Leaseholds

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  • Leaseholds
  • Premier Icon tomhoward
    Subscriber

    See if you can buy the lease? Find out how much it actually is per year?

    jekkyl
    Member

    it might be reasonable to start with but the concern is that the landowner would sell the land and the new owner might put the leasehold charges up and you’re forced to pay as you have a house there. If you decide to proceed get your sol to investigate the terms thoroughly and explain to you any consequences. iiwm I’d walk away.

    bwfc4eva868
    Member

    With all the stuff in the news, are they really that bad? Looking at new builds still, the area is decent enough and houses look better quality than some new build ones from another developer.
    All new builds in the area seem to all be leasehold even the £250,000 4 bed detached ones in the area (Burnley)

    thecaptain
    Member

    In a word, yes. What is the justification for the leasehold arrangement? It can make sense where there is communal ownership and responsibility such as a block of flats, but rarely for a detached house.

    Premier Icon TheGingerOne
    Subscriber

    Depends if you own the lease when you buy the house. My previous property was leasehold, but all of the owners of the houses on buying the house became directors of the management company that owned the lease. We each had 1 share. It meant that it was all fine,but we had to run a registered company, have a secretary, management meetings etc.

    We had communal areas that needed looking after – parking, tennis court and grounds

    nealglover
    Member

    Depends entirely on the terms of the lease.

    Some are short, some are long.
    Some are expensive annually, some are cheap.
    Some are allowed to increase over time, others are fixed.

    Ours is £10/year, fixed price, for 999 years.

    Depends on the leasehold.

    Old house with 999 year lease and the rent is fixed and pennies is fine. Ditto a flat where there’s an obvious reason it needs to be leasehold.

    Newbuild Id not touch with a bargepole. You just know its going to be sold as an investment and ramped up as rappidly as possible.

    Premier Icon deadkenny
    Subscriber

    Leaseholds have their place with flats, and are a legal requirement technically even if you own or share the freehold.

    New build leaseholds on houses are a pure scam. There’s nothing stopping them increasing the fees each year to insane prices and many do just that. Watch out on the lease term. Short and you have to extend down the line to be able to sell then they can charge whatever they like to extend.

    They should not be leasehold, end of.

    Plus if you’re buying a house, if leasehold, you don’t own the land. Yet still paying silly money equivalent or more to older houses where you’d normally own the land the building sits on.

    Rockhopper
    Member

    Your mortgage company might make the decision for you.

    Premier Icon Ming the Merciless
    Subscriber

    Huge amounts of coverage of new build leasehold/doubling rent scam on R4. The Government are looking to legislate against it and some developers are trying to buy back the lease from the “shark funds” they sold them too.

    IMO AVOID.

    drlex
    Member

    There a rationale for L/H on new estates – covenants that can be enforced and estate charges to be levied – but the recent scams involving rising ground rents, inflated costs for permissions to extend and alter, plus the sums requested for enfranchisement means that the only way I’d consider such is if the freehold was vested in a management company for which the purchasers all had shares, as TheGingerOne mentions, above.

    Premier Icon jimdubleyou
    Subscriber

    There’s nothing stopping them increasing the fees each year to insane prices and many do just that

    There is, it’s written down in the lease documentation.

    Trouble is some lease documentation says, we may double the rent every 5 years. So by the end of your mortgage, you’re paying £10k a year in ground rent!

    I would save yourself the hassle and pay the extra few grand to buy the freehold outright.

    https://www.freeholdcalculator.com/freehold_simple.php

    Ewan
    Member

    When I had a lease hold flat the terms under which it could increase were very clearly written down in the lease. Basically it was fixed price and then after a number of years (20 IIRC) it doubled.

    Buying a lease hold can be a massive PITA tho. When I looked into it the process seemed to be:
    Wait two years
    Look online and find that there is a standard formula that should be used
    Contact lease holder and ask the price
    Get quoted a massive number
    Dispute the cost, pay for solicitors etc, and then end up paying the value that the formula suggested in the first place

    My view is that lease hold is a massive scam full stop. When I sold my flat I got charged a £1k ‘admin’ fee in order to get some of the documents I needed (certified copy of the lease and various records) – I had the photocopies from when I bought it, but according to the solicitors I had to pay to get new ones. As far as I can see there is no point whatsoever in lease hold – even flats should just be share of freehold – it’s a relic of the feudal system and should be banned.

    Short and you have to extend down the line to be able to sell then they can charge whatever they like to extend.

    Actually, it’s just done via a formula. You work out the amount of money you would need to put in the bank accruing interest to cover the ‘rent’. So if you’re extending from 80 to 99 years, it’s 19 years rent, minus 80 years of interest.

    The problem is with buying it back, land with planning permission is worth roughly the same as land with a house minus the cost of building it (plus a margin), so it goes up in value much quicker (as a percentage) than the value of the house. So the underlying value of the leasehold goes up VERY quickly.

    nealglover
    Member

    There’s nothing stopping them increasing the fees each year to insane prices and many do just that

    The only way that is true, is if that’s written into the leasehold contract.

    All leaseholds have the terms specifically listed in the contract.
    Length of lease
    Price per annum
    Increase schedule

    Even if the developer sells the lease, they are selling the terms of the contract also.

    Get your solicitor to check the terms and make sure they suit you. If not, then negotiate a change.

    We got ours changed from 99 years to 999 years.
    And from £200/year to £10/year.
    And from doubling ever 20 years, to fixed for full term.

    Premier Icon deadkenny
    Subscriber

    nealglover – Member 
    The only way that is true, is if that’s written into the leasehold contract.

    All leaseholds have the terms specifically listed in the contract.
    Length of lease
    Price per annum
    Increase schedule

    Fair point. Just checking my old lease and it does mention sums payable over lengths of the lease, but back when there was a separate landlord we paid the rent amount plus a huge sum for overpriced buildings insurance (expensive commercial block of flats insurance to cover a converted semi), which seemed to be no option but not mentioned in the lease. That one kept going up by a fair whack and a few times struggled to get proof of the insurance out of the landlord when he did that.

    The freehold came up to buy after landlord died so both flats bought it and share the freehold, no rent as we’d be paying ourselves, and much better insurance arranged ourselves.

    Anyway, a better wording is there’s nothing stopping them inserting hugely increasing prices into the lease terms and many do just that 😉 . Buyers are either not made aware of this or are desperate to buy so gloss over it.

    nealglover
    Member

    we paid the rent amount plus a huge sum for overpriced buildings insurance

    That’s specifically to do with flats though, not leasehold in general. As it wouldn’t apply to a house bought under a leasehold deal.

    Anyway, a better wording is there’s nothing stopping them inserting hugely increasing prices into the lease terms and many do just that .

    Again, with flats possibly, as you would generally also be paying for upkeep of common areas/ and insurance. Not so with leasehold on a house. Here you are just paying ground rent, on an egreed schedule, for a fixed term.

    Buyers are either not made aware of this or are desperate to buy so gloss over it.

    Decent conveyancing solicitors are worth paying for, and listening to.

    Premier Icon deadkenny
    Subscriber

    nealglover – Member 
    Not so with leasehold on a house. Here you are just paying ground rent, on an egreed schedule, for a fixed term.

    But this is what’s happening with these new builds. The terms allow insane rises in ground rent over the term.

    http://www.telegraph.co.uk/money/consumer-affairs/government-act-leasehold-rip-offs/

    nealglover
    Member

    But this is what’s happening with these new builds. The terms allow insane rises in ground rent over the term.

    The lease has an agreed schedule and a fixed term.

    No increases outside what is agreed in the lease are allowed.

    This is purely down to people not reading what they are agreeing to.
    I’m not saying that doubling every 25 years is fair, or reasonable. But that’s what’s in the contract. And people sign that deal without negotiating it to their favour.

    Ours was originally, £120/year, doubling every 10 for 99 years.
    We negotiated changes and are now at £10 per year, fixed for 999 years.

    Premier Icon deadkenny
    Subscriber

    I’m just agreeing with you. Just stressing the point that terms they are agreeing to (without reading) are allowing it to happen.

    Not always their fault. So many will just go with stock solicitor provided by estate agent, house builder company, and they’ll not make you aware of such things. Especially first time buyers.

    nealglover
    Member

    Not always their fault. So many will just go with stock solicitor provided by estate agent, house builder company, and they’ll not make you aware of such things. Especially first time buyers.

    Indeed, but some of those people have really been let down by crap advice from Conveyancing Solicitors.

    In particular, the couple who have a leasehold that will cost £6 Trillion /year before the end of the term.
    They need to be talking to these guys….

    https://www.theclaimsconnection.co.uk/complaints-against-conveyancers.html

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