Talk to me about Leasehold!

[cloppyklip]

Hi all I know nothing about leasehold. Is it one to completely avoid when buying? I have seen one with zero ground rent and 944 years on the lease. Can you make structural changes without permission from the leaseholder? Any restrictions on what you can do to the property?

Thanks!

If you can avoid LH, try to.
so much depends on the LHs - and they can change, LHs can get sold, can be hard to get hold of if you want to do works. Nothing is permanent.

Is it a house or a flat?

I keep popping up re anything leasehold and direct everyone to the National Leasehold Campaign FB page. You can put questions on there and read up.on the horror stories of leasehold. With a leasehold property it's never actually yours, it's just like renting really except you get all the maintenance bills. You have to deal with management companies, services charges that only ever go up, strict regulations as to what you can and can't do to "your" property. I really can't imagine anyone other than a freeholder saying leasehold is a great idea unfortunately.

Not the exact legal position but leasehold is essentially paying for the right to reside in a space rather than buying a section of a building. I sort of view it as paying for rent upfront, in this case 944 years of rent upfront. When you sell it the next person is then paying you for the years you haven’t used and on and on.

That is not exactly the legal position but you are so at the mercy of the freeholder and appointed management committees and the fees they charge and are liable for maintenance expenditure they incur without any real say. Any sort of dispute is difficult to deal with without incurring lots of time and legal fees.

I would never buy one again is the short answer.

I live in a leasehold and it's mostly fine. You can't buy a flat without it being leasehold (in most cases) and I live in the South East and can't afford a house.

I get a bill once a year for service charge, management fees, building insurance and sinking fund - about £900. Outside of that it's just like living in any other home.

Isn't it one of those "it depends" questions.
Some leaseholds are rip-offs, known as fleeceholds. Some leaseholds are just 'the way we do things round here' e.g. I believe there are huge areas of only-leasehold built in northern, Victorian towns.

The devil is in the detail. You have to read the lease.

Really, if you can you should avoid anything that isn't freehold. Unless it's massively cheaper. If you can't afford to buy a freehold then as others point out - look at the detail very carefully and fully understand the agreement. They are all slightly different so you need to look at each potential property individually.

Often people don't have a choice because all flats are leasehold and freehold houses are so much more expensive.

I didn't have a problem with my leasehold flat. It was often quite helpful to have block maintenance arranged by the management company and the service charge was reasonable.

It's worth looking at the lease carefully though and ideally speaking to someone who lives there already (a neighbour, not the vendor). Some have restrictions around things like keeping pets. You would also usually need permission for any structural alterations.

Is it a house or a flat? There is quite a difference between a historical leasehold- which is common on houses in the NW, because they were all built on land owned by a wealthy landowner so the legals date back to that and don’t mean much in the modern world- and a leasehold on a flat built within the last 30 years which is basically designed to fleece owners and put a lot of restrictions on them.

The people that say leasehold is evil and to be avoided at all costs are people who have been burned by dodgy practices where leasehold has been misused and abused, generally by modern developers.

The other risk is short leases, which will significantly reduce the value of a property. You can renew a lease, but the shorter the lease, the more you need to do it, and the more they'll charge, so it's a bit of a hazard.

As said above, it's fairly unavoidable with flats - someone has to own and manage the building the flats are in, and if they aren't leasehold you end up with having a "share of freehold" situation, which comes with all its own problems of trying to manage a group of flat owners with different opinions.

There's also an awful lot of very benign situations where leaseholds have been used in the past. In my town almost everything is leasehold because of the way the town was developed. The only freehold houses you see here will be the ones where someone has exercised their right to buy the freehold. We tend to be on 999 year leases with a peppercorn ground rent here - I think the precise ground rent can vary a bit, but mine is £10 a year and although that's higher than specified in the lease documents (from 1919), it hasn't changed in at least the last 20 years, so I think there are very limited points at which it can be changed. Everyone has the right to buy a freehold now and I assume it's fairly inexpensive, but I haven't even had to stump up £200 on ground rent so far, so I can't see any point to buying it. For situations like this, there are no maintenance charges, no service charges and all of that, but you do have to get leaseholder permission for any major changes - I've added a driveway and an extension while I've been here and it was just a case of exchanging letters to get permission, no money. Leaseholder permission has always been a bit of a tick box exercise - if you can get conservation area and local council sorted, the leaseholder just go along with it.

The one you describe at 944 and zero ground rent sounds probably like mine. Is it a new town? I think it's more common in the sort of places where a huge planning corporation came in and built and managed a whole town. If it worries you, you'll have the right to buy the freehold after you've lived there a few years.

Just be aware that the peppercorn rentscananddo change. Mine was £10pa -? Until it was bought by a specialist company and it went up to £2k and it increases every year because of infla though always more than inflation AND I have to take out the buildings insurance through them which unsurprisingly is more expensive than what I can source no I’m not bitter at feeling so bloody powerless

When we were buying leasehold semi we asked how much it would cost it to be freehold. It was only £1800 so we bought it.

Ground rents can not just be put up like that. They are in the lease and will be detailed what you pay ground rent for the duration of the lease.

Do you mean service charges? If it is ground rent get on to your freeholder as they are breaking the terms of the lease as even the most onerous ground rents (which no mortgage company would lend on) should not go from £10-£2000 just from a change of freeholder/managing agent.

Nope, the leasehold was sold from a person who had just a couple to a London company specialising in them. We tried to challenge it at the time and there wasn’t anything we could do. We sold as quick as we could. We’d been thinking about it before but that was the catalyst tbh. Knowing we were being overcharged for insurance meant we were jumpy about what was to come. Not sure what did, if anything, but wouldn’t wish that uncertainty on anyone.

Do you mean the freehold? As you were the leaseholder.

Your legal advice was possibly shocking then! I am an ex freeholder and have never, ever seen a lease (for a flat not a house) that the ground rent could go up erroneously unless it was stipulated in the lease.

It's a scam. If you go below 80 years you have to buy more and it's expensive.

I'm in this situation, can't afford to extend, and want rid, but will take a hit on the price offered.

It's all very well people saying, don't buy leasehold, but depending on your budget and location, it can be difficult to avoid. There are some rules of thumb:

Renewing a lease that is 80 years or less gets very expensive as you must pay a % of the value of the property plus all the legal fees and cost of the lease. So I'd avoid anything below 100 years.

In most cases now, because of leasehold reform in 2023, if you renew a lease it will be set at 999 years with peppercorn ground rent (so, a nominal sum of £10 pa usually). You still need to watch out for the service charges (especially if managed by any group other than the leaseholders) as these can be expensive.

With old leases, you have to study the lease carefully for nasty things like doubling ground rents every 10 years. Do your own research and read the lease before offering, then always use a conveyancer who is experienced with leasehold and will alert you to any issues.

Leasehold can be just mildly annoying right through to utterly ruinous, so you do have to do your due diligence. I am hoping for more meaningful reform of this antiquated system, but we'll see.