Leasehold house - should we?

[Barkyboots]

Our house is under offer, and we have had an offer accepted on a house that we both feel would be great for us... but it’s leasehold. We’ve never owned a leasehold property before, and everything I’m reading about them is pretty negative. It’s only five years old, an end of terrace townhouse. It’s leasehold because the terrace of six houses has underground parking, shared with some of the flats on the site. All the other houses on the site are freehold, because their parking is specified spaces on the street. Would it be a bad decision to go for this house? We are both a few years away from retirement and love the location and style of the house... but I’m really worried about the risk of escalating service-type charges, or being responsible for a share of some unexpected huge expense in the future, as we’d struggle to cope with that once retired. Current owners have this as their second home so I don’t think they’ve been too concerned about costs. The house has also been on the market for a year and three previous sales have fallen through which makes me wonder...
Anyone with law/conveyancing/specialist leasehold knowledge who could advise me on what are the key things to ask/look out for, before we make the decision to go for it or back out? Any positive stories from any of you about buying modern leasehold properties?! Thanks in advance.

I would want to know why three previous transactions had fallen through first off.
Is there ground rent payable? If so, work out the cost of escalating rents over the term.
I personally would avoid leasehold if at all possible.

How long is the lease OP?

I had a leasehold property and it was the bane of my life. Having to share costs for building work etc. I would never do it again as really the house is never yours. Im guessing there is also big service charges involved? These will rise. Bear that in mind. With freehold you will never have that problem

You might want to look how service charge is apportioned and what costs you would need to participate in.

Personally, I can see the sense in a leasehold property if you’re after a one-bed flat but I wouldn’t buy a leasehold house. Whenever you want to make changes to a leasehold property, eg changing windows or knocking through a wall etc you need to seek freeholder’s permission + leases need extending when they get shorter so it could cause you unnecessary stress.

No don't buy a leasehold house.

The reason for you saying it is leasehold is not a good one. I know people who brought freehold houses where they had to pay service charges for various parts of the grounds e.g. parking. However their own house and garden are/were freehold.

All good advice so far, but I would also ask to see copies of the most recent service charge accounts and the budget for the current year too. Ask how much they're currently paying. The existing owners should be able to provide you with this. It will show you what reserve funds have been built up (if any) for future major works costs.

I would guess that the development will have accounts with a number of what we call "schedules", so one for the flats, which would include costs specific only to them, like lifts, entry phones, etc, then one for your leasehold houses and possibly a separate "estate" schedule. You would likely need to contribute towards costs specific to your underground car park (regular maintenance, cleaning, lighting of it, etc) and may have to contribute to the estate maintenance as a whole - communal garden areas, for example.

Go and look again at the car park and think "what could end up costing a lot of money" - probably replacing fire monitoring equipment, drainage, etc, and consider whether the reserve funds in the accounts are reasonable given what might occur.

If it was me though, I don't think I'd buy it. The future service charges are just too uncertain. I would be hesitant about the length of the lease too. New developers create relatively short leases to get more money out of people along the line for selling an extended lease.

Before you look any further at leasehold houses, please read the Which investigation from 2018 & 2019 and the BBC article giving an update in 2020.

Leasehold houses, or certainly the way they have been sold, is being promoted as the next PPI scandal.

I would avoid with a bargepole. Like PP said, leasehold on flats are bad but accepted consequence of flat purchase, but not for houses.

Thanks everyone for replies so far, really useful. The lease is the remainder of 999 years so that seems fine. None of the various service charges (we’ve seen the three bills for 2019 for bins, parking and estate services) seem too extortionate in themselves, but they currently add up to about £1800/year. Ground rent is currently £475/yr. But you’re right, I don’t know anything about ‘schedules’. Do we need to start incurring solicitor’s costs to find all this out, or can we just ask the management company directly? How can I find out about possibly buying the freehold? Thanks again.

The Leasehold Advisory Service are the main body for this.
They have a website and phone advisors.
Give them a go.

Why are you paying extra for bins? Isn't the estate served by the council?

All the charges are extortionate. When I enquired what one of my friends' in a freehold house with communal stuff was paying for service charges it was less than £100 per year.

Do we need to start incurring solicitor’s costs to find all this out, or can we just ask the management company directly? How can I find out about possibly buying the freehold?

You don't need a solicitor.

You can enquire with the management company directly but some will not respond to you as you aren't the leaseholder.

You can also get the leaseholder e.g. vendor to ask the questions for you instead, but even then some management companies simply don't answer or charge the vendor money for unsatisfactory answers to the questions.

I've known people pull out of purchases for all these reasons but on flats.

BTW the ground rent is also extortionate. Old ground rents were set at a peppercorn value so in some cases it is now not worth the freeholder collecting them as they are less than a pound.

Bloody hell that ground rent is huge- wouldn’t touch with a barge pole sorry

You need to do your maths with the ground rent.

The issue has arisen as Leases have started to contain unfair ground rent escalation provisions such as doubling every 10/15 years over a term of 999 years. This results in an extremely high ground rent which could affect the value and future marketability of the property.

Are you aware that the government has already told house builders that they can't build and sell anymore houses as leasehold....only flats can be leasehold now.

This is a huge ongoing scandal with the government gearing up to legislate on lots of aspects of leasehold.

You'll probabbly find you can't get a mortgage on a leasehold house anymore.

Yes, you would be crazy to go ahead. The issues are very well known and it would be the equivalent of buying a house when you know it has a major structural problem that will cost thousands and possibly be unsellable in future. The info is all out there about the probs so run for the hills fromnthisnkne. There are lots of lovely mon leasehold houses. Go for one of those.

I agree that the ground rent is extortionate. Service charge also seems pretty steep unless there are some beautiful grounds with fountains or something. I wouldn’t go for the place unless it’s in Chelsea/other prime London and hundreds of thousands cheaper than comparable freehold houses.

Service charges are increasingly expensive. Freeholders can be a pain in the ass.
The amount of potential issues that could (not definitely) arise is something I would stay well away from. Google section 20s and that will stress you enough to not bother with a lease hold.

I used to work in law and am a landlord.

Pull out now, you will save yourself thousands.

No 🌺

I'm a conveyancing solicitor.

Don't buy it. I presume it's outside London? In which case the current ground rent is unacceptable to most lenders (though some accept indemnity insurance).

Plus what everyone else has said.

I work in Property Management and my advice would be to know exactly what you’re getting yourself into before going ahead. Leasehold isn’t the problem, the issue is that most people get into it not knowing exactly what they’re signing up to.

A house on a residential development be it Freehold or Leasehold will still be obliged to adhere to the covenants within the lease. I obviously don’t know the specific development you’re buying on but it could be things like not making noise outside of set hours, not being allowed to change the colour of your front door, gardens must be maintained at all times, no increasing the height of garden fences, no storing items in the front garden etc.

With regards to costs, you need consider exactly what is in the car park. You don’t mention the size or that it’s secure but there could be gates, intercom & access control systems, cctv cameras, fire alarm systems & extractor fans, emergency lighting, drainage, bike stores. All of this equipment, if it is there, needs maintaining and eventually replacing. It’s the residents collective responsibility to pay for this.

In addition to this, if the roads aren’t adopted then you are required to pay for the maintenance of the estate areas. This could include maintaining street lights, cleaning the street areas, communal landscaping, winter gritting etc.

The lease probably also allows the landlord to introduce additional services which you may need to contribute to. As an example this could be security patrolling the estate if it is needed, you would benefit from this, therefore, you have to contribute to the cost.

The person who asked about bins, the cost is not normally for the collection costs as you are correct this is covered by your council tax. The costs are usually for the hire and the maintenance of the big communal bins.

Personally

'Never Ever Again. Absolutely fucking never, even if living in a cave is the only other option'.

I HATE it.

Also the ground rent does seem a little on the high side but not extortionate to me assuming this is a 3/4 bed house. Everyone is right though, you need to check what’s in the lease about how these costs increase.

I would never ever buy a leasehold house. You will also find it much harder to sell as evidenced by prior sales falling through. Walk away.

It’s leasehold because the terrace of six houses has underground parking, shared with some of the flats on the site

Who has told you this is the reason?
This doesn't make any sense. Why would the owner of the house not simply rent their parking space? Why does that mean the house itself is leasehold? It doesn't add up and the fact it's only 5 years old sounds like it's prime candidate for one of those properties caught up in the leasehold house scandal PPs have been referring to.

Will you ever want to sell it? As PP said, that may be tricky for exactly this reason.

There must be other houses out there for you, I would forget it and move on.

(Or better still, in this market, sell yours, move into rented for a year and buy a mansion when the property market is on its knees!! DP keeps trying to convince me to do this!)

Bargepole vote here too I'm afraid!

And I think all your charges listed are extortionate actually. Also, it doesn't really matter what the previous charges have been, what happens if the freeholder sells the freehold to someone next week? They might double the charges straight away, so you'll never have any security.

I wouldn't, I'm even put off buying a flat just because of leasehold service charges which are nearly always extortionate. Am I bugger going to pay over a hundred quid a month on top of mortgage, council tax etc. I'm holding out for a house even if it means I have to save more and hold out for a couple of years