Leasehold house sale

[Hellon]

I am in the process of selling my leasehold home, 999 years with ground rent reviewed every 5 years increasing with RPI. After 4 months we finally found a buyer and things were progressing well, or so I thought. About 3 weeks ago our estate agent told us their mortgage offer had been approved. Last week the enquiries came through and one of the enquiries was to get a deed of variation for the lease. My solicitor sounded positive, said she has sold homes before that required this and it should be ok. Fast forward a week and now it transpires that the buyers mortgage have basically said they can’t put a value on the property due to the lease conditions, therefore the property cannot be recommended as suitable security. The buyers have now asked us to purchase the freehold to proceed!
I have asked Bellway how much the lease will cost to purchase as my first step, if this is an option then I would have to pass this cost on to the buyer, which at this stage I don’t know if they would increase their offer.
My next thought is that they try and get a mortgage from a different lender, they are first time buyers.
Other lease hold houses have sold on my estate within the last 5 years of moving here and 3 of them were last year during covid, surely lenders are still lending on these types of leases.
My main question is, should I be purchasing the freehold and selling to this buyer, or should I be resisting it as a leasehold and waiting for a buyer who can purchase this type of property. Or what other options do I have, get a deed of variation anyway to make the lease more attractive or pursue the freehold purchase, feeling confused

What’s your ground rent currently?
Most lenders prefer increasing at least every 10 years.
A deed of variation is your best bet.

Bellway has signed the Pledge for Leaseholders www.gov.uk/government/publications/leaseholder-pledge/public-pledge-for-leaseholders
so getting a deed of variation should be straightforward.

It’s £250 per year, will be reviewed in 2024 then every 5 years after. Can I request a deed of variation even if this buyer pulls out?

Are you outside London? Definitely request the deed of variation regardless. It doesn’t matter if you find another buyer before you complete the deed.

Yes outside of London, thanks for your advice

I've just bought my lease as I want to do building work on my house. But I know a few people in the estate that have sold as a leasehold.
The only difference I noted is the price in the house. The leasehold is cheaper.
I know people have found out how much it would be to buy the leasehold for the potential buyers (that alone costs around £250).

Not for nothing has the word fleecehold entered the dictionary.

Seems the buyers mortgage provider have picked up the fact that on paper there are no limits to what the lease can be raised to.

I know people have found out how much it would be to buy the leasehold for the potential buyers (that alone costs around £250).

I rarely dabble in the dark arts, but how you get the values needed to buy a lease are up there with bell, book and candle. Last time I tried it all revolved around the "rateable value" which in England hasn't existed since 1990. Good luck getting that from anywhere.

A few neighbours bought the freehold when we moved here and paid circa 5k. Purchasing the freehold is complicated and timely as there is the formal and informal route, the informal route is when you just agree a price with the owner of the lease, they don’t always remove all the convenants so you end up with a fleece hold. As houses have sold as a leasehold house I am sure that there is mortgage lenders who will lend but maybe a deed of variation will be required. I think the fact that the buyer is saying we will only proceed if I buy the freehold after 8 weeks of me accepting their offer is making me wonder what to do.

Your solicitor can do a simple deed of variation that means it will be suitable security. Not sure if the freeholder will charge a premium but shouldn’t be extortionate…

I wouldn’t buy it as leasehold as the pool of lenders is small and getting smaller. Makes it harder to sell, as you have found out.. but honestly it is fixable….get on to your solicitor and if they seem useless get another one!

The buyers solicitor has declined a deed of variation and has asked for us to purchase the freehold, my solicitor has also said that she wouldn’t advise a client to purchase the house with this type of lease and says the best route is to purchase the freehold also

Aren’t leasehold houses often priced a bit lower to account for the potential annoyance? If so, you might just want to get a hypothetical freehold valuation.

The OPs problem is because as things stand, the freeholder has written themselves a blank cheque which the lenders have spotted. If the lease were to end up as £10,000 per annum, then the ability to repay the mortgage (all they care about) is compromised.

Buying the freehold can be a lengthy process but if you aren't going to sell without it then it's always going to be worth doing. I'd expect it would be much easier given its a large corporation rather than an individual owner.

You'd be well within your rights to pass the cost on to the buyer, or just buy the freehold and put it back on the market with an uplift in price if there would be one.

You see, I"d say the opposite. Just lower the price to accommodate the price of them buying the freehold.

I'd be glad to be rid of a leasehold property. No one is buying them these days.

All good advice, thanks, I just have to wait until I can get a price to purchase the freehold and then go from there, I guess in the long term we need to purchase it anyway otherwise we will stuck in this house forever more

Hello, please can you update with what you did? We are currently in the same position, only we are the buyer. We have been advised that as the ground rent exceeds 250 per annum that the vendor needs to put in place a deeds of variation or purchase the freehold. Thank you so much.

Hi, in the end we purchased the freehold as the solicitor advised a deed of variation wouldn’t be good enough for the lender. The solicitor advised we go 50/50 on the freehold purchase and tried to negotiate but in the end we paid for 90% of it as we just wanted to sell and keep our onward purchase on track. The whole process from accepting an offer from our buyer to completing the sale which we did on the 29th July took 6 months. The freehold purchase took almost 4 months to resolve, getting a price from the Builder who still owned the freehold and dealing with their solicitor. Once we owned the freehold, our buyers solicitor insisted that we registered with the land registry first and had to expedite the land registry to get it done within 2 weeks, which ended up taking almost 4 weeks.
The whole process was very draining and I was constantly chasing the solicitor, land registry, builder for the freehold, estate management to get it done as quickly as possible. Like I say we finally completed and now own our new home and our buyers are happy they now moved into our old home and now own the freehold to it. Good luck with yours

Thank you so much for getting back to me, how much was the freehold please?

Ours was 5k but they can vary

Hi Hellon, thank you so much for the advice. I am also trying to buy a bellway leasehold property in its 7th year (due to increase next year and every five after that). Can I ask if you remember how much your house was worth? 5k would be manageable if that is what ours turned out to be but how did they decide this? We are buying ours for 235k so hopefully 5k is an average price for our freehold. Such a minefield! Can I also ask what your ground rent increased to usually? Ours starts at 180 per annum but have no idea how much it will increase to...
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Lalala1991 how did your sale turn out? Did you go through with it?