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Housebuilders must halt leasehold sale of new houses, says minister


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Ah, Help to Buy. Another car crash looming for the taxpayer as people will simply point out that they've been rinsed by a purchase made via Govt. endorsed scheme. That a house builder could possible be vetted for even something as dumb as Help to Buy while employing this sort of sharp practice is a pisstake.

I like how the BBC article states that the investors would find it a useful income stream to fund, eg, pensions. More intergenerational ransacking in progress. Every which way.

 

Democorruptcy was onto a related leasehold scam like a rat up a drainpipe ages ago, in that leasehold charges are covered by the taxpayer, seemingly without limit, for those with certain benefit entitlements. So the financial sector is on it like a vampire.

Edited by The Knimbies who say No
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19 minutes ago, The Knimbies who say No said:

Ah, Help to Buy. Another car crash looming for the taxpayer as people will simply point out that they've been rinsed by a purchase made via Govt. endorsed scheme. That a house builder could possible be vetted for even something as dumb as Help to Buy while employing this sort of sharp practice is a pisstake.

I like how the BBC article states that the investors would find it a useful income stream to fund, eg, pensions. More intergenerational ransacking in progress. Every which way.

 

Democorruptcy was onto a related leasehold scam like a rat up a drainpipe ages ago, in that leasehold charges are covered by the taxpayer, seemingly without limit, for those with certain benefit entitlements. So the financial sector is on it like a vampire.

They would be especially if there's an eventual chance of billions of pounds from some little semis.  

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7 minutes ago, Wayward said:

Leasehold is necessary for flats...but I have no idea what the justification is for selling houses leasehold other than as a scam.

I have a flat in Spain. Common practise over there is that the owners of blocks of flats co-own the freehold. They have laws over how residents' communities control their joint interests.

If developers were forced to give up the rights to the land when they develop something here, there would be no need for flats to be leasehold. If the government is going to look at the law to prevent developers from these sharp practises with houses, they should go all the way and examine flats too.

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Quote

'I signed £1.3bn rent contract by mistake'

6 hours ago

Luke Mosson bought a flat for £150,000, but later realised that a clause in his contract meant the ground rent over the whole lease would cost more than £1.3bn.

He is now negotiating with his landlord to be released from that clause.

you couldn't make this up!

http://www.bbc.co.uk/news/uk-38834621

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Why do many on this thread believe all UK flats are leasehold and it makes sense ? 

I'm pretty sure it's mainly the SE where this happens and most other places have a shared freehold (Jockland certainly is)

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15 minutes ago, ccc said:

Why do many on this thread believe all UK flats are leasehold and it makes sense ? 

I'm pretty sure it's mainly the SE where this happens and most other places have a shared freehold (Jockland certainly is)

Hi- I have never encountered shared freehold flat...all have been leasehold.  Some oldish (1950s) and some modern...this is in Hampshire.  Sorry no experience of Scotland.  Leasehold does work when done in the traditional way - ie fixed low nominal ground rent - issues arise when greed creeps in.

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 'The land beneath my home was sold'

http://www.bbc.co.uk/news/uk-38834619

Quote

Property developers are selling the land that thousands of homes are built on, without the knowledge of the people who bought those houses.

"because it's classed as a flat "

 

 

Edited by Saving For a Space Ship
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4 hours ago, Wayward said:

Leasehold is necessary for flats...but I have no idea what the justification is for selling houses leasehold other than as a scam.

It has been in existence for many, many years. The difference in the example publicised in the recent article is the escalation clauses. Ground rents for leasehold houses were typically a few pounds a year. The amounts may have given the freeholder a reasonable income in the past but after the inflation of the post war years they are now negligible. Of course freeholders may have other ways to increase the running yield. For example the lease may oblige the leaseholder to insure the property using an insurer chosen by the freeholder, the premiums may well be higher than obtainable elsewhere because the freeholder receives commission from the insurance broker.  

Is ground rent a scam? Not always, envisage the situation where a land owner allows someone to build a house on land he owns in exchange for payment of ground rent. Would that be unreasonable. I would certainly consider it if it meant I could build a house in a location that was desirable for me.

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1 hour ago, sleepwello'nights said:

It has been in existence for many, many years. The difference in the example publicised in the recent article is the escalation clauses. Ground rents for leasehold houses were typically a few pounds a year. The amounts may have given the freeholder a reasonable income in the past but after the inflation of the post war years they are now negligible. Of course freeholders may have other ways to increase the running yield. For example the lease may oblige the leaseholder to insure the property using an insurer chosen by the freeholder, the premiums may well be higher than obtainable elsewhere because the freeholder receives commission from the insurance broker.  

Is ground rent a scam? Not always, envisage the situation where a land owner allows someone to build a house on land he owns in exchange for payment of ground rent. Would that be unreasonable. I would certainly consider it if it meant I could build a house in a location that was desirable for me.

hi thanks....so these are houses you are talking about not flats? I just don't see the need to sell a house as a long lease?? Unless you wanted to create a contrived income stream.

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The other more general point about that sort of contract is that it ingrains inflationary pressure and the expectation of inflation.

Doubling every 10 years is roughly 7℅ a year.

Ground rent for flats usually tended to be very small maybe just a few quid a year.  A nominal amount and some would say  mainly to make the point about who owned the land - certainly never amounting to anywhere remotely near to billions over the length of the lease.

Edited by billybong
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Although this guy is clearly an idiot and the doubling (i.e. 7% increase a year) of the ground rent is clearly too high, the article's title is misleading as they have added up the total ground rent over 190 years! I'm sure he will be dead long before he had paid £1.3b! At worst, if say he lives there for the next 50 years until he pegs it, he will end up paying £77500 in ground rent! And the flat will be unsellable, as anyone with half a brain wouldn't buy with that sort of ground rent cause.

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4 hours ago, Wayward said:

hi thanks....so these are houses you are talking about not flats? I just don't see the need to sell a house as a long lease?? Unless you wanted to create a contrived income stream.

Well its a future income stream. I wouldn't use the term contrived, I'm sure if you researched it more you would find more reasons why a landowner would like or need to create a passive future income.

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9 hours ago, renting til I die said:

Although this guy is clearly an idiot and the doubling (i.e. 7% increase a year) of the ground rent is clearly too high, the article's title is misleading as they have added up the total ground rent over 190 years! I'm sure he will be dead long before he had paid £1.3b! At worst, if say he lives there for the next 50 years until he pegs it, he will end up paying £77500 in ground rent! And the flat will be unsellable, as anyone with half a brain wouldn't buy with that sort of ground rent cause.

PMSL - £77500 is still 20% more than I paid for a 3-bed semi detached 15 years ago. It's just ground rent for a shit flat. What a scam!

Although, he should have read the T's and C's, so he is a fool.

Edited by dpg50000
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30 minutes ago, moneyfornothing said:

Normally when you buy a house, you pay for land cost + building cost + builders profit.. there should have been a substantial difference in the initial price paid to buy a house as a leasehold as the land cost is not being paid for..did this happen or are the builders having their cake and eating it too?

Spot on.

As someone said above - if a landowner allows someone to build on their land and charges a reasonable annual lease for it then maybe this isn't too bad.

What we are talking about here though is housebuilders buying land 100% of a landowner. Building flats/houses on this land then selling for full whack prices - whilst at the same time keeping the ownership of the land to enable continued income from it.

100% scam IMO. Only reason people accept it is because it's been around for so long folk don't sit back and realise just how much of an **** ******ing they are getting. 

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21 minutes ago, ccc said:

Spot on.

As someone said above - if a landowner allows someone to build on their land and charges a reasonable annual lease for it then maybe this isn't too bad.

What we are talking about here though is housebuilders buying land 100% of a landowner. Building flats/houses on this land then selling for full whack prices - whilst at the same time keeping the ownership of the land to enable continued income from it.

100% scam IMO. Only reason people accept it is because it's been around for so long folk don't sit back and realise just how much of an **** ******ing they are getting. 

I would accept leasehold if buying a flat...but for a house I just don't accept it other than as being a trick and I would require an appropriate discount as compensation.

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15 minutes ago, Wayward said:

I would accept leasehold if buying a flat...but for a house I just don't accept it other than as being a trick and I would require an appropriate discount as compensation.

I still don't see why leasehold is acceptable for flats. A block of flats is really just one big house you own a share of. I would expect to own a share of the land it sits on too.

Unless of course the sales price was low and reflected this of course. Can't see that in the UK.

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3 hours ago, ccc said:

I still don't see why leasehold is acceptable for flats. A block of flats is really just one big house you own a share of. I would expect to own a share of the land it sits on too.

Unless of course the sales price was low and reflected this of course. Can't see that in the UK.

okay interesting but I have never seen shared freeholds for flats in southern England...lots of questions in my mind about how this would work.  With a leasehold we have one party with the superior interest but with shared freehold are all the 'owners' supposed to act as a democracy?...I can foresee disagreements arising...not quite like a hippy commune but you get the idea.

I wouldn't expect a discount for a flat being leasehold (unless short lease) because all other flats are leasehold so all are comparable.  With houses most are freehold and so I would expect a discount for a leasehold house v freehold, for compensation for the inferior interest and onerous leasehold obligations- most obviously rent...you would need to calculate the NPV of the rent obligation and add some...

I think these leasehold houses are a scam, a contrived income generator that poorly advised buyers (tenants) are falling into.  It would only work in a sellers market, the house builders are trying their luck and getting away with it..it seems (for now).

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Just a thought: We already have the "Commonhold and Leasehold Reform Act 2002" which generally failed as apparently only about 20 developments ever used that tenure.

According to this article, the act required that all stakeholders be in agreement to migrate existing tenures to Commonhold (which obviously wouldn't happen if freeholders are making extra revenues from lease extensions every x years, plus ground rents...).

How about modifying the above act so only the leaseholders are required to be in agreement (thus enabling more leaseholders to escape the freeholders' grip)? This could take the form of a one-off fixed low price payable to residential freeholders.

Obviously the legal experts converting the tenure would be in for a pile of extra cash, but at least there is some competition there in terms of different priced legal experts.

Would take a progressive government to do this though...

 

EDIT: Obviously the above post relates to leasehold flats. IMO leasehold houses should be banned by law.

Edited by The Young and the Nestless
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31 minutes ago, Wayward said:

okay interesting but I have never seen shared freeholds for flats in southern England...lots of questions in my mind about how this would work.

They do exist but mostly in older properties because new ones (built this century) will be trying to fleece you for whatever they can. I've seen a couple advertised and viewed one last year. IIRC the owners were part of a specifically formed company and made all maintenance decisions by a regular committee that met twice a year. I'm sure disagreements can occur but was told theirs ran pretty smoothly. Costs seemed reasonable compared to other leaseholds. For me the potential problems would be out-weighed by the added level of control and downward pressure on costs.

Personally I think leasehold should be ended. It's rentier scum behaviour.

 

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4 hours ago, ccc said:

I still don't see why leasehold is acceptable for flats. A block of flats is really just one big house you own a share of. I would expect to own a share of the land it sits on too.

Unless of course the sales price was low and reflected this of course. Can't see that in the UK.

The only way you can guarantee people will pay service charges for repairs of common parts is by leasehold. Failure to pay & lease can be forfeited.

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18 minutes ago, Fatmanfilms said:

The only way you can guarantee people will pay service charges for repairs of common parts is by leasehold. Failure to pay & lease can be forfeited.

It looks like Commonhold also enables repair charges to be enforced. (But as mentioned above, nobody really uses Commonhold.)

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10 hours ago, dpg50000 said:

PMSL - £77500 is still 20% more than I paid for a 3-bed semi detached 15 years ago. It's just ground rent for a shit flat. What a scam!

Although, he should have read the T's and C's, so he is a fool.

I agreed, it is still a ridiculous sum for ground rent. I was just pointing out that it was a damn slight less than the £1.3b the article would have you believe he would be paying.

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