Leasehold property thinking of pulling out

[Lioness1989]

We had our offer accepted and mortgage approved 1 month ago. We hired a solicitor and will now be liable for the fee regardless. She has carried out some checks and after reading more into it, I’m regretting offering on a leasehold maisonette. We only did so as we have been searching for over 1 year with no luck, and there aren’t many freehold or share of freehold properties. She found that at the moment the ground rent is under £250 but it will double at some point.

This will bring the cost to over the threshold of £250. She’s told the sellers solicitor that we will require a deed of variation to bring the price below £250 indefinitely. We haven’t heard anything yet but I’m reading online that apparently most freehold companies will not do the deed of variation, and even if they did it doesn’t guarantee that we won’t have issues when we come to sell it in a few years time. Apparently according to my reading, we would be responsible for paying the fee.

Also I’ve read that they can charge whatever they like for things such as buildings insurance, just because it’s been reasonable in the past, doesn’t mean there won’t potentially be a big increase in the future. This also applies to other things like maintenance that might need to be carried out in future as there doesn’t seem to be any service charge. The flat below (mine) and the flat above are now both for sale. This is concerning me, I don’t know if it’s the same owner but I have a feeling it’s not. What are the chances they would both be listed for sale within the same few months… this makes me wonder if there’s something unknown to us that might be in the pipeline.

Regardless our lender will not lend if they refuse the deed of variation. If they refuse then I guess we will automatically pull out and will be a few thousand pounds down after paying the solicitor fees. I am having such a bad feeling now, but my husband is optimistic and thinks I’m being a bit negative. What is everyone else’s experience with leasehold in London?

I’m no expert but I thought the threshold was £1000 for London https://www.mplaw.co.uk/insights/news/the-ground-rent-issue/

But yes if you can’t get the mortgage you’ll have to pull out either way. The solicitor might not charge the whole amount or might be willing to transfer some of the costs already borne to a new instruction if you find something else?

I do wonder whether the seller of a leasehold should arrange the deed of variation, or at least get some indication of appetite of willingness to sign one from the freeholder, before going to market. Otherwise this is going to cause a lot of people to sink money into conveyancing costs only to have to pull out once the property is found to be unmortgageable

I owned a leasehold maisonette in London for 15 years. Selling it and buying a freehold house has been the best thing I've ever done. Leasehold is a nightmare as far as I'm concerned and I'd never do it again. Only bought it in the first place as literally couldn't afford anything freehold at the time. Unless I had absolutely no choice I'd wait and buy a freehold every time.

I lived in a leasehold maisonette in London too. My freeholder was batshit - doing anything was a long drawn out process (eg over a year for a License to Alter for our loft conversion). I have never been so relieved than the day we sold it & we didn't have to have anything to do with her again. If I had my time again I would not buy a leasehold.

Op, the rules on leasehold are changing and I think doubling ground rent may be banned fairly soon. It would be worth looking into this though.

Personally, I would avoid leasehold if I had other options but the govt are working on a programme of reform which should hopefully make them much fairer.

op read the recent thread are my sellers behaving bizarrely
the op got lots of good info - the sellers were trying to rush through a sale
and she decided to pull out

It the seller that has to apply deed of variation ot will take months won’t be cheap and they have to pay for and the freeholder may not agree it will cost thousands
the bonus of a DOV is that it restarts amount of years on the lease again

dont accept an indemnity policy as it dosent protect you

don’t accept an informal lease extension either

no flat in my sons building of over 400 flats can be sold due to the GR issue
my son was lucky and spotted it along with his solicitors and they pulled out

and when you look on RM a lot of flats were sold last summer but have not completed.

New build with a lease after I think July 2022 only have a peppercorn rent so the are fine to buy

once more people understand the issue with GR older flats won’t sell and new builds will shoot up in price

https://www.mumsnet.com/talk/property/4831931-bizarre-seller-behaviour-would-you-pull-out

ground rent if it goes above 1k in London and 250 outside of London. Its basically an expensive rental
where you can’t do much but have to pay loads

I thought it was £1000 for London but on the enquiries the solicitor has put if it’s over £250 as being an issue. Let me just double check with her…

https://www.frettens.co.uk/site/blog/property-blog/ground-rent-over-250-pounds-here-are-your-options-leaseholder

it’s on here but if you Google ground rent 1k London issues you will find lots of info on it

it’s 250 outside of London.

ifs an issue because if say your ground rent is 500 a a year now in London and doubles every 10 years then it’s will be 1k soon

I just checked and it doesn’t double every year but it doubles every time it changes so for example every 10 years it might double. So it won’t be an issue for me right now but for future buyers it will. It might still stop the bank from lending too, which I suppose is a blessing in disguise if they refuse to amend it.

Just got confirmation the bank looks at the whole lease. So they won’t lend without the deed of variation. I suppose we just have to wait and see.

It will say somewhere in the lease how often it doubles

honestly I would walk away now while you haven’t lost any money

Having had problems with leasehold in the past, I would caution you and probably advise you to walk away.

High and increasing ground rent is a red flag.

There are some very good leasehold specialist solicitors out there who are worth the money, so you could consult with a couple of those if it helps you decide. We used one, to good end.

It’s hard to find a flat in London that isn’t leasehold and in my experience you need to move a long way out to be able to afford a house, depending on budget of course. Not all leases are the same, ground rent on my London flat was fixed at £150 a year for the entire lease and service charges did go up but not ridiculously considering I had it for 25 years. Repairs and maintenance were done efficiently and we were never asked for extra money for anything.
You could also look for share of freehold which usually comes with 999 year lease and no ground rent. It annoys me when these costs are not on estate agent listings and you have to get well into the process and incur costs before you find out.

That's a shame it's not a share of the freehold maisonette as there are a few around our area (zone 5 SE London) that we looked at a few years ago

A fully leasehold maisonette with increasing GR does not sound like a good option

Surely it should be the current owner who pays the deed of variation rather than new owner? Makes it a more attractive property

I'd walk away if it can't be sorted

A deed of variation doesn’t increase the term @Im99912 .
The £250 might be down to your specific lender’s requirements OP. Either way most will reject any sort of doubling.

Just walk away and accept the loss on solicitor fees, you’d loose more if you buy the property, we sold our leasehold flat recently after 3.5y on the market, best day in my life!

@MinnieMountain.
your correct my mistake
but I think that if you get the ground rent removed or changed to a peppercorn GR it automatically extends the lease back to what I was originally

I’m all leased out 😂

I’m going to wait until the sellers solicitor responds to all of the questions and checks. I’ll see if the freeholder and current leaseholder will make the changes and pay. If not I’ll be pulling out, and even so the bank will just remove the offer anyway.

They're probably waiting to hear back from the landlord about the variation

Walk away and write it off to experience. Avoid leasehold like the plague !

Not easy to avoid in London though.

No, this is total rubbish.

There are plenty of leasehold flats in London that are fine. You just need to do your due diligence first. Flats in my building had a fixed ground rent of £50 per year, and service charges were reasonable. Eventually we bought the freehold (not an easy feat in a building of 115 flats) so most flats (but not all) also own a share of the freehold. The ones that don't still pay £50 per year as ground rent.

There are plenty of similar buildings in London.

Absolutely. Buying leasehold is something you’ll only ever do once, and then vow to never do it again.

In my experience, the worst thing about it is the ‘major works’ invoices. This is when the freeholder decides that certain work needs doing to the building. Eg New roof, windows or lift etc. They come up with some ridiculously over inflated price, and send each shareholder an invoice for their share. You have virtually no say in it, and they threaten eviction if you don’t pay it.

I was very glad to be shot of my leasehold flat, and am now very happy in my freehold house.

Doubling ground rents is something that lenders are now very hot on. You will never get a mortgage with that condition in the lease.