ad

leashold contract

S

Sibod2002

New Member
Hi guys I'm new to this forum so be gentle .

Basically I own a leasehold house which currently has 75 years left on. The house was originally freehold but was turned into leasehold just before I bought it in 2011 by the previous owners .

The lease created in 2011 stated it was for 99 years from 1992. I am currently paying £300 a year ground rent but from the start of the lease the ground rent doubles every 20 years .

I signed the papers so I know I am bound by the contract. I just wanted Any advice or ideas before I make a move to purchase the lease as I want to sell my house . They have quoted me £15300 to buy the freehold which has jumped from £9000 when they quoted be in January 2015. I am no expert so any advice would be appreciated .
 
R

Richard Mews

New Member
Hi guys I'm new to this forum so be gentle .

Basically I own a leasehold house which currently has 75 years left on. The house was originally freehold but was turned into leasehold just before I bought it in 2011 by the previous owners .

The lease created in 2011 stated it was for 99 years from 1992. I am currently paying £300 a year ground rent but from the start of the lease the ground rent doubles every 20 years .

I signed the papers so I know I am bound by the contract. I just wanted Any advice or ideas before I make a move to purchase the lease as I want to sell my house . They have quoted me £15300 to buy the freehold which has jumped from £9000 when they quoted be in January 2015. I am no expert so any advice would be appreciated .
Seems sharp practice by the owners. The more time goes on and the term of the lease runs down the more you will have to pay either to buy the freehold or to renew the lease. The value of the freehold is determined by the amount and multipled by usually 25 - 30 times. It seems that with the increase due in 2022 that this has been factored into the price and seems about right.
It could be a good idea to buy it now as it will only go up in price and also if you ever decide to sell then it will be much more attractive as a freehold.
 
N

nmb

Well-Known Member
What is the general advice when buying leasehold properties? Are there any actions you should take to protect yourself in the future when looking to sell the property?
 
R

Richard Mews

New Member
Always check the small print for the ground rent amount and if there are any increases in the future.
The amount of time remaining on the lease is important the longer the better as if it is getting near 50 years remaining then some lenders won't lend.
Renewing leases can be expensive and in the hands of the freeholder>
As a case study I had a vendor in Sunderland wanting to sell her flat but it only had 63 years left on the lease. My buyers were not interested unless she extended the lease. She agreed to to this but it cost her £6,500!
 
L

lookinginvest

Member
Why are leaseholds so complicated? What is the benefit for an investor to hold the freehold on a property yet not actually own the property? This may seem like a simple question but it will be one that many property investors have thought about.
 
R

Richard Mews

New Member
Okay so lets take a block of 10 flats where the freehold owns the building and 10 leases have been created on the flats.

The benefit is in the long term ground rent the freeholder charges each leaseholder per year. Say it is £200 per year per lease that equals an annual income of £2000 and this investment is a safe investment because if the leaseholder does not pay the rent the freeholder can claim possession of the flat.
Another thing to remember is the length of lease created on each flat. If it is say 125 years then that is more attractive than 250 years to the freeholder as it will come up for renewal earlier where the freeholder will be able to charge the leaseholder to extend the lease. This usually happens when it gets near 50 years remaining as many mortgage companies won't lend on short leases

Freehold Ground Rents are very much in demand and are considered a good long term investment.
 
N

nmb

Well-Known Member
Thanks @Richard Mews for your very concise and very informative overview of the subject of freehold/leasehold. So in theory it is possible to build up a significant income from freehold investments with minimal ongoing work required?
 
R

Richard Mews

New Member
Yes it is possible the initial yield can be poor but as a very long term investment it is good and can be re-sold. Little ongoing work is required
 
L

lookinginvest

Member
@Richard Mews , while no investment is ever risk-free, is there any downside to owning freeholds? From what you have said they seem rock solid as they are backed by the leasehold properties and if the owners renege on their lease payments the freehold owner can claim possession of the property?
 
Top