The Daily Mail makes a good point today: tens of thousands of leasehold house owners – and a fair few thousand potential buyers – are in limbo land.
They do not know what is going to happen to this form of tenure.
LKP’s advice is: do not touch a leasehold house with a barge-pole.
They are a scam and the housebuilders have acted disgracefully and need to put right matters with their wronged ex-customers.
If you want to buy a house, insist on it being freehold and don’t pay much for it, either.
Many of the valuations of the leasehold houses do not stand up to close scrutiny.
And always, always, ALWAYS your own lawyer and valuer and pay for them. If you cannot afford to – and so are tempted by the sellers’ freebies – ask yourself a) why are they free?; b) can I afford to buy anyway?.
The leasehold house racket is now done for, whatever the detail of Sajid Javid’s policy.
He has a whip hand: developers’ shared plunged five per cent today on news of a threat to the Help To Buy scheme, by which taxpayers help first-timers buy new-build homes.
45 per cent of Taylor Wimpey’s business depends on this taxpayer funding.
This story still has legs …
Purchasing a property is probably the biggest investment any person will make in their life. Don’t fall into temptation born out of desperation. Take your time. Use a truly independent solicitor, not one whose “advice’ may be compromised by a too close relationship with the seller.
A few hundred pounds you may appear to save will end up costing you many thousands of pounds later. Insist on freehold at the time off purchase. Don’t succumb to promises of a freehold after completion..
There are dramatic changes in the offing. If you are patient, you will be able to buy a freehold house, and remember the developers need to sell houses more than you need to buy them?
Whilst an initial gut feeling would be not to buy a leasehold house on greater reflection a second hand leasehold house should not be dismissed altogether – because of press comments over leasehold prices will have dipped quite substantially . I would have thought that one should consider a leasehold house by factouring in the cost of removing the ground rent .
Firstly get the lease and this can be downloaded in many cases from the Land Registry web site for £3
Then get a surveyor with experience of leasehold matters to caluculate the discounted value of the rent, and if the lease term is less than 125 years the value of the reversion. DO NOT RELIE ON FREE VALUATIONS pay a proper fee probably about £500 plus VAT
Allow a further £4K to cover all the legal s and valuations of your own surveyor and the landlords
Armed with this info consider making an offer reflecting the cost of removal of the ground rent and have the current lessee serve the enfranchisement notice on exchange
Many leasehold houses with unpleasant ground rent terms can not be sold at the moment because of the press coverage Here is an oppportunity by acting reasonably and professionally to obtain a property at a competitive price.
Wow Stephen. You don’t take any prisoners do you. Kick em in the teeth while they are down, through absolutely no fault whatsoever of their own (the leaseholder that is)
I just would not advise anyone to move into (notice I dont say “buy”) a house/flat with a ” mondern age” (=onerous) lease
In other words, Stephen, wait for a crash in value and buy up the property cheap,Never mind the losses that the previous owners were duped into? What a lovely world we live in?
Sorry, can’t see how this advice fits a campaign website dedicated to improving rights of leaseholders?
Rather whiffs of ‘profiting’ (even if professionally and reasonably done whatever that means in context) at an existing leasehold house owner’s sorry state of affairs.
Also cannot see the logic? Pay £500 for a valuation of the premium, then pay a ‘further fee’ for your valuer’s fees and the freeholder’s?
Perchance a valuer?
If the house owner can afford to enfranchise, why give an ‘opportunistic’ buyer a nice little earner?
Or does this plan only apply to house owners in desperate need to sell, which goes back to my opening concern?
I don’t own a leasehold house, so no point no opportunists lurking outside my window!
The advice given was initially “don’t touch leasehold with a barge pole” this would be profoundly disturbing news for those existing leaseholds wanting to sell
I was suggesting ways in which a deal could be structured mindful of the problems contained in some leases. My suggestion would be to create some interest in existing leasehold . The advice given in the article suggested there was no hope for existing leaseholders wanting to sell.
If you had a leasehold house and you were struggling to sell my idea may give some ideas as to how to sell it
There is a real danger that in a market that is cooling that prices particularly for second hand leasehold houses could be set to fall quite dramatically as buyers not understand what is an acceptable ground rent as opposed to an onerous ground rent dismiss any viewing altogether of leasehold houses. The press coverage needs to be a bit more balanced pointing out the differences between onerous rents and mortgagee acceptable rents
Stephen, regretably the only correct answer re a house or flat with a “mondern day” (onerous) lease is, Do NOT touch it with a barge pole. Yes there will be sacrifices and lambs to the slaughter re current leaseholders of onerous leases but, and thats the big but, the problem can be eliminated etc by some MEANINGFUL action by the government which would/should follow through with said amended leases being saleable at correct prices again
The answer is, is that houses should never have been sold as leasehold. Those that “engineered” an artificial value enhancement solely for their benefit must now face up to the consequences of their actions and restore the freehold to the home owners., be they first or subsequent buyers .
Thing is though anybody looking to sell a leasehold house now is going to have to reduce the price from the outset to make it more attractive to a buyer. Once the buyers solicitor spots the onerous clauses and rent reviews, which unlike the current owners solicitor certainly will what with all the publicity (which I welcome by the way even though I’m somebody with the most to lose). Then the buyer will be looking for further reductions to offset the cost of the freehold, Even though it’s already being advertised at a reduced price due to the lease anyway
For somebody to do that theirs a big chance they’d walk away with nothing at all, not even a return on their mortgage payments for x number of years. . It is nothing more than a double whammy, and if I’m perfectly honest, personally, I’d rather take a hammer and bolster to the house and pull it down brick by brick. After all I’m leaving with nothing as it currently stands, might as well have a little fun along the way!
Have to say, this was not the best piece ever written on the subject, and one should never, EVER, quote the Daily Mail.
Love it. Never read the Mail or look at the pretty pictures (not now).
The gov folks have to move fast, that’s all.
Meanwhile, for balance I liked Stephen’s analysis under another article about bench marking GR to its present value. Recommended exactly the same to DCLG. It offers a fair stepping stone reprieve for current leasehold houses and flats.
Bear in mind a lot of the ‘complex’ existing law predates the modern interweb. The world has moved on from complex formulaes that need ten people locked in a room with degrees in codology to argue out.
Imagine ground rents can be bought out separate to extensions. I think this accords with Stephen’s idea. Imagine law defines the ‘fair ground rent’ by reference to its capitalisation (present value)
Imagine also a government widget similar to the Bank of England inflation one, only linked to RPI indices and actual Land Registry average sales (these already show property type by local areas).
The punter puts in their GR review date, previous review date, current ground rent and postcode, and the widget churns out the statutory increase. The punter serves a simple Review Notice to freeze the review. No need for valuers and solicitors and legal costs to determine nowt.
Imagine this widget goes further and lets the punter shove in all their GRs (or the review dates if not fixed) and gets back the capitalisation present value? Can use this to buy out their ground rent to nil separate to needing an extension with a simple notice. No negotiation, no offer of an ‘informal’ lease with hidden ‘bolt-ons’.
All it needs is imagination, clear law, and use of existing new technologies.
If you are referring to today’s article in the Daily Mail written by Angela Epstein,I shall defend my cousin!(even if I agree!)
In all the discussions concerning fairer ways of charging for ground rents, still I can find no explanation as to why houses that used to be sold on a freehold basis, have been sold as a leasehold? Isn’t any fairer system a bit like negotiating with a burglar as to how much he will steal from you?
If I was offeeed the choice of two identical houses,one with a 999 year lease at a peppercorn and one with a 999 year lease with a £250 ground rent I would pay more for the one with a peppercorn rent..
HOWEVER the discount rate I would apply would not be the rate currently used in valuation cases. I would apply a more simplistic method of more or less the number of years I expect to live there by the rent I would pay . I doubt that I would seek to discount that rather crude sum I would come up with
So on a rent of £250 I would in my mind value the benefit of a peppercorn rent over a rent if £250 as worth about £3000
In a formal valuation case the figure would be more like £5500 to £6000 if there rent doubled every 25 yrs throughout the term
If we are selling a house we try to present well it to get the best possible price. Many of us have been guilty of “tarting@ up our home to achieve this. Various tv programs seek to exploit this.
Therefore if a developer puts a rent on a lease hold basis on a house I don’t necessarily at face value have an issue with this PROVIDED it is crystal clear and admin terms are clearly set out at the start. The developer is only seeking to obtain the best possible price which in a free market economy he is expected to do
I am virtually on the verge of buying an ‘apartment’ (not a house). which is 1 of 30 new build flats. The terms are a GR of £250, then after 10yrs, it increases with the RPI every 5yrs thereafter. Does this sound reasonable ?
What if we go ahead under this agreement and then there is an announcement after the governments 8 week consultation ? Can the agreement be changed in line with the results of the consultation ? What’s to stop free-holding companies carrying on charging high fees irrespective of what they say in 8 weeks time ?
What is classed as ‘onerous’ and would the above be classed as onerous ?
Whose to say we sign up and then 2yrs later the freehold is sold onto a 3rd party. Can they suddenly change the terms and demand even higher fees ?
What rights do we have in demanding the purchase of the freehold at a reasonable price when buying the property ? or can this not be done (as the flat is 1 of 30 in this new development) ?
We are in limbo having sold our house and expected to make a decision on the purchase once our solicitor comes back in the next few day’s. It’s easy for people to say, ‘don’t touch it with a barge-pole’ but we have set our hearts on the flat and we cant afford to keep living in temp accommodation much longer, as well as there being a shortage of good property on sale.
Please remember we are buying a new build apartment NOT a house so not sure if this makes a difference. Everyone’s comments, suggestions and advice appreciated. – Thanks you.
Tony NO the ground rent terms do NOT sound reasonable. Talk to your lawyer and request that the onerous clause is removed. Is it a Taylor Wimpey new build or one of the others mentioned? Don’t sleepwalk into a nightmare. They need to sell the flat more than you need it. It’s time to have a chat ( without coffee) with your lawyer and the developer. Good luck.
Hello Tony, well lots of questions but so much more info needed to give full advice.
You “love” the flat but, think and think again first.
What area are you purchasing in.
Why do you need to buy leasehold.
You can find Freehold flats, but not new build (where the residents own the freehold lock stock and barrel. You are your own bosses, you appoint your own managing agent, you are in total control.
There is no ground rent to pay
I have experience of managing freehold apartment sites and they are miles better than leasehold.
It is not just the GR to consider, it is all the other charges a landlord/Managing Agent can legally impose
My mother lived in leasehold over 55s apartments and they were ripped off to hell, electricity, insurance, exit fees etc etc etc (And no, it was not managed by Peverel/Firstport, There are many many bad managing agents). in my mothers case the landlord was TAYLOR WIMPEY!!
I am now retired but I will never move to any leasehold, flat or house.
Just buy yourself a freehold bungalow and, when the time comes that you need care, let the NHS or private carers come to your property to help you.
There are so many factors to consider. Have you got money to burn. Do you mind if your leasehold property drops drastically in value.
Do you want to leave any money to children etc.
Personally I am not prepared to leave less to my grandchildren because of being ripped off by these builders and managing agents because I did not buy freehold.
It would be interesting to know what your solicitor has actually stated to you about your purchase and the lease
Kim is right. Tony, why do you have to go for new build with unacceptable ground rent.
Where my mother lived in over 55s purpose built apartments they were only 20 years old and still look like only 5 years old.
Ground rent never goes up and is 100 pounds per year.
Situated in Warwickshire in up market and well sought after town of Kenilworth
The complex is 28 two bedroom apartments
The above is just an example of what you can get if you must have an apartment
Thanks for all the comments. Much appreciated. Just to say it is NOT Taylor Wimpey or the others you mention. The Developers are Marrico.
Just some background info…. We are a couple who have just gone for early retirement and decided to ‘down-size’ to this two bedroom apartment. The area is considered to be one of the better post code areas for the city which is why we decided to pay a little more to have a nice, safe environment in a nice area. The apartment fitted our needs in terms of location (very near to good shops, cafe’s, restaurants, the city centre, a nearby gym, and two nice parks in a very leafy, tree-lined street. As mentioned, we have kept our eye’s open for other apartments but nothing seems to fit the above criteria. We paid a reservation fee for the apartment at the very beginning (please note this is not a deposit but a ‘reservation fee) which will be lost if we pull out although that would not be an issue if it was found to be an onerous contract.
We are also aware of service/management charges which amount to £100 p/month for the upkeep of all common grounds internally and externally including the lift, gardens, gates, etc. It’s a low-rise, 4 story development of 30 apartments.
I know we have total control in what we do (at this point) but it’s not easy to find a place that fits in with us as this apartment does regards the nearby facilities and lifestyle we want to lead. We scan the property websites daily and have visited other properties but they do not seem to match up to what we want so it’s not just a simple..”Hey go live somewhere else that’s freehold”. I don’t want to live somewhere I don’t feel comfortable in or is not right for us just because it’s freehold. And neither can we find anywhere that ticks all the boxes including it being freehold.
I have been in touch with my solicitors today (if this is who you mean when you say Lawyer ?) and have been constantly hounding them for answers stating all the points raised by the LKP. There reply verbatim was as follows :-
…..”We have been in touch with the Law Society ourselves and they have replied today that they too are still investigating the matters and cannot provide any guidance at this time. No one has any answers at the moment and this is a matter that will ultimately be determined but when is something we are not able to confirm.
The profession as a whole are looking into the matter including CML, insurance providers, developers , barristers to name few and it is not feasible or possible for us to have a remedy for these issues when the government are still looking into and consulting on the matters as it affects or may affect a very large percentage of leasehold Properties. “………
So we are still awaiting there progress and update and continue to be in limbo living out a suitcase.
So what’s people’s thoughts on the above ? Once again, thanks for for any comments and advice as well as experiences in this matter. Much appreciated. – Tony