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The Masked Tulip

What Is The Point Of A 1000 Year Lease To The Leaseholder?

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I was looking at a house which states this and I thought what is the point? This is in Swansea and not central London.

In a 1,000 years the place could be beach front property with global warming or it could be under water or it could have been nuked.

I know nothing about leases so is this common? Why not just sell the freehold?

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I was looking at a house which states this and I thought what is the point? This is in Swansea and not central London.

In a 1,000 years the place could be beach front property with global warming or it could be under water or it could have been nuked.

I know nothing about leases so is this common? Why not just sell the freehold?

Control.

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Ground rent. Usually something silly like £10 a year.

I assume from when £10 used to be worth something and not just something kids get to spend on sweets during the fakerecession.

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Control.

In a way yes.

I'm not a lawyer, but I understand with a leasehold property the freeholder can impose rules on what you can do in/with them. Sometimes these rules are regarded as being for the general good (no pets, no music after 11:00, no panting your house pink, etc) and so are accepted, even liked by the residents.

Personally I think that leasing property should be illegal, and all freeholds should pass to the leaseholder.

.

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Some marinas have leasehold homes, to prevent "owners" building odd extentions, or painting them in a colour that is out of character with the rest of the homes.

Oh and the freeholder, somewhere down the line far in the future will receive a nice windfall, when the leaseholder wishes to extend the lease.

Edited by Money Spinner

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How much is the rental on a lease in the regions then - I assumed it was a few grand like the stuff that people who buy into new buid flats have to pay?

You are confusing ground rent (low figure) with service charge (high figure). I would not have thought a leasehold house would require a service charge.

.

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I was looking at a house which states this and I thought what is the point? This is in Swansea and not central London.

In a 1,000 years the place could be beach front property with global warming or it could be under water or it could have been nuked.

I know nothing about leases so is this common? Why not just sell the freehold?

An example could be properties advertised as "Share of Freehold". If you have a share of the freehold, you must still grant yourself a lease for the property you are living in. Most people just grant themselves 999 year leases, because it means they don't have to worry about renewing it again.

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How much is the rental on a lease in the regions then - I assumed it was a few grand like the stuff that people who buy into new buid flats have to pay?

i could not tell you.

the lease will almost certainly have a schedule, e.g. [say] £10 a year for the first 20 years of the lease, then £15, then...

in the London leases I've seen it's usually small amount... a year's charge worth maybe about a day, or less than a day's worth of the normal rent you'd pay if the whole thing was rented out for you to live in.

but it's worth something because you get it year after year after year. and then one day [almost never in teh case of this 1000 yr lease] the property reverts to the freeholder.

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As silly as it sounds, I was brought up not to consider property that is leasehold unless it is central London.

Edit:

Every time in Swansea when I have seen a house advertised as leasehold - it used to be very rare but I guess more people want that 'control' and are selling the house from freehold to leasehold - and I have asked the EA how much the annual charge is not once has an EA been able to tell me.

They all say "You have to ask the leaseholder" which, surely, is their job?

Can I have a house which is freehold and decide to sell it but sell it as a 1000 year leasehold so I can get some, IMPO, control freak mentality from a tenner a year rental?

Edited by The Masked Tulip

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You are confusing ground rent (low figure) with service charge (high figure). I would not have thought a leasehold house would require a service charge.

.

so that's the reason for the lease then.

Flats do require a service charge so they therefore have to have a mechanism for enforching that charge

tim

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They all say "You have to ask the leaseholder" which, surely, is their job?

Estate agents are pretty much useless at their job. :)

Can I have a house which is freehold and decide to sell it but sell it as a 1000 year leasehold so I can get some, IMPO, control freak mentality from a tenner a year rental?

Most leaseholds are flats (common parts so makes some sense), or on land owned by aristocrats (for which I suggest the guillotine as a solution), or where the associated rules are felt to be of communal benefit.

Outside central London it seems leasehold is generally regarded with suspicion, so if you sold a house this way it would not only cost extra in additional legal fees, it would fetch less. The annual ground rent is likely never to provide a return in a single lifetime.

I also understand that you can now force the freeholder to sell you the freehold or extend the lease. As I said up thread it has therefore become IMO a pointless anachronism.

.

Edited by the shaping machine

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How much is the rental on a lease in the regions then - I assumed it was a few grand like the stuff that people who buy into new buid flats have to pay?

It varies. But when I lived in Sheffield, it was £5 or £10 a year in ground rent. By and large, it's generally only a token value.

There may be a schedule of ground rent increases, but I've never lived anywhere where there was - It was a flat rent for the duration of the lease. The more modern flats do have higher (but still a token) ground rents (e.g. £100), although the developers started taking the piss around the peak of the bubble (and I've seen £500 per year in 2007 vintage flats).

The ground rent is not to be confused with the service charge.

The ground rent gets the resident sweet FA. It's purpose is largely a reminder to the leaseholder that there are conditions that they need to abide by (usually, what modifications they can make to the building, minimum standards of maintenance, no eyesore external decor, etc.). And it's there to ensure the general wellbeing of all residents who share the land (e.g. the residents in block of flats, or residents on a very exclusive and expensive road in central London who wish to preserve the elegance of their neighbourhood).

The service charge is a charge levied on the leaseholder to pay for the maintenance of the land or building, for which the leaseholder is not solely responsible. E.g. a block of flats will need a cleaner to clean the communal areas, the communal areas will need maintenance and decoration, fuel for light and heat in communal areas must be purchased, etc. In other words, the leaseholder gets a service for their service charge. Many new build developments have extortionate service charges, because the developers sold the 'dream' of 'luxury executive lifestyle'. So you frequently have blocks with a concierge, gym, fancy decorative 24/7 lighting, etc. all of which are massive cash vampires. This is often made worse by the developer simply contracting out the maintenance to their cronies who are very inefficient and charge a fortune for their services (which of course gets added to the service charge).

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I also understand that you can now force the freeholder to sell you the freehold or extend the lease. As I said up thread it has therefore become IMO a pointless anachronism.

You can pretty much always force the freeholder to extend the lease. The law sets out exactly how the price to extend is to be calculated, so the freeholder cannot just take the piss.

You can usually also force the freeholder to sell (again, the law provides a method of ensuring a fair valuation). However, there are exceptions (e.g. if the freehold includes non-residential land, e.g. a farm or parkland). The law can get very complicated here, so expert advice is required.

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Estate agents are pretty much useless at their job. :)

Most leaseholds are flats (common parts so makes some sense), or on land owned by aristocrats (for which I suggest the guillotine as a solution), or where the associated rules are felt to be of communal benefit.

Outside central London it seems leasehold is generally regarded with suspicion, so if you sold a house this way it would not only cost extra in additional legal fees, it would fetch less. The annual ground rent is likely never to provide a return in a single lifetime.

I also understand that you can now force the freeholder to sell you the freehold or extend the lease. As I said up thread it has therefore become IMO a pointless anachronism.

.

I have seen new houses with leases of 999 years which cost 100 quid a month, RPI linked.

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I have seen new houses with leases of 999 years which cost 100 quid a month, RPI linked.

I wonder if this is what is going on in my part of the world. Lots of Londoners bought in Swansea in the past 5 years and now loads are selling up.

I wonder if some of them think they can get a nice retainer from the Welsh serfs for the rest of their natural?

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You can pretty much always force the freeholder to extend the lease. The law sets out exactly how the price to extend is to be calculated, so the freeholder cannot just take the piss.

You can usually also force the freeholder to sell (again, the law provides a method of ensuring a fair valuation). However, there are exceptions (e.g. if the freehold includes non-residential land, e.g. a farm or parkland). The law can get very complicated here, so expert advice is required.

I've read that back when Margaret Thatcher was pushing through her law on leasehold reform, the aristos in the Lords added an amendment such that blocks of flats with > a certain percentage of commercial space were excluded. Many of the more expensive blocks of flats in London have shops on the ground floor, so fall into this category (cunning...)

.

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I live in a west end mansion block we all extended lease a while back for £5000 and the freeholder voluntarily offered 999yrs, when 99yrs would have been acceptable, the ground rent was also zeroed. We didnt want the responsibility of the freehold. The service charges are divided by square footage. Ours is typically £600 pa, (which included insurance, cleaning, managing agents etc) with a refurb every 7 yrs. Its a good and happy arrangement. I moved here from a freehold house, and i actually much prefer it. But you do have to be careful, as someone above states lifts concierge etc really bump up costs as do buildings which need constant exterior maintenance, masonry work etc. My brother in law owns a penthouse in kensington, service charges alone are £14000 pa. Lease extensions start to get progressively pricey once they fall below 70yrs approx.

Edited by tennaval

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The service charge is a charge levied on the leaseholder to pay for the maintenance of the land or building, for which the leaseholder is not solely responsible. E.g. a block of flats will need a cleaner to clean the communal areas, the communal areas will need maintenance and decoration, fuel for light and heat in communal areas must be purchased, etc. In other words, the leaseholder gets a service for their service charge. Many new build developments have extortionate service charges, because the developers sold the 'dream' of 'luxury executive lifestyle'. So you frequently have blocks with a concierge, gym, fancy decorative 24/7 lighting, etc. all of which are massive cash vampires. This is often made worse by the developer simply contracting out the maintenance to their cronies who are very inefficient and charge a fortune for their services (which of course gets added to the service charge).

This is the real source of value to the landlord - caveat emptor.

I once asked a knowledgeable estate agent in South Ken how lease extensions were priced - he was so vague about it I decided not to push it further. It seems very opaque. Anyone know how it is calculated in practice?

e.g. Lease remaining 55 years. Extend to 125 years. How much does that cost?

As to 999 year leases - these are a marketing gimmick to make the buyer think he has "virtual freehold". He does not.

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  • 140 Brexit, House prices and Summer 2020

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