Leasehold London Flats - Do You Even 'own' Them ?

[ccc]

Just watching HUTH.

Central London shoebox. £140k in auction. Tiny and a total mess.Lease is just 17 years.

Apparently to extend it would cost about £200k ?!

You wouldn't ever really own this - would you ? Its ridiculous. You are just renting a space in a building owner by someone else.

PS I assume the likes of the Duke of Westminster own most of this stuff ? No wonder they are worth billions for literally doing nothing.

Edited November 12, 2014 by ccc

[Snugglybear]

The clue's in the name - leasehold.

[ccc]

Its just a scam isn't it ?

[Corruption]

Its just a scam isn't it ?

Yes, most nations sell flats with the freehold.

[thevaliant]

You never legally own a leasehold property, however if you have a very long lease (say >200 years) and also own the freehold as well via a company or via joint freeholders, you could argue you effectively own the property.

But most leases aren't that long. 99 years is the norm and after they fall below 80 you start having issues with marriage values and obtaining a mortgage.

I've heard of tales of old Mrs. Miggins, buying the leasehold flat way back when when she was a 20 year old. Fast forward 60 years and she dies. Family think they've got a windfall, when in reality they suddenly realise they've got a flat with only 39 years to run (or less) and can't sell at anywhere near what they thought it was 'worth'.

17 years isn't even a joke - it's just a reasonably long rental agreement.

[ccc]

Yes, most nations sell flats with the freehold.

Yep they do even in sunny jockland.

[Elad]

Leases of 17 years can be used as a rental - guarantees your rent for the next 17 years, of course not including maintenance charges, boilers, etc.

Then compare the 200k cost of lease extension against the cost of flats nearby, the total might be cheaper.

Share of freehold allows you to set your own lease expiry date, just did my flat to 999 years for 450 quid.

[Wurzel Of Highbridge]

So you could rent the property out for 17 years, then strip it of all fixings, floors, windows, wall coverings, floorboards, stairs, wiring, plumbing etc sell that and recover a couple of quid.

I guess that the property doesn't have to returned in any kind of habitable condition. You could even return it as a dangerous liability?

So these ground rents I see for auction for bugger all the owner of these is who the property is returned to and in the meantime and usually responsible for some maintenance?

[Mrs Bear]

You never legally own a leasehold property, however if you have a very long lease (say >200 years) and also own the freehold as well via a company or via joint freeholders, you could argue you effectively own the property. .

Someone we know bought the FH of a 1900-ish maisonette. Owner (leaseholder) of the other m/ette ( just 2 purpose built in the house, typical of many in London) did not want to share, so they now own the whole FH. Existing lease was about 90 years IIRC. The f/holder was a mite awkward so it went to a tribunal - they cannot refuse to sell and cannot dictate whatever price they like - there is a formula for working it out. I think it cost about £11k. The maisonettes would each have been worth about £350k at the time - this was a couple of yrs ago.

Reasons for buying were, I gather, a) to avoid having to extend the lease in future, and b] ability to convert a large loft without having to get a cussed freeholder's permission.

Edited November 12, 2014 by Mrs Bear

[Hectors House]

Majority of houses in Manchester are leasehold, something people who are moving to the area struggle to get round their heads!

[Steppenpig]

Just a thought, but maybe short leaseholds would be something worth looking at as effectively being a long fixed rent. Prices should be more in line with rental costs, than freehold or long leaseholds.

[@contradevian]

Just a thought, but maybe short leaseholds would be something worth looking at as effectively being a long fixed rent. Prices should be more in line with rental costs, than freehold or long leaseholds.

Of interest to me as someone who has fewer days left on Earth than behind me and no immediate family to leave it to

[The Generation Game]

I remember as an accountant having a client which was the freehold (ltd company) for a group of 4 freehold flats. All the leaseholders were the directors of the company, pay a ground rent into the company and split expenses for communal areas / roof repairs.

None of the owners actually lived in the flats and we could not get hold of any of them from their contact info for the accounting records. Eventually the accounts became overdue and it went through the process of the application to strike off to company (via notice in the London gazette) etc. Company got struck off (freehold reverts to the crown) and then one of the owners called us up in a rage about it.

Instead of late filing fees of a few hundred quid, I think it costs a few thousand to recover the freehold and get the company re-registered at Companies House.

[Will!]

I narrowly avoided a potentially disastrous purchase of a leasehold flat in a block in Southwark.

The flat was on a 99 year sub-lease. The block was on a head lease owned by a management company, with a few decades to run. The management company was owned by the owner-occupiers of the flats. The freehold was owned by Southwark Borough Council.

The management company seemed to me to be entirely dysfunctional. Most of the owner-occupier shareholders were pensioners with no interest in long-term investment in the block. The centralised heating system was on its last legs and needed replacement at a cost of tens of millions with significant re-plumbing and probable removal of asbestos required inside each flat. No enquiries had been made as to extending the head lease and there were no plans to do so. It was not clear what Southwark Borough Council's plans would be if and when ownership of the block reverted to them, but it was quite possible that it would see the owner-occupiers as a cash cow.

The block was superficially very well maintained but the lesson for me was that owning a share in the company that manages the block is no guarantee of good management. I walked away. Flats there are now up around 30% since then, of course.

Edited November 12, 2014 by Will!

[thevaliant]

I remember as an accountant having a client which was the freehold (ltd company) for a group of 4 freehold flats. All the leaseholders were the directors of the company, pay a ground rent into the company and split expenses for communal areas / roof repairs.

None of the owners actually lived in the flats and we could not get hold of any of them from their contact info for the accounting records. Eventually the accounts became overdue and it went through the process of the application to strike off to company (via notice in the London gazette) etc. Company got struck off (freehold reverts to the crown) and then one of the owners called us up in a rage about it.

Instead of late filing fees of a few hundred quid, I think it costs a few thousand to recover the freehold and get the company re-registered at Companies House.

I understood company restoration is actually quite cheap, but solicitors (if you use one) usually make it sound very onerous.

We did one recently. You've got to file the accounts and annual return and pay the penalties, but the restoration cost was only about £20 and a form. Of course, this company had only been 'gone' a week.

If you leave it longer, then yes, things can get expensive.

[The Eagle]

Central London shoebox. £140k in auction. Tiny and a total mess.Lease is just 17 years.

£140k rent for 17 years tenancy sound like a very good deal to me in central London, even for a studio flat.

That's less than 700 quid a month, I paid more than that in zone 3 10 years ago.

Of course having to pay the whole 17 years rent upfront might be a problem for most...

[ccc]

£140k rent for 17 years tenancy sound like a very good deal to me in central London, even for a studio flat.

That's less than 700 quid a month, I paid more than that in zone 3 10 years ago.

Of course having to pay the whole 17 years rent upfront might be a problem for most...

Yes looked like her plan was maybe just to rent it out for the period then leave. Would make a decent sum per year. However she was delighted that discussions had started re. The extension. Of leases in the building that could increase its value ?

She had to get 'finance' from another of her 'properties' to buy this in the first place. Not quite sure where she planned to get 200k from ?!

The most distasteful part of it was when she was talking about the refurb. The walls were so thin that when doing some work they knocked right through into next door. Luckily for them the neighbour was doing similar so it was laughs and smiles from her all round and with the voiceover man.

The fact she was running a business to provide a home and service for a person in a building with incredibly poor build quality ? Didn't even cross their mind to even think about that.

This country really has turned to shit.