Leasehold help.

jawa1

Looking at buying a house which is Leasehold.

House value is £130,000
The leasehold was done in 1934 and was for 800 years.
So a nice long length.

The ground rent is £4 a year.

Is there any point trying to buy the freehold?

What does the ground rent normally increase by per year?

Are there any rules on what it can be increased by?

RiskAdverse100

It depends what the lease says.

If the rent is stated to be £4 for the whole of the 800 term that no increases are allowed.

I certainly think you should make an offer for the freehold. The admin costs involved in collected the rent each year could easily be more than £4.

Depending on what the lease says about rent increases you could offer £100 for the freehold plus another £500 or so to cover legal fees.

If I was the freeholder I would certainly consider such an offer.

RiskAdverse100

prudryden

Like Risk says - if you can buy it for around £100 + legal expenses, you might as well. Owning the freehold in your case is probably not crucial.

Also, as Risk says, chances are the Ground Rent doesn't increase. Check the leasehold docs.

itgirlinuk

What are the general reasons why we should buy the freehold? Is property price the only reason?

cattie

itgirlinuk wrote:

What are the general reasons why we should buy the freehold? Is property price the only reason?

Owning the freehold on a leasehold property is usually beneficial price wise, but there are other benefits. You & other leaseholders can band together to form your own management company & decide when repairs & maintenance are required & which company to use for the work. Many managing agents don't shop around to find the cheapest quote & leaseholders can end up with high bills when work is required.

Leaseholders who currently pay high service charges may be able to reduce the costs considerably by hiring in their own choice of personel & keeping costs to a lower level.

Also if you want to do alterations to your property then the process becomes much more straightforward if you own or have a share of the freehold.

Doozergirl

itgirlinuk wrote:

What are the general reasons why we should buy the freehold? Is property price the only reason?

If you have a lease which is under about 90 years then you will benefit from extending the lease as it's value becomes higher to the freeholder as the term decreases. A lease is effectively an agreement to rent the property for a long term, so as it gets shorter the value in the property starts to move from the 'tenant' to the 'landlord'.

It also means you take control for the management of the building and the buildings insurance. Flat owners in particular can potentially save quite a bit of money on service charges etc, though this can also be done through the 'Right to Manage' which should be much, much cheaper than buying the freehold unless the lease falls far below 80 years in which case it can be cheaper to buy the freehold.

The whole thing is incredibly complicated and variable!

In the OPs case, the freehold is worth very little at all to the freeholder and it probably won't make agreat deal of difference as to whether the OP buys the freehold or not. It won't affect the value of the house, but it is generally more carefree to own a freehold property. You often need to consider how long you're going to stay at the property as to whether it is worth buying the freehold.

Richard_Webster

Need to distinguish between buying freehold of house and freehold of block of flats or house converted into flats. You can buy the freehold of a house on yor own but a block of flats can only be bought collectively.

The very confusion is a clue to the reason for buying the freehold of a long leasehold house. When you come to sell there are a certain number of people out there who know someone who has had trouble with their LEASEHOLD FLAT and therefore assume that leasehold houses are just as bad. In practice, the problems are fewer and usually less serious, but nevertheless a certain number of people don't even look at a house if it is leasehold!

It will vary a bit from area to area, but round my way estate agents don't value very long leasehold houses any different from freehold ones. Neverthelss because of possible buyer resistance it is probably worth spending some money on buying the freehold - for some general background see http://www.rwco.co.uk/central_eastleigh_older_terraces.htm where I explain some of the ins and outs of such houses in my area.

The other point is that sometimes these freeholds change hands and the new property company freehold owner sets out to exploit that situation. One ploy is to write letters asking for a questionnaire to be completed by the lessee with questions about such matters as whether any extensions have been built. If you reply to these giving details of an extension this is followed by a letter asking for a very large fee for considering whether to grant a consent under the covenants in the lease! This kind of harrassment eventually culminates in an offer to sell the freehold for some unreasonable price like £1,500 and some people have got so stressed that they have given in and paid up!