Leasehold

Leasehold law is under review, and about time too.. At the moment it all too often seems like a licence for ripping people off over ground rent and maintenance charges. Not to mention the premium FHolders are allowed to charge for extending a lease.

I’d want to be sure at least, that the lease was still over 100 years, and be sure of ground rent/maintenance charges. These are often higher in new builds and in any block with lifts.

Cost of extending a lease shoots up after the 80 year point. What I find odd is that estate agents are often unaware of such a basic fact! ‘Oh, I don’t know - I’ll have to find out.’

We have a rental flat (one of just two) that is leasehold. Initially we were going halves with a dd who couldn’t afford to buy on her own - the idea was for her to rent out the 2nd bedroom and we’d take the income.
However, because of a supposedly absentee freeholder, her mortgage offer was withdrawn at the last minute.

Despite our solicitor* urging us to withdraw from the purchase, we went ahead anyway, because we thought it’d be a good buy.
*He turned out to be pretty hopeless anyway.

The freeholder turned out to be not ‘absent’, just hiding a few miles away under another name - because of debts attached to the FH! I had to use a tracing service to find him, and he only decided to admit his identity when he thought there was going to be money in it.

We ended up eventually buying the FH - a drawn out and expensive process, but I’m very glad we did it.

Our lease is now down to 82 years so we ought to extend, but at least we don’t have to pay a premium to a FHolder, just the legal fees.

minxie

Thank you all, I shall continue to seek a freehold property. The maintenance on some of the leasehold run into a couple of thousand annually plus ground rent. Thank you

I think you've made the right decision.
Two friends of mine are in leasehold flats and for one of them the service charge has become so high that she's having to move.
In the case of the other, the residents' committee can vote on whether they want work done. They've voted to have new balcony railings - which my friend doesn't want - at a cost of £5000 per flat.

If you are buying in England, as far as I am aware, all flats are leasehold. We have one, perfectly happy with the arrangement. It has the remains of a 999 year lease, all the flat owners own the lease and we employ agents to provide services such as grounds maintenance, roof, etc.,. Don't be put off, but do your research as we did. Ask about service charges and don't be persuaded by the lowest as this will likely mean there is no reserve fund to pay for major works such as roofing repairs, fencing etc. For reference, we pay just short of £900 per year and the externals and grounds of the small development are kept very well.

Hi there,
I have a leasehold property that I own outright...My advice is avoid if you can...My maintenance fees keep going up although often for good reason..Windows etc but I dont feel that I have control...I will be selling it this year .

Minxie Beware of any new dvelopment with a lease or built in the last 30 years, but get the solicitor to check the lease itself.

Before that leases are like the flat I owned at one point, DDs and my MiL's the ground rent is fixed or changes once every 50 years under a limited circumstances.

Beware any lease on flats where the flatowners do not own the lease themselves and manage it through a flat-owner controlled company, so that they have full control over all costs, whether regular maintenance, grounds management etc, or one off repairs.

Our bungalow is leasehold, built in 1958 we pay £3.50 twice a year.

The reason I am doing it, is we live on a boat at present. When it is no longer feasible for us to remain here. We would have somewhere on land to go to. We would then sell the boat and the house to buy a better house

I think minxie that first you need to ask yourself some basic questions about why you are buying to let.

If it’s for the rental income then a leasehold flat can be a good purchase in terms of annual return on your capital investment. They are usually cheaper to buy and return a higher percentage in rent.

If it’s for a Capital investment where you want to put a lump sum into property with a view to selling at a profit later then a freehold house is a better investment. It will increase in value more in the long term than a leasehold flat.

Also be aware of your obligations as a Landlord. A leasehold flat may cover many of those in the Service Charge whereas you will have to pay out yourself in a Freehold. Things like Landlord Insurance, Safety Certificates and tests, maintenance to a required standard, all sorts of things that owner occupiers don’t even think of could make Leasehold a less stressful option.

I have to ask. Have you really done your homework on these sorts of things

Rosina The conditions binding the lessee are stipulated in the leasehold contract they sign. There is no obligatory standard contract. If the leasehold demands a red rose on midsummers day, then you have to do it.

I understood that as as a leaseholder you own the inside of the flat - a solicitor described it as owning the plaster skim on the walls and the space therein. It puzzles me that leaseholders are constantly having to pay for outside maintenance; surely this is what the service contract payments are for, and as the person/company owning the lease owns the fabric of the building, they should pay for the major works. My friend (and others in her block of flats) was asked to pay thousands towards work that had not been carried out properly by a contractor, although the contractor had been employed by the leaseholder . She eventually sold and rented - her savings were almost gone.

A more positive point of view from me.
We live in a block of 9 flats and in 2016 we bought the freehold of the block between us.
We started off paying a management company to look after the block but in 2019 decided that we would do it ourselves.
We set up a limited company and my husband and I are directors and run the company.
All flat owners pay a service charge each month, not a fortune, and everyone has a say in what the money is spent on.
I keep the accounts, I used to be a bookkeeper, and they are audited by a qualified accountant each year.
This works for us as a block, it may not work for everyone.
As each flat owns a share of the freehold it is much easier to sell them on.

Leases are not all bad. DD has a 999 year lease granted in the 1920s. Her ground rent is £30 a year and cannot be changed. She could buy her freehold for a fairly low amount but cannot see the point.

Again with flats there are no problems with leases providing the flat owners own the lease. DMiLlived in a converted house with 4 flaats in it. When the developers sold the flats they were sold with each flatowner having one of 4 shares in a Limited Company. The lease was vested in the company, so the flat owners oned their leasehold and were responsible between them for care and maintenance of the premises.

Chestnut

Lincslass

I would never buy a leasehold property, and personally think that leasehold should be banned. Can only speak from the experience of my mum, who had a leasehold flat in a small town complex, leases sold to company in London, all went downhill, with massively increased maintenance, one flat had roof problems, all had to pay. Outside painting, all had to pay. Put me off completely as it nearly broke my mum.

The leases can't be sold, they are owned by the leaseholders. If the leaseholders do not own the freehold then they can opt to buy the freehold and manage the property themselves. If someone else owns the freehold then they can of course sell it. Whoever runs the site has to present yearly service charge accounts to show the leaseholders what their money has been spent on. The leaseholders can challenge this if they feel the cost is too high.

However, any work done on the site must be paid for by ALL leaseholders. Roofing is possibly the worst, but the roof belongs to the whole property, not just the flat concerned. So does the outside. So any decoration in communal areas inside or outside has to be paid by all leaseholders.

You have to remember that the leaseholder only pays a share of the cost (depending on how many flats there are). If they had their own property they would be paying the whole cost.

Well the freeholder sold it. I don’t care what the details are but the company were modern robber barons.

Chloejo if you don’t pay any service charges what happens if a new roof or repainting the exteriors is needed, you and the other owners will surely be liable for the fairly hefty costs?

They charge a fortune in service charges for flats and they start off low and go up to over 2200 in 4 years my friends has gone up from 800 to 2200!
My maisonette is only cheap ground rent no service charges ! Rent out quite quickly

Thank you all, I shall continue to seek a freehold property. The maintenance on some of the leasehold run into a couple of thousand annually plus ground rent. Thank you

Lincslass

I would never buy a leasehold property, and personally think that leasehold should be banned. Can only speak from the experience of my mum, who had a leasehold flat in a small town complex, leases sold to company in London, all went downhill, with massively increased maintenance, one flat had roof problems, all had to pay. Outside painting, all had to pay. Put me off completely as it nearly broke my mum.

The leases can't be sold, they are owned by the leaseholders. If the leaseholders do not own the freehold then they can opt to buy the freehold and manage the property themselves. If someone else owns the freehold then they can of course sell it. Whoever runs the site has to present yearly service charge accounts to show the leaseholders what their money has been spent on. The leaseholders can challenge this if they feel the cost is too high.

However, any work done on the site must be paid for by ALL leaseholders. Roofing is possibly the worst, but the roof belongs to the whole property, not just the flat concerned. So does the outside. So any decoration in communal areas inside or outside has to be paid by all leaseholders.

You have to remember that the leaseholder only pays a share of the cost (depending on how many flats there are). If they had their own property they would be paying the whole cost.

Are you buying a house or a flat? You mentioned both. If buying a house it must be freehold, do not get leasehold.

If buying a leasehold flat check the length of lease, service charge and ground rent. If you are getting part of the freehold with your flat then check who's running the site, the other freeholders or a management company. Make sure the site is run efficiently by checking the accounts and any other paperwork which is submitted to your solicitor when you buy. This will show work which has been done or is planned and other information about the site.

I would never buy a leasehold property, and personally think that leasehold should be banned. Can only speak from the experience of my mum, who had a leasehold flat in a small town complex, leases sold to company in London, all went downhill, with massively increased maintenance, one flat had roof problems, all had to pay. Outside painting, all had to pay. Put me off completely as it nearly broke my mum.

Don’t take on anything with a short lease. I was advised years ago that anything getting down to 125 years remaining would not be a good buy.
We are leasehold (but shareholders in the freehold) and have what remains of a 999 year lease.

Read this minxie. I’m assuming you’re looking at a newish apartment & not somewhere that has a long-standing 999-year lease.
As always you need good legal advice when investing in any property.
amp.theguardian.com/business/2021/dec/22/taylor-wimpey-drops-costly-leasehold-terms-after-investigation

Don’t do it.
If it’s an apartment then you have no choice.
If it’s a house, then it’s a yearly fee to the Leaseholders which will increase each year until it gets ridiculous, as the Government has now said that all new properties should be Freehold, it might become difficult to resell at a later date.