999 year lease - why?

suffolkb

Purely out of interest.I`ve noticed that some flats have a 999 year lease.So,if I bought one I assume that I could pass it on to my kids and so could they etc.But what would happen in,say,500 years when the building was knocked down for regeneration of the area?
What is the point of a 999 year lease anyway?.
I only got to think about this as my sis has bought a leasehold house in Doncaster.Never heard of this before - only flats.

Fitzy29

999 years lease on a flat are almost as good as freehold, and many law firms/mortgage companies treat them as such.

Basically who ever issued/sold the leases basically want nothing more to do with the property, the only reason you still require it to be leasehold is so that there is management and funding for the building itself as everyone who owns part of the building must contribute to it's up keep. For example if the roof leaked would it be fair for only the people on the top floor to pay for it, no it must be paid by everyone and each lease on each flat will ensure this is enforced. Such buliding usually will have a small management team to sort these issues out. All in all you won't be able to get a mortgage on a freehold flat as it's too risky for lenders...

As for a leasehold house, there's no real reason for this other than the land it's built on belongs to someone who didn't want to part with it for whatever reason.

Ian_W

But what would happen in,say,500 years when the building was knocked down for regeneration of the area?

Don't expect to ever find that out for sure!!!!

As Fitzy says the main purpose of long leasehold on flats is to provide a way of controlling how the communal areas and fabric of the building are dealt with. Freehold means you own the land beneath the property and the sky above so it's clearly not suitable for multi-occupier units. In other countries they have laws about horizonal and vertically seperated buildings which provide those, here it's leasehold.

Long leasehold houses are often accidents of history. In our area a lot of cottages were build by Mill/Mine/Factory owners in 1800's or later for workers and most of those are 999yr leaseholds with a long lost freeholder and a peppercorn rent that's never been collected in living memory. Their value is no different to a similar freehold property.

In 500yrs, if the World is still around, whoever owns those properties will have the same rights as now as far as anyone can tell. But why worry? I certainly won't be here, I doubt you will and it's even unlikely your children will.

Astaroth

I was wondering why people buy the freeholds of these buildings with 899 years of a 999 lease left (when the rent is less than £1 and currently lease has no review clause)?

I can see the potential point for groups of tenants to buy it to remove an unpopular freeholder but looking at auction sites where blocks of 20 flats are going for massively over their guide price (and presumably therefore also their reserve) it would appear that others are also bidding on them. Why would owning a block of flats which you will basically get no rent worth while bothering collecting from for the next 890 years be a sound investment? My only thoughts would be that the grounds are worth "something" for extra development but then presumably you would need to reimburse something to the leaseholders (if this is possible at all.)

clutton_2

There are many many unscrupulous purchasers of leaseholds who, send "official looking" letters to new leasehold property purchasers, claiming that demands have previously been unsuccessfully made for the groundrent and that payment is now overdue. The precise rents can be found in the original Lease document, and (if from late Victorian times) are often something like £1.7s 6d. These companies say that since it has not been paid, an administrative fee of usually £120 + VAT is also due. The most back-rent that can be claimed in 6 years worth.

The unwary/un-knowledgeable will pay the amount claimed, rather than the £1.40p. Yet another little scam to be aware of !

Robert_Sterling

suffolkb wrote:

But what would happen in,say,500 years when the building was knocked down for regeneration of the area?

Do not worry about that.

Fitzy29

In addition to what clutton has said some firms will want to buy the freehold to a block of flats with the intention of making a profit from the service charges and ground rent.

A mate of mine lives in a block of city centre trendy flats, think there are around 100 of them on the site, a management compant bought the freehold and now charges each leaseholder £400 a year ground rent and £600 a year service charge, soooo that's a total of £1000 a year for each flat you do the maths!!

The worst thing is that the site's maintainance isn't up the scratch by a long way and if you are unlucky enough to lose your security key phob to gain access they charge you £40 for a new one ( they cost £2.50 )... Rip off to say the least...

Clever leaseholders buy the freehold before any of the above happens and manage the building themselves so all money in is well spent and you never get ripped off!!

suffolkb

I`m not worried about it.My house is freehold.I just wondered what would happen as the property is unlikely to last 999 years.Me neither.

michaelbubba

I have another question about 999 year leases. I have recently been offered the freehold puchase of a farm and had almost agreed the price when the seller was advised that because the title is in the name of his father, over whose estate the seller has power of attorny, if he sells the farm before his father's death any tax relief that might acrue aterwards, would not be available. My question is, does this only apply to freehold sales, or, if I buy a 999 year lease, will the tax relief for the fact that the farm freehold is still with the original owners still be available to them?