This is expected to be introduced from April 2028 but the implementation or certainty of the policy is still unclear.
In practice, the high upfront costs of buying in the UK mean you need to get it right the first time and plan to hold for the medium-to-long term.
5) London is not one market
Outside of Zone 1, London is less a single city than a collection of interconnected villages.
US clients from Manhattan particularly notice London’s lower density and abundance of green space. The tradeoff is that some local neighbourhoods are not as conveniently located and do not have the same amount of local amenities.
Before offering on a property, it is important to understand hyperlocal market conditions and not base offers of general market data. At any time, a 5 bedroom house in Prime Central London will not be performing the same as a 2 bed warehouse flat in Shoreditch. Both markets are dominated by completely different buyer profiles and market sentiment is affected by different factors. In London, properties on the same street may even perform differently depending on what side of the road they are on.
This is why the majority of media headlines about the London property market do not give buyers accurate context for their search.
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DISCLAIMER: This article is intended as a general guide and does not constitute legal or financial advice.
