Leasehold property

ConfusedLady

Hi,

We have just got our final documents for the house that we are about to buy.

We knew it was leasehold but didn't know how long it would be for. Our current house lease was 900ish years. The new lease is 250, is this now the norm?
Also the documents mention something about consulting the landlord before we do any amendments to the house. Does this mean we technically don't own the house and are just paying a £200,000 mortgage to live in the house?
Also when we have paid the mortgage off does this mean that it really isn't our home to pass onto our children?
Does anyone have any experience of purchasing the leasehold and would the landlord refuse? Would there be any benefit to asking about purchasing the leasehold in a few years time?
If we technically are only renting does this mean we can't do any external amendments ie build a shed in the garden?
The ground rent is peppercorn.

Bantex_2

Technically you are buying a 250 year rental agreement which you pay up front for.

sydenhambased

And if you wanted to "buy" the house, you'd be offering to buy the FREEhold.

Most of the answers to your questions will be in the lease document - your rights to put up a shed or extension, for example.

You can (of course) leave the remainder of the lease to your children, or sell it on as you would a freehold house.

ConfusedLady

Hi, If renting for 250 years then does this mean the leaseholder can come in our property to check any repairs we have done and that we have to get permission for everything?
So for current property we bought a 900 year rental agreement?
We haven't been given the option to buy the freehold?
So in 250 years, if for example our great, great, great, great grandchild lived in the property can they be chucked out or would the lease get extended?

sydenhambased

ConfusedLady wrote: »

Hi, If renting for 250 years then does this mean the leaseholder can come in our property to check any repairs we have done and that we have to get permission for everything? No, unless that's what it says in the lease! Read your lease!
So for current property we bought a 900 year rental agreement? Yes!
We haven't been given the option to buy the freehold? Not from what you've said so far, no.
So in 250 years, if for example our great, great, great, great grandchild lived in the property can they be chucked out or would the lease get extended?Chances are something would've changed by then - do you really expect the same house to be standing there for the next 250 years?

See my comments in red!

ConfusedLady

it references we have to get permission to do anything relating to repairs hence why we are now thinking we have not bought a property we are just paying to rent it. It states if we want to do anything external we need the leaseholders permission. Therefore again making us think we are just renting.
I really don't know regarding 250 years, our current house is 130 years old.
It is in a lovely area and therefore planned to pay of the mortgage within 10-15 years and then pass it to our children and assumed if the area still the same one of them would remain in the house with their children.

Back to my original question, to us who don't really know anything about buying it looks like we are renting if we have to have the leaseholders permission all the time.

sydenhambased

"looks like we are renting if we have to have the leaseholders permission all the time."

I haven't seen your lease, and even if I had, I'm a classical musician, not a solicitor.

That said, while I'm still renting:

1. I can't replace the faulty boiler.
2. I can't redecorate the bedroom.
3. I can't put in a new kitchen, even though the existing one's 30+ years old and tired.
4. I can't do anything about the grill that fuses all the electrics so can't be used.

When we finally complete on the leasehold flat we're buying, I'll be able to do all of those things, if they need doing, without talking to the landlord at all.

That sounds more like ownership than renting to me.

stator

If you wanted to build an extension you might have to pay the freeholder. If extending is important to you I suggest you just abandon this house and find a freehold.

Why is it a leasehold? Usually there's a reason, like it's converted from a larger property and there are shared parts of the building, eg roof.

princeofpounds

Yes, a leasehold is technically renting a property for a very long time.

However, it would be a total mistake to think that it is anything like being a normal tenant on an AST type of tenancy.

Leasehold tenure is much more powerful, to the extent where most people do think of it as buying the property, even though that is not technically correct. That is why leaseholds are bought and sold just as freehold houses.

. Our current house lease was 900ish years. The new lease is 250, is this now the norm?

No. There isn't technically a norm. There is very little practical difference between a lease of 900 years and a lease of 250 years. Lease length starts to matter a bit more when you get under 100 years and noticeably when you get under 80 years.

To be simplistic, the basic reason is that you have the right to extend the lease for peanuts. The only time it stops being peanuts is when the lease gets shorter, and the 80 year barrier is important because the law starts to consider the value of the property a bit more at that point.

Also the documents mention something about consulting the landlord before we do any amendments to the house. Does this mean we technically don't own the house and are just paying a £200,000 mortgage to live in the house?

You own the lease on the house. This is a valuable asset.

Freeholders are able to place some restrictions on leaseholders because they still own the ground and they still own the reversionary rights. So they still have some interest in the property even if in practical terms it is negligible.

You should read the lease and ask your lawyer about the practical implementation of any points that concern you. For example, you may need to ask for permission to amend the property, but often the freeholder cannot reasonably refuse and can only ask for a nominal administration fee.

Also when we have paid the mortgage off does this mean that it really isn't our home to pass onto our children?

It is your home and your lease to pass on to your children. If you pass a 170 year lease on instead of a 250 year lease the value will be almost the same.

Does anyone have any experience of purchasing the leasehold and would the landlord refuse?

Millions of people. It is a very common structure.

Would there be any benefit to asking about purchasing the leasehold in a few years time?

You mean the freehold. You actually have a right to buy it, for a house, in most but not all circumstances.

http://www.lease-advice.org/information/faqs/#Houses-BuyingtheFreeholdandLeaseExtension

(Incidentally that site will tell you all about leaseholds, it's a govt-funded advice service).

If there is no real ground rent, a very long lease, and no restrictions from the freeholder you may not even want to bother as the legal costs will outweigh any benefit except for the psychological.

If we technically are only renting does this mean we can't do any external amendments ie build a shed in the garden?

You are not 'only renting'. You are a leaseholder, which is way more powerful. Whether you can build a shed or not will depend on the exact terms of the lease. Ask your lawyer.

Hi, If renting for 250 years then does this mean the leaseholder can come in our property to check any repairs we have done and that we have to get permission for everything?

Technically they can go to court and ask for access, but I have never ever heard of a freeholder asking for access to a house (flats are different as the freehold needs to be involved to look after the common parts).

So for current property we bought a 900 year rental agreement?

Yes, but you have to get this concept right. It is not the same as being a regular tenant.

We haven't been given the option to buy the freehold?

I can't tell you without knowing all the details why this is. Sometimes it is done by developers to earn a little extra cash on top - but this is more common in flats and they would normally be charging ground rent.

Sometimes it is done for a legal reason; perhaps the property is built on ground that cannot be split into a separate freehold for some reason. Impossible to tell from herebut your lawyer may have an idea.

So in 250 years, if for example our great, great, great, great grandchild lived in the property can they be chucked out or would the lease get extended?

The way the law has been for a long time now; it would be extended. The general movement has been to give more rights to leaseholders over time , not less.

ConfusedLady

Thanks princeofpounds.

Very informative.

Just a couple of questions.
If either of our children stay in the house and then pass it onto their children regarding:
To be simplistic, the basic reason is that you have the right to extend the lease for peanuts. The only time it stops being peanuts is when the lease gets shorter, and the 80 year barrier is important because the law starts to consider the value of the property a bit more at that point.
Would it be wiser for them to esquire about extending the lease in say 50 years?
Regarding your second reply, I think I understand now. The landlord will want to see potential improvements because if they aren't improvements or an eyesore then they will not allow the because it affects their land?
Thanks for the link regarding buying the freehold. I will read this shortly.

princeofpounds

Would it be wiser for them to esquire about extending the lease in say 50 years?

With a 250 year lease, I don't think the question of lease renewal is really going to come up as a serious issue for about 150 years.

Regarding your second reply, I think I understand now. The landlord will want to see potential improvements because if they aren't improvements or an eyesore then they will not allow the because it affects their land?

It's a bit broader than that - it affects their interests more generally.

In theory, although probably never in practice, the freeholder will eventually get the property back through reversion when/if the lease runs out. So they wouldn't want you to, for example, destroy it and replace it with a tin roof shack.

But also very common is that there are other interests that might be affected. For example, imagine a leasehold house which is a wing of a mansion (there are a few around) with a a shared roof like the previosu poster suggested.

If you were have a partial roof collapse, they aren't going to want to you replacing it with a cheap flat roof because the original roof may have been providing necessary support for the roof of the central hall. The flat roof would work for you, but it might imperil someone else's property on the same freehold.