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Spindler

Stuck in Leasehold House

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I really don't understand why people bother with leasehold.

Not so long ago I was following a case in Private Eye. The gist of it was that tenants in leasehold flats that had cladding similar to Grenfell tower were being shafted to the tune of £20k each for the removal of that cladding. The owners of the flats were offshore companies unwilling to stump up the money for removal themselves. The tenants took it to court. If I recall correctly I don't think the case has been resolved yet, but it didn't look good for the tenants. 

Then there's all the stories like the link about where ground rents double and triple. 

Never 'buy' leasehold. Never! It's a scam. 

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It's not always bad - depends what you buy.  Family member bought a maisonette, purpose built Edwardian with a garden, one of just 2, 95 year lease, minimal ground rent, no service or maintenance charges. and proceeded to buy the freehold at a reasonable price (worked out via a formula - the Fholder can't just charge what they like). 

Buying a LH newbuild house, or a flat in a new or newish block, is a whole different matter though. Wouldn't touch those with a ten foot  bog brush.

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38 minutes ago, Orb said:

I really don't understand why people bother with leasehold.

Not so long ago I was following a case in Private Eye. The gist of it was that tenants in leasehold flats that had cladding similar to Grenfell tower were being shafted to the tune of £20k each for the removal of that cladding. The owners of the flats were offshore companies unwilling to stump up the money for removal themselves. The tenants took it to court. If I recall correctly I don't think the case has been resolved yet, but it didn't look good for the tenants. 

Then there's all the stories like the link about where ground rents double and triple. 

Never 'buy' leasehold. Never! It's a scam. 

totally agree no freehold no sale......i have said many times its a long term rental.....those leaseholders you mention havent got a leg to stand on they are responsible for the maintenance costs

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2 hours ago, Spindler said:

totally agree no freehold no sale......i have said many times its a long term rental.....those leaseholders you mention havent got a leg to stand on they are responsible for the maintenance costs

It's not possible to buy a freehold flat. Leasehold doesn't have to be bad...depends on the terms of the lease. Traditionally they were fine. The issue is mainly with leasehold houses...these are a scam.  But a scam  arising out of market conditions. If folk weren't fighting tooth and nail over shelter these scams wouldnt work...

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yes you can buyt he freehold or a share of the freehold to flats...i know someone in a block of 2 maisonettes...she bought the freehold to both

 

"But a scam  arising out of market conditions. If folk weren't fighting tooth and nail over shelter these scams wouldnt work... "

no this is down to builders taking advantage of stupid people....as if they didnt have enough butter on their bread...they decided to gouge some more...they would have tried this eventually whatever the conditions....because theyre just plain EVIL

 

Edited by Spindler

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6 hours ago, Spindler said:

Poor buggers. Just awful. The ones with ground rent doubling every 10 years are unbelievable. The (new) freeholders who have bought the freehold from the (evidently) dodgy developers must be akin to hedge funds who buy e.g. Venezuela's furrin debt for pennies in the pound - contractually ridiculous, but a contract nonetheless. 

It looks like the UK government are doing a review - but will they over-turn exiting unfair contracts? Their problem is any changes to a medieval system brings focus on that ridiculous system - how do they legislate against the madder bits of a medieval leasehold system without bring the entire mad system into question? Where can they legally draw the line between fair/unfair leasehold? With a specefic % increase each year? Enormous can of worms the greediest housebuilders have created by coming up with patently insane leaseholds, specifically designed to be sold on.

OT, but the thisismoney article is an awful non-disclosure of VI as well;

Quote

We asked two leasehold experts at Osbornes Law what you can do about it.

Guy Osborn, leasehold reform department, Osbornes Law

Guy Osborn, leasehold reform department, Osbornes Law 

Guy Osborn, leasehold reform department, Osbornes Law, replies:

Osbornes Law, Osbornes Law, Osbornes Law

Where is the acknowledgement that this is (clearly) an advertising article for Osbornes Law? It very much looks like Osbornes Law has paid for this - where is that made clear?

I've just made a complaint to the ASA about this - I'll update this thread with their (inevitable "we won't do anything about it" response). They won't care because online stuff is unregulated.

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5 hours ago, Mrs Bear said:

It's not always bad - depends what you buy.  Family member bought a maisonette, purpose built Edwardian with a garden, one of just 2, 95 year lease, minimal ground rent, no service or maintenance charges. and proceeded to buy the freehold at a reasonable price (worked out via a formula - the Fholder can't just charge what they like). 

Buying a LH newbuild house, or a flat in a new or newish block, is a whole different matter though. Wouldn't touch those with a ten foot  bog brush.

I had understood that the leaseholders should be offered the freehold, on a sale of the freehold, but may be wrong.

There were some legal changes a while ago that established a formula that leaseholders can use, and there is AFAIK a right to buy for leaseholders. But if that formula is based on the value of the freehold, then the doubling-every-10-years leaseholders would probably still be screwed, as the formula must include the long term value of the freehold - which in this case will be enormous in a few decades.

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I still don't understand how the solicitors who allowed doubling ground rates to get through haven't been sued to high heavens yet. 

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31 minutes ago, Upabove said:

I still don't understand how the solicitors who allowed doubling ground rates to get through haven't been sued to high heavens yet. 

What you need to grasp is that the people who "bought" (Inverted comma's because i don't believe leasehold constitutes purchasing anything) these leaseholds are financially illiterate......and after borrowing all that money to "buy" the leasehold are tapped out.....legal action costs a lot of money......and there is no guarntee of success.....simple fact is i suspect in a lot of these case the builders pointed the "buyers" to their own solicitors which i would think is illegal because i would not be surprised if they hinted heavily they'd just sell it to someone else who was going to use their solicitor....

Years ago i looked at some really nice flats(lord knows why with my view on leasehold). and my uncle did as well...we both had freeholds and were looking at downsizing/property abroad mix.....the developer...turned round and said we havent got time for you to sell...we want immediate deposit and completion in 4 weeks.....well that'll limit your market say's I ...they didn't give a flying ****...i guess they were only interested in BTL and cash ready types.....deposit lol....i don;t need to put down a deposit in the 2nd hand market...these rogues make up their own rules....and with these leasehold scandals..you ca see there is no moral  code...there simply is no level they wont stoop to ...they are utter scum.....and tbh scum doesnt really cover it !

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1 hour ago, Upabove said:

I still don't understand how the solicitors who allowed doubling ground rates to get through haven't been sued to high heavens yet. 

+1 I think the law society should investigate.  The BMA (I hope) would investigate doctors who were that bad.

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IIRC there was an article discussing the solicitors views on people signing the dotted line when properties involved leaseholds.  During legal contract reviews and whatnot related to the property and the mortgages themselves, the solicitors made it very very clear to the buyers that there were implications such as the above mentioned.  Buyers chose to continue and ignore their advice.

What was interesting about that article is a group of solicitors came together in a forum and concluded this behaviour had become common practice as buyers were so so desparate to proceed, whatever it took.

Behaving responsibly doesn't seem to reap much rewards these days, does it?

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52 minutes ago, iamnumerate said:

+1 I think the law society should investigate.  The BMA (I hope) would investigate doctors who were that bad.

I like to think the solicitors would have covered themselves for this... as mentioned above, many buyers chose to overlook the matter despite it being spelt out to them.  

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4 minutes ago, blackhole said:

I like to think the solicitors would have covered themselves for this... as mentioned above, many buyers chose to overlook the matter despite it being spelt out to them.  

Maybe you are right in which case the buyers were lunatics.

If the buyers got a mortgage you would have thought that the bank would have worried about the leasehold condition - after all if after 20 years the mortgage can't sell the house, then if they stop paying there is no point in repossessing. 

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18 hours ago, Spindler said:

Not the Tories.

Leasehold have been kickign around for years.

The buse/leasehold milking started under Labour.

Some places - flats in cities - you are always going to have to get leasehold.

I agree that you should not buy a house esp. new estate with a leasehold. But ... people use a solicitor who will warn them bu they dont listen - they see £££££££££

 

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26 minutes ago, iamnumerate said:

Maybe you are right in which case the buyers were lunatics.

If the buyers got a mortgage you would have thought that the bank would have worried about the leasehold condition - after all if after 20 years the mortgage can't sell the house, then if they stop paying there is no point in repossessing. 

Theres probably cases of a solicitor not discovering a leasehold - and youd be able to sue on that. But these are rare.

More likely that the solicitor made the buyer aware that the place was leasehold, explained what the negative aspects are ... an the buyer went ahead.

Article like this are only telling half the story:

https://www.chroniclelive.co.uk/news/north-east-news/stunning-houses-newcastles-most-beautiful-13851443

Lovely houses and very very central

https://www.google.com/maps/@54.9772031,-1.6168545,3a,75y,99.81h,83.53t/data=!3m7!1e1!3m5!1spdXOhvpholbqS9B4WNpdww!2e0!6s%2F%2Fgeo1.ggpht.com%2Fcbk%3Fpanoid%3DpdXOhvpholbqS9B4WNpdww%26output%3Dthumbnail%26cb_client%3Dmaps_sv.tactile.gps%26thumb%3D2%26w%3D203%26h%3D100%26yaw%3D168.672%26pitch%3D0%26thumbfov%3D100!7i16384!8i8192

However .... they were aware of the leasehold when they bought the property. The years left have run off.

A quick look shows they are bought cheap - again leasehold puts buyer off rightly

https://houseprices.io/?q=St+Thomas'+Crescent%2c+Newcastle+Upon+Tyne&p=2

Howard Philips, one of the residents effected by the situation, said: “We bought this house as a family home but our children have moved on, me and my wife are in our seventies and we would like to move into a smaller house with fewer stairs.

“This whole affair has devastated us, we really don’t know what to do next.”

Phyll Buchanan, 60, is in the same situation.

She said: “We had an offer put in on the house in 2014 but as soon as the leasehold situation came to light it was over.

“Buying this house was meant to provide security for our daughters but now it’s just a wasted asset and, rather than leaving them something, we’ll be burdening them with a house they must maintain but can’t sell.”

Tough for these. These are exceptional legal situation and its not changed sicne they bought the houses.

People buying leasehold due to scammer builders have a case. These people do not - the legal situaton as been in place years - centuries.

 

 

 

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38 minutes ago, iamnumerate said:

Maybe you are right in which case the buyers were lunatics. 

If the buyers got a mortgage you would have thought that the bank would have worried about the leasehold condition - after all if after 20 years the mortgage can't sell the house, then if they stop paying there is no point in repossessing. 

" Maybe you are right in which case the buyers were lunatics. "      Entirely Possible

"If the buyers got a mortgage you would have thought that the bank would have worried about the leasehold condition "

Be interesting to see if lenders start paying a bit more attention to this......imagine a scenario...deep housing crash...negative equity...in a few years....leaseholder hands back the keys......lender sells for buttons.....with the full recourse mortgage the former leaseholder is on the hook for a massive shortfall......but they won;t be worth pursuing....but the lender or the lenders agents will keep tabs on them for 12 years...looking for wealth/inheritance for example.......

 

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the sad fact is these mugs didnt understand you dont own jack with a mortgage anyway.....but you got yourself on the hook to be gouged.....trying to pay off a monster loan (poss HTB as well)...and then due to the contract you are getting fee gouged and the supposed "asset" you signed up to due to the terms is going in the other plunging..and this before the real effects of the biggest correction we will ever see over the next few years.....they think they are ********* now imagine the scenario in 2021 !

Edited by Spindler

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4 minutes ago, Spindler said:

" Maybe you are right in which case the buyers were lunatics. "      Entirely Possible

"If the buyers got a mortgage you would have thought that the bank would have worried about the leasehold condition "

Be interesting to see if lenders start paying a bit more attention to this......imagine a scenario...deep housing crash...negative equity...in a few years....leaseholder hands back the keys......lender sells for buttons.....with the full recourse mortgage the former leaseholder is on the hook for a massive shortfall......but they won;t be worth pursuing....but the lender or the lenders agents will keep tabs on them for 12 years...looking for wealth/inheritance for example.......

 

Lenders *have* always paid attention to leaseholds. Try getting a mortgage for a lease with less than 100 years.

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1 minute ago, spyguy said:

Lenders *have* always paid attention to leaseholds. Try getting a mortgage for a lease with less than 100 years.

yes but have they been paying attention to these new type of fee gouging leaseholds is my point...

 

a few cases of keys going back will certainly wake them up if they/re not already alert to it....i think its quite possible its been off their radar and is now coming on it....

Edited by Spindler

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1 hour ago, spyguy said:

Some places - flats in cities - you are always going to have to get leasehold.

Not necessary to have the UK system of potentially-abusive separate freeholder though.

In the UK system there are already three systems which are usually advertised as leasehold:

1. Share of freehold. This is what is used for flats in most of the rest of the world and should IMO be the only option and the one that all existing moves towards.

2. Leasehold with a separate freeholder. Not only private freeholders but often the council are the freeholder and ground rents which are bounded by what the contract says are the smallest problem. Management fees, few hundred for admin fees for looking at a plan to change anything, expensive insurance with a kickback to the freeholder/agent who arrange it, huge fees for maintenance and gardening and concierge and .... well the skys the limit really and either you pay up or lose your flat so they are effectively a blank cheque included as part of the lease.

3.Duchy leaseholds. I don't know the exact details of these but owned by the duchy of Cornwall and leases tend to involve rent of a few hundred a month with lengths of 10-20-30 years and advertised as "renewable". House still prices as 300-400-500k which is maybe only 100-200k less than it would be freehold. Some [limited] details can be seen on RM listings in places like dartmoor. I have read there were special acts of parliament created specially for duchy leaseholds.

One easy [and free for the gov] measure that could be implemented is to require ads for leaseholds to include current and maximum possible monthly costs as well as a complete list of fees and potential increases to them. Better still ban these fees. Given how long they are taking with the lettings fees ban, I'm not holding my breath.

Have the current reforms insisted on share of freehold as the only option for new blocks?

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3 hours ago, iamnumerate said:

+1 I think the law society should investigate.  The BMA (I hope) would investigate doctors who were that bad.

Doubt it, it's not their job. The BMA is the largest trade union for doctors (by some margin) and would simply say that this is well outside their remit. In theory the General Medical Council are the ones who police the medical profession, not the BMA. Mind you, given the GMC's track record, you'd be quite right to include (I hope) in the second sentence of your post... 

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37 minutes ago, Shrink Proof said:

Doubt it, it's not their job. The BMA is the largest trade union for doctors (by some margin) and would simply say that this is well outside their remit. In theory the General Medical Council are the ones who police the medical profession, not the BMA. Mind you, given the GMC's track record, you'd be quite right to include (I hope) in the second sentence of your post... 

Thanks for the correction.

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Ok, my 2p as I own a leasehold house.

We looked at a housing estate in early 2017 before the media attention to leasehold, and it was never told it would be leasehold until we sat down and had a discussion. At that point we said no-way, and went away.

Cue our house search for the remainder of 2017, and eventually we went back to the same development as the leasehold houses were priced a good 20-25% less than older freehold houses. We had a good look at the lease, and the covenants were reasonable with the ground rent at £150 pa (RPI increases every ten years).

We tried to buy the freehold at point of purchase, but the developer wouldn't entertain it. We even offered £10k to buy it! They did however agree not to sell it within two years, and offer us first refusal at that point. They also agreed the price would not exceed 25 times ground rent, so £3750 for us.

The law regarding Freehold on Leasehold houses (not flats) is that you do not have the right to buy the freehold within two years of ownership. The process is enfranchisement if done formally.

Now we've owned the lease for 18 months, they have agreed to sell us the freehold early. Most of the [draconian] covenants are removed, and fee paying covenants expire after five years (so another 3.5 years away). The covenants that remain we agree with, for example we wouldn't want our neighbours having livestock etc. Oh, and we can have commercial vehicles that don't exceed a certain size.

Overall we are very very happy, 1. that we've bought a house far cheaper than other older houses, and cheaper than other freehold new estates, and 2. the covenants are to be seriously relaxed - and I've owned another 2009 freehold new build, and the covenants we far more draconian.

We are buying via the informal process, and have chosen to just accept the price as costs of surveyors and legal negotiating would cost more than we'd save.

To be honest, the developer should have just sold the freehold as they would have got more money for the house!

 

This isn't to say others have been caught out with the doubling ground rent. And to their defence, the solicitor should have advised them properly - how many first time buyers even knew what a TP1, covenant etc is. I bet a lot of those buyers didn't even see the lease until way into the process.

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5 hours ago, blackhole said:

IIRC there was an article discussing the solicitors views on people signing the dotted line when properties involved leaseholds.  During legal contract reviews and whatnot related to the property and the mortgages themselves, the solicitors made it very very clear to the buyers that there were implications such as the above mentioned.  Buyers chose to continue and ignore their advice.

What was interesting about that article is a group of solicitors came together in a forum and concluded this behaviour had become common practice as buyers were so so desparate to proceed, whatever it took.

Behaving responsibly doesn't seem to reap much rewards these days, does it?

Some estate agents try to get you to use 'their solicitor' for legals, so is it possible in some cases that the house builders & solicitors were in partnership, where the solicitors didn't explain or make available the full leasehold details, because their income depended solely on the take up of these shoddy leasehold newbuilds they were involved with?

Not defending buyers that are ignorant and don't read small print, but I can only imagine the sales pitch/stage managed setup in a Help to Buy development office, the whole process of 'making everything easy for the buyer', we'll take care of everything for you' type ******** etc. etc.

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  • 293 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • up 5%



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