How is stamp duty calculated on leasehold flat?

[KarlaKK]

Hi, I'm going to view an over 55s leasehold flat today. It is not something that would usually interest me but it seems very good value price wise even though the annual service charge is high. I need to find out more about how much the service charge and ground rent will go up every year etc. It interests me as even factoring in an increase each year over 10 or 20 years the amount paid out seems like it won't be as much as other leasehold flats that aren't for over 55s. I know I have lots of questions to ask including questions I don't even know I should be asking. I don't want to pay for a solicitor just yet until I can determine the costs and pitfalls a little myself.

The estate agent told me there won't be any stamp duty to pay as flat is less than £250k. However, from what I've read online it might not be that simple. Things like assigned leases and new leases are mentioned. The GOV stamp duty calculator asks about various dates that I don't have but will ask the estate agent about. These are probably in the lease document itself.

I just wondered if anyone has bought a leasehold flat for around £200k that might have an idea if there is any stamp duty to pay. It is not a new development. It has a share of the freehold with 980 years left. Presumably it's an assigned lease?

Any tips on how to calculate the stamp duty? Thanks!

Not a stamp duty answer, but I would be very cautious of purchasing a leasehold retirement home. I am in a leasehold group and it's always the retirement homes that seem to the most impacted. there is no cap on service charges. Management companies can raise them to whatever the hell they like.

I think it's unlikely that you'll have to pay stamp duty. Maybe best to speak to your solicitor though?

Thanks MotherOfRatios.

As its an existing lease the lease has already been 'assigned' so you only pay the standard stamp duty - if less than 250k and you own no other property then nothing.

As an aside, age restricted properties have a limited market by nature and often have high ongoing costs, and are therefore usually hard to sell in the future. This is why they often look 'cheap' to buy.

FWIW I am over 55 and would never consider buying one.

Thanks Nots456 but, as said, I thought I'd ask on here first before incurring any solicitor's costs. I know I need to find out more about how much the services charges can go up first before making a decision about whether to go ahead or not.

Thanks Johnny. I thought it must be an assigned lease so no stamp duty to pay so good that has been confirmed by you.

It is not something I'd usually consider either. I've been looking at houses up to £475k but that means about £11k in stamp and leaves me with no money. Usually at that price for the area the house will need money spent on it too.

Flats in the area are £300-350k with still fairly high service charges and sometimes not a decent amount of years left on the lease. This flat I'm considering is also much more pleasant. It is £200k. No stamp duty would cover three years of the current service charge versus if I were to buy a house. I need to find out more about how much the service charge goes up by each year - whether in line with inflation or something else.

My thoughts were over 10 years I might be spending the same as the £300-350k flat although I realise when I die my son who will inherit might not get back what I paid for it plus might have trouble selling it. The savings I will have left will cover the service charge each year even factoring in an increase. If I buy a £475k house everything I have will be in that. Better for my son long term but maybe not for me. Anyway, thanks for your help. Lots to consider. Usually I'd run a mile.

To be certain, you need to know what the ground rent is for each of the next 5 years.

Thanks Minnie!

Theres a stamp duty calculator on the HMRC website, ground rent irrelevant unless it's a new build

The rent in a lease is only relevant on a new build/ or if no premium is paid

As well as service charges which are usually high, you need to be aware of contingency/sinking fund fees on the future resale which are often extortionate on retirement flat leases- e.g. a certain % x number of years living there.

As a conveyancer I'd strongly recommend steering well clear unless there is no other option

As a conveyancer I second this!!

But they often give extras in the form of community and extra facilities as you get older no?

Some do/some don't but the actual costs on top of service charge when you sell are absolutely extortionate and in my opinion should be illegal

My Dad is looking at buying one, but he's 85 and wants low maintenance. Me and DSis aren't bothered if we get no inheritance from the flat. The freeholder uses a housing association to manage the block, so service charge isn't cheap but substantially cheaper than new build retirement flats.
OP at least the one you are looking at is over 55s, I was surprised v expensive Mccarthy Stone ones are over 70s which really limits who can buy

IANAL but a share of the freehold is exactly that. There is no time limit on it. What you are suggesting sounds like a very long lease.

It is common to buy a leasehold flat and be granted a share in the company that owns the freehold

Thanks LT. I really appreciate your advice and knowledge.

Especially the bit about sinking fund fees on a future resale.

I am not sure it does help your son in the long term. Because the purchaser market is limited they can be difficult to get rid of and he can't live in it himself if u55.

https://www.rightmove.co.uk/properties/142299218?utm_campaign=property-details&utm_content=buying&utm_medium=sharing&utm_source=copytoclipboard#/&channel=RES_BUY

I've posted the flat. It is definitely not something I'd usually consider but I am slightly desperate - been living in various cheap hotels after I sold my place and my work is a bit precarious right now so didn't want to take on a mortgage.

I just thought you get a nice flat for the money even though the fees are high. I saw another flat in the area for £275k that needed a lot of work that wasn't half as nice. Long term after I die I think the over 55s flat will be a headache for my son to get rid of and it might fall further in value.

For me though I was thinking even if over the next 10 years or so the service charge goes up to £5k a year, so c.£50k over 10 years, that is still less (£200k + £50k) than the flat on for £275k, which needs work doing to it. Of course, with the £275k flat you're less likely to lose money on it, when I sell or my son has to upon my death.

I spoke to one of the residents while there and he and his wife said they were delighted with the place and the service charge had only gone up a minimal amount in the 2 years they'd been there.

I am taking onboard what everyone is saying about leasehold though.

To me, I was just considering buying this, which would leave me some savings that would cover the service charge. I'm still working as well although not sure how long the job will last but I can get another if the worst happens.

Alternatively I buy a small house, but that won't leave me with any savings. I was also considering it as stamp duty on a £450k house would be about 3 years of the service charge equivalent.

I'm currently dealing with a probate sale and I do think you need to pay attention to how easy would it be to sell if you passed away? Or do you have the funds to sort of cover a year expenses for your son to pay the SC etc if you pass away because from what I'm seeing leasehold is a burden to people when they're loved ones die.

Thanks Mother. I'm careful with money and would hope to have a year's worth of service charges to cover a delay in selling it but you never know what is around the corner. Also, I think LT mentioned some other fees when you exit, which I don't know anything about (if I've understood that correctly) so there is that worry. I think overall it is best to steer clear of leasehold if you can. Thanks everyone.

If you or your son want to sell it in the future you will struggle. It may be you need a care home, but it wont be an easy sell to pay your care home fees etc..... Hence why this flat is so much cheaper than others you are looking at. There is a reason for that! People don't want them. I would steer clear personally.