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Eddie_George

Leasehold Property - Any Reason Not To Buy One?

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Leasehold Property - Any Reason Not To Buy One?

Sorry, you have confused me, shoudl that not be:

Leasehold Property - Any Reason Not To LEASE One?

I think you've answered your own question there.

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Say that I'm happy with:

  • The flat itself
  • Length of the lease
  • The service charge
  • The ground rent

Any reason to not proceed? Any pitfalls?

On a more serious note:

Shared anything is a pain, so share maintenance could be painful.

Many "property companies" have whacked up ground rent for no reasons.

Re-newing leases can become expensive if they are below (is it) 70 years in London ?

I'd personally not touch one with a barge poll.

I think you have the right to buy the freehold now tho ?

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Shared anything is a pain, so share maintenance could be painful.

I agree.

Many "property companies" have whacked up ground rent for no reasons.

Didn't know that, will look into it. Any link?

Re-newing leases can become expensive if they are below (is it) 70 years in London ?

Not London, but I will only buy with a long lease anyway.

I'd personally not touch one with a barge poll.

Unfortunately, decent houses in decent areas are out of my price league. Besides, I wouldn't buy at those prices. My idea is to buy somewhere cheaper for the short term. If prices fall, I don't lose as much.

I think you have the right to buy the freehold now tho ?

I believe so, but I expect you'd be fleeced with legal fees. Plus I don't think a share of freehold completely eradicates hassle and unforeseen fees.

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I have had three leasehold properties:

1) was leasehold but as a collective (4) flats we purchased the freehold and managed from there.

2) was leasehold

3) was always share of freehold.

In London it is pretty much the norm, but I would investigate the management company and see what their accounts are like and how much interaction they have with the owners of the flats. Most management companies are run as a business - so will try and maximise their money in, etc. The leaseholders have a fair number of rights to view the accounts and vote on what the company can do, assuming that the MCo communicate, some don't!

The number of flats and the percentage that are rented out would be a consideration. I more people that are prepared to be involved in Management issues the better.

Purchasing the freehold is a good thing, but can be costly, the length of lease and ground rent of each individual flat makes up the calculation total. A new management company has to be set up and each flat has to be a director of that company and one person nominated as the Secretary. Shares have to be issued and transferred if any flat is sold and the change in directors has to be registered at companies house, along with annual accounts. Not a massive hassle, an accountant can take care of it for a few hundred a year. But you can extend your lease at any time for minimal cost (we extended ours in 3) to 999 years and it cost 500 quid) and normally would make a place more sellable in the future if you so desired.

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I believe so, but I expect you'd be fleeced with legal fees. Plus I don't think a share of freehold completely eradicates hassle and unforeseen fees.

I don't think it is the legal fees that are the costly part, you have to buy the freehold at value to the freeholder - it is a documented formula and there is an ombudsman to resolve differences, but it is a multiple of the ground rent and number of years left plus something else.

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I don't think it is the legal fees that are the costly part, you have to buy the freehold at value to the freeholder - it is a documented formula and there is an ombudsman to resolve differences, but it is a multiple of the ground rent and number of years left plus something else.

Thanks for your informative posts. What if the flat is over a shop? I guess that would make obtaining the freehold more complicated because one of the participants is a business.

Edited by Eddie_George

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If it`s in a Council block of flats, you will be liable to pay towards any improvements that the Council undertake for their tenants, i.e. new kitchens, bathrooms or roof repairs etc.

Add to that housing associations ....my aunt had to stump several thousands pounds for new kitchens and bathrooms in the rest of the block but she got nowt for here money

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On a more serious note:

Shared anything is a pain, so share maintenance could be painful.

Many "property companies" have whacked up ground rent for no reasons.

Re-newing leases can become expensive if they are below (is it) 70 years in London ?

I'd personally not touch one with a barge poll.

I think you have the right to buy the freehold now tho ?

It's under 80 years that it becomes a lot more expensive.

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On a more serious note:

Shared anything is a pain, so share maintenance could be painful.

Many "property companies" have whacked up ground rent for no reasons.

Re-newing leases can become expensive if they are below (is it) 70 years in London ?

I'd personally not touch one with a barge poll.

I think you have the right to buy the freehold now tho ?

Costs start to go up below 80 years, see http://www.moneysavingexpert.com/mortgages/extend-your-lease

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Thanks for your informative posts. What if the flat is over a shop? I guess that would make obtaining the freehold more complicated because one of the participants is a business.

Don't know whether it would apply to you, but I've heard that it's a lot more difficult to get a mortgage on such a property - lenders aren't keen. Not sure why, unless it's e.g a possible later change to something like a chippy, with smell and increased risk of fire.

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Never buy leasehold,never buy a flat,someone else is in charge of your exterior maintenance,the fees always go up,if you buy a flat you quadruple your chance of a tosser neighbour,,,,,,aviod.....

I agree, flats are for renting. Too many possibilities of problem with buying one.

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Never buy leasehold,never buy a flat,someone else is in charge of your exterior maintenance,the fees always go up,if you buy a flat you quadruple your chance of a tosser neighbour,,,,,,aviod.....

I agree, flats are for renting. Too many possibilities of problem with buying one.

Yeah you're probably right, I just wish renting had more security and protection from twit landlords.

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I agree, flats are for renting. Too many possibilities of problem with buying one.

Unless in 2007 you were a BTL speculator.

Now in 2015 you are probably an ex-bankrupt who rents a flat.

I love a bit of Irony in the afternoon.

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A lot of negativity about this on here - don't normally see that on here ;)

You are doing the right research, buying a leasehold without the right research can be problematic, but there is no reason to preclude it if your research ticks the right boxes. There are a lot of people living quite happily owning leasehold properties - I have for 14 years.

Above a shop could be problematic, but for the other problems of mortgaging and change of use issues others have highlighted. The freeholder management company would require the same due diligence and questions. It might even be easier as there would not be as many flats to contend with. If you are looking for a cheaper place to live then above shops tend to give you more for your money because a majority are put off, but makes them difficult to sell.

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If a landlord has a number of properties, the first they will sell off will be the most rubbish one. Often this means it needs expensive repairs or has expensive outgoings

Edited by bumpy

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If the sinking fund isn't sufficiently funded and a major repair comes along, you're going to be asked for a significant contribution whether you can afford it or not.

The Management Companies don't tend to care about how they spend your cash either. Self management is the way to go if you can get over 50% of the leaseholders interested.

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LH flats that apparently often work better than most are the sort of purpose built Edwardian/Victorian maisonettes you see a lot of in London and I dare say elsewhere. Typically they look like a house, but unlike conversions they have their own adjacent front doors. Usually there are only the two flats to consider and since they are both self contained with no communal areas (although the garden is sometimes shared) there are no common areas to be maintained. Also if there is a question of buying the FH there is only one other person to deal with, and if they don't want to buy their share, it's possible to buy the whole.

Maintenance charges are also typically much lower than in blocks, and I gather frequently there are none at all, since there is no lift or communal areas.

I looked at several with a relative who was thinking of buying, and must say they struck me as a much better bet than most blocks or conversions, especially any on the fist floor (no noise from above) and quite a few had their own private bit of garden, with their own access, from purpose built steps if on the 1st floor.

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Purchasing the freehold is a good thing, but can be costly, the length of lease and ground rent of each individual flat makes up the calculation total. A new management company has to be set up and each flat has to be a director of that company and one person nominated as the Secretary. Shares have to be issued and transferred if any flat is sold and the change in directors has to be registered at companies house, along with annual accounts. Not a massive hassle, an accountant can take care of it for a few hundred a year. But you can extend your lease at any time for minimal cost (we extended ours in 3) to 999 years and it cost 500 quid) and normally would make a place more sellable in the future if you so desired.

Each owner only has to be a shareholder of the ltd co, not a director. Many choose to be "directors" so they can boast to friends at dinner parties that they are directors of a property management company. You don't have to see your share in the ltd co. if the flat is sold but it is normal. The freehold co is a separate legal entity.

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Don't know whether it would apply to you, but I've heard that it's a lot more difficult to get a mortgage on such a property - lenders aren't keen. Not sure why, unless it's e.g a possible later change to something like a chippy, with smell and increased risk of fire.

Self-fulfilling prophecy maybe? Lenders are reluctant to lend on flats above shops therefore there is less demand for flats above shops leading lenders to be more reluctant to lend on flats above shops, etc, etc?

On the plus side my dad reckons the nicest, and cheapest, flat he ever lived in was above a retail shop. The shop closed soon after he got in from work each day so there was no external noise, which is quite a contrast to the average thin-walled flat conversion (or even ground floor purpose built)...

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new kitchens,

You're liable for other peoples new kitchens as a leaseholder of a council property? Seriously? I didn't think the liability extended that far, I thought it was for improvements to the communal areas, condition of the building no the contents of the other flats.

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