Leaseholds

The_Fat_el_Hombre

Have I got this right? You pay the normal price for a home and when the lease is up you have to give it back for free? Surely that's just passing a bomb - a very expensive bomb? Granted some of the leaseholds are for almost a 100 years and would see me out but every moment spent there it would be effectively decreasing in value?

Wickedkitten

It's going to be decreasing in value whether it's a leasehold or freehold.

You won't have to worry about maintenance and repairs with a leasehold but you will have to pay ground rent and a service charge usually, plus you can get the lease extended.

sarah_elton

My lease is a 999 year one so will outlast the building.

Robert_Sterling_3

Chlamydia wrote: »

Have I got this right? You pay the normal price for a home and when the lease is up you have to give it back for free?

You have got this wrong. You do not pay the normal price for a leasehold property. What you actually pay for it depends, among other things, how many years are remaining of the lease.

Some flats in London start with a 999 year lease.

Most people prefer a freehold property and so, other things being equal, the freehold costs more than the leasehold.

The_Fat_el_Hombre

Costs more? What sort of a percentage more (generally)?

chewmylegoff

Chlamydia wrote: »

Have I got this right? You pay the normal price for a home and when the lease is up you have to give it back for free? Surely that's just passing a bomb - a very expensive bomb? Granted some of the leaseholds are for almost a 100 years and would see me out but every moment spent there it would be effectively decreasing in value?

i) when you buy the leasehold it is likely to be cheaper than a comparable freehold property - although not hugely so (unless the remaining lease term is short). surveyor once told me 10% cheaper as a very rough estimate, but that was for commercial property.

ii) you have the legal right to extend the lease after you have lived in the property for 2 years. you have to pay a leasehold premium to do this, which will cost a few grand, but you get another 100 years (or is it 125 i can't remember - probably depends on what you agree with the freeholder) on top.

the only other issue with it is that the freeholder will charge you a service charge every year. the freeholder is responsible for the upkeep of the fabric of the building, so they will charge you for buildings insurance and repairs/maintenance to the building. this will generally be more expensive than sorting it yourself if you're the freeholder.

sooz

flats generally have to be leasehold
can't see the point of a leasehold house though

Wickedkitten

sooz wrote: »

flats generally have to be leasehold
can't see the point of a leasehold house though

Aren't a lot of new build houses leasehold now?

daveb975

Chlamydia wrote: »

Have I got this right? You pay the normal price for a home and when the lease is up you have to give it back for free? Surely that's just passing a bomb - a very expensive bomb? Granted some of the leaseholds are for almost a 100 years and would see me out but every moment spent there it would be effectively decreasing in value?

The idea is that you never let the lease run down to a low number of years. Most leasehold places come with lease lengths of 99, 125 or 999 years. They do not really devalue that much until you get down to 80 years. A 999 year lease is virtually like having a freehold as you will never have to worry about how many years are left, when to renew etc.

You cannot own a flat freehold. When people refer to buying the freehold of their block of flats, what they really mean is that they are forming a company to buy the freehold from the existing freeholder. Each flat owner remains a leaseholder, but it normally makes it easier and cheaper to renew if you part own the company that owns the freehold.

I can't see any reason for freehold houses (although quite a few still are).

chewmylegoff

sooz wrote: »

flats generally have to be leasehold
can't see the point of a leasehold house though

flats have to have a lease, to define which bit of the building is yours and rights of entry to that bit of the building, i think.

but as well as having the leasehold of a flat, you can also get a share of the freehold of the building. this gives you, ostensibly, more control over what is going on than if you have a separate freeholder, who is only holding the freehold as a way of making profit out of you.

and that's the point of leasehold houses. the developer sells you the lease and retains the freehold. they then make a mark up on the buildings insurance that they recharge you for, and a couple of years later offer to sell you the freehold for a few grand. just an extra way of making money as far as i can see.

Thrugelmir

Wickedkitten wrote: »

It's going to be decreasing in value whether it's a leasehold or freehold.

You won't have to worry about maintenance and repairs with a leasehold but you will have to pay ground rent and a service charge usually, plus you can get the lease extended.

The service charge on a leasehold property includes all repairs and maintenance to all communal parts of the building and shared facilities such as gardens, car parking and roads.

So even if you live in a ground floor flat you will contribute the maintance of the roof. You do need to look into this type of issue when buying leasehold as you may find yourself liable to a sizable service charge even though you only lived in a property a short period of time. A good managing agent will make provision for exceptional one off costs every year so that a reserve is created to fund this type of expenditure.