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sampsonk

Leashold Purchase

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Hi All,

I'm new to this site and forum, so please be patient with me. :)

We bought a new leasehold semi-detached house a few years ago and are paying £200 per annum in ground rent. There are 5 houses in the block, all semis. The 6th house (to which we're joined) is already freehold - not sure how or why.

The builders have recently decided to sell the freehold and have offered it to both a ground rent purchasing company and to the residents. The total cost is around £3.5k per household (assuming all 5 buy-in) and over 50% of the leasehold households need to buy it. If for example, 3 properties buy the freehold then the cost to those 3 properties will increase and the remaining 2 properties will pay the annual ground rent to those households.

The current freehold (owned by the builders) is in perpetuity and whoever buys the freehold will be unable to raise the ground rent.

What I'm unsure about is whether it's actually worth opting in and trying to buy the freehold from the builders. I was wondering if anyone had any thoughts or whether there were any questions/queries we should be raising with the builders.

Many thanks.

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How long is your lease? If only 99 years without a share of the freehold there many be a cost to extend the lease. If it is 999 years why pay out £3,500 now rather than £200 a year when I guess in 15 years £200 will be buttons.

Hi.

Many thanks for the quick response. When we asked how long the lease was for, the builders said it was "in perpetuity", meaning it lasts forever.

My initial thought is to just keep paying the annual ground rent, rather than trying to buy the freehold as I can't really see an advantage to buying it. I guess it's more attractive to house buyers if/when we come to sell, but I don't think it improves the value of a house.

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How long is your lease? If only 99 years without a share of the freehold there many be a cost to extend the lease. If it is 999 years why pay out £3,500 now rather than £200 a year when I guess in 15 years £200 will be buttons.

That depends on what you want to buy with it. If it is used toward buying a house it could well be worth more.

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You should check whether the lease imposes restrictions on the property. Some leaseholds for example wont allow changing the internal layout of the property. If your lease has such restriction then buying it out might have value to yourself or a future buyer way beyond the monetary value of the ground rent.

Edited by goldbug9999

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Not necessarily to the OP - but why the hell is a new build Semi-Detached setup as a Leasehold anyway - a Semi should by definition sit in its own plot of land, so would naturally be a Freehold unless there are perverse incentives one way or another to encourage against this?

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Not necessarily to the OP - but why the hell is a new build Semi-Detached setup as a Leasehold anyway - a Semi should by definition sit in its own plot of land, so would naturally be a Freehold unless there are perverse incentives one way or another to encourage against this?

From what I'd read on MSE forums a few years ago I assumed they all were.

http://www.rightmove.co.uk/house-prices/detail.html?country=england&locationIdentifier=POSTCODE^4222937&searchLocation=M40+3SL&referrer=listChangeCriteria

These near me are leasehold .. apart from one I think

6 Waters Edge, Moston, Manchester, Greater Manchester M40 3SL

£128,995 Terraced, Freehold 30 Mar 2011

Edited by SarahBell

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From what I'd read on MSE forums a few years ago I assumed they all were.

http://www.rightmove.co.uk/house-prices/detail.html?country=england&locationIdentifier=POSTCODE^4222937&searchLocation=M40+3SL&referrer=listChangeCriteria

These near me are leasehold .. apart from one I think

6 Waters Edge, Moston, Manchester, Greater Manchester M40 3SL

£128,995 Terraced, Freehold 30 Mar 2011

OK - But the same question applies - why are new build houses being setup as Leaseholds initially? From what you have shown it appears that it is a generic thing rather than specific, but there must be a reason for it, and I was wondering what it was...

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OK - But the same question applies - why are new build houses being setup as Leaseholds initially? From what you have shown it appears that it is a generic thing rather than specific, but there must be a reason for it, and I was wondering what it was...

From https://www.gov.uk/government/policies/helping-people-to-buy-a-home

Residential leasehold

Leasehold is a long-established way of owning property in England and Wales based on an agreement between the freeholder and leaseholder (sometimes also referred to as landlord and tenant). There are (by industry estimates) around 1 million houses and 2 million flats held on long leases in England – ‘long’ meaning more than 21 years’ duration when granted. Around 40% of recent new-build properties in England are leasehold.

The law about leasehold tenure is complex. The aim of the law about leasehold tenure is to protect both leaseholders and freeholders.

http://forums.moneysavingexpert.com/showthread.php?t=1877763

Is interesting./

I assume it's so they can add restrictions on asking permission for changes that will affect the 'estate' it is on. Things that might make houses left for sale less saleable.

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It is very important that you do not allow a leasehold investment company to purchase the leasehold.

The freeholder may have a number of rights over the development - e.g. to enforce various standards (e.g. appearance) of the buildings and grounds (provided that this is stated in the lease). Obviously, the freeholder won't be paying for this, as it is the leaseholder who must pay for anything that the freeholder wants done. This type of lease is quite commonly used in the "posher" parts of London, to ensure that the area continues to be posh.

One thing that is commonly found in leases, is that the leaseholder is not permitted to make changes to the "structure" of the building. In other words, you may not be able to change the internal layout. Or alternatively, the lease may require that you apply to the freeholder for permissions to make "structural changes". What constitutes such a change is open to debate but a common interpretation is that any modification that comes under the scope of the "buildings regulations" counts as substantial.

A common practice by leasehold investment companies is to give this permission only in exchange for a substantial administration fee. Your boiler has packed in, so you need a new one. That comes under the Part L buildings regulations, so you need permission - that's £95 + VAT. Need a new plug socket installed - that's building regs part P - another £95 + VAT. Need to update your double glazing - you guessed it, another £95 + VAT.

Leasehold investment companies vary in their business practices. Make sure you check out the company that it interested in buying your freehold, and check them out to, see if they tend to engage in this type of practice.

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My sister has "right gip" with her leasehold in London! If you are joint freeholder, with the other lessees, that can work! :huh:

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True story,

My wife didn't believe how old a friend of hers was. Because she was named as something on the leasehold/freehold management co thingybob for the block of flats where she lived, we looked her up on duedil.com and found she was 3 years older than she'd ever admitted.

Absolutely no help to you whatsoever. Have a good day.

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