Should I buy a house that's leasehold?

superbabe612

Hi all, I'm hoping for some help/advice. I've had an offer accepted on a semi-detached house, I've applied for a mortgage and paid my solicitor to do the searches on the property. However, they've just received the contracts from the vendor's solicitor stating that the house is leasehold, not freehold.

The brochure doesn't mention the tenure, nor does the memorandum of sale. Should the estate agent/vendor have disclosed this information before/when I made the offer on the house?

I don't know much about leasehold except I'd have avoided it if I'd known! What are the disadvantages? Should I go ahead with the sale or reconsider?

Thanks!

ps I've also posted this is the 'Buy my Freehold' thread so apologies if anyone gets deja vu!

Freecall

My view is that whatever the pro’s and con’s of buying freehold or leasehold, the difference is a highly significant and material factor.

For an EA not to mention it when trying to sell the property (especially in a market where the default position is definitely that houses are usually freehold) is unprofessional to say the least.

After all, when selling flats they are usually only too keen to point out where a ‘share of freehold’ is included.

clint_S

This really depends on the length of the lease. If you have a long lease, say 999years, then you'll really not see any difference between the two. Most new builds, whether freehold or leasehold, require maintenance of the communal areas and as such you'll be hit with the same fees. The houses will have the same restrictions on what colour they should be, whether you can stick a TV Arial on the roof, etc.


Short leases below 70 years are different and should be avoided.

TBagpuss

It depends on the terms of the lease.

In particular:
- service / rent charges - how much are they, are they variable, do they include elements for properties other than your own (e.g. communal areas)
- restrictions - does the lease impose obliogations or restrictions on what you can do with the house

My first house was leasehold- it had been built in around 1907 on (I think a 999 year lease) There was a rent charge of £3 a year which wasn't variable, and a restriction preventing me from running a tannery or keeping pigs in the back yard, or from using the house as a brothel, none of which presented any problems.
on the other hand, new properties, particularly those which are ex council or housing association may have much higher rent charges or obligations for sharing the cost of upkeep of other properties, or have more restrictions about what you can do.

If it wasn't on the particulars it is possible that the owners didn't realise - it may have a minimal rent charge that they had forgotten about or no longer pay.

I would suggest asking for a copy of the head lease and taking it from there.

moneyistooshorttomention

clint_S wrote: »

This really depends on the length of the lease. If you have a long lease, say 999years, then you'll really not see any difference between the two. Most new builds, whether freehold or leasehold, require maintenance of the communal areas and as such you'll be hit with the same fees. The houses will have the same restrictions on what colour they should be, whether you can stick a TV Arial on the roof, etc.


Short leases below 70 years are different and should be avoided.

I've read about some new houses (of the, quite obviously, should be freehold variety) being leasehold instead these days.

Its a new one on me to be told that any freehold newbuild houses would be expected to pay for maintenance of communal areas though. That thought wouldn't cross my mind - I'd just think "standard house (obviously freehold)" = obviously the Council maintain communal areas (ie in the same way as they mow their grass verges etc). Is that the case with a few newbuilds (even of the standard freehold variety)? When househunting recently, one of the houses on my "possibles" list was pretty darn recently built and it never occurred to me that the green areas in the road would be anything other than the Council's responsibility to maintain.

AdrianC

If there were two identical properties for the same price, one freehold, one leasehold, you'd be mad not to go for the freehold.

But the choice isn't that simple - so there's a lot of other factors to take into account. How big is the price difference to a similar freehold? How long's the lease? What's the ground rent? How much would the freehold cost?

Freecall

TBagpuss wrote: »

....a restriction preventing me from ..... using the house as a brothel

Oh well, just have to find another way of making a living I guess.

TBagpuss

Freecall wrote: »

Oh well, just have to find another way of making a living I guess.

It would make for an interesting complant against a conveyancer, wouldn't it? "M conveyancer didn't warn me I wasn't allowed to run a brother in the house" "And were you planning to, ma'am?" I may be wrong, but I thought it was illegal to run a brothel anyway...

superbabe612

AdrianC wrote: »

If there were two identical properties for the same price, one freehold, one leasehold, you'd be mad not to go for the freehold.

But the choice isn't that simple - so there's a lot of other factors to take into account. How big is the price difference to a similar freehold? How long's the lease? What's the ground rent? How much would the freehold cost?

There have been 2 other properties on the same road recently sold - both needing a lot of work (not just cosmetic) so they were £30k cheaper, and one of those is freehold. I really need a house I can move straight into, which is why I chose this one.

I've just found out that the lease is about 700 years and the ground rent is around £7 a year, which is probably the best case scenario I could hope for!

My google research says I may have the right to buy the freehold after two years, but since it's a semi, there's an adjoining property so would I need the neighbour to do the same?

Freecall

superbabe612 wrote: »

There have been 2 other properties on the same road recently sold - both needing a lot of work (not just cosmetic) so they were £30k cheaper, and one of those is freehold. I really need a house I can move straight into, which is why I chose this one.

I've just found out that the lease is about 700 years and the ground rent is around £7 a year, which is probably the best case scenario I could hope for!

My google research says I may have the right to buy the freehold after two years, but since it's a semi, there's an adjoining property so would I need the neighbour to do the same?

No, your neighbour would not need to do the same and with 700 years to run there would not necessarily be any point in you doing so either.

The issue is not really the ground rent but the terms of the lease. You need to have a good look through and make sure that you fully understand (and are happy with) the terms.

While you solicitor will do this from a strictly legal perspective, I would highly recommend getting a copy and reading yourself. You have a strong vested interest in the whole issue and will therefore be motivated to spend time going through it clause by clause.

If there is anything you don't understand then come back on here, there are many knowledgeable people hanging around these boards.

catterlen

Freecall wrote: »

No, your neighbour would not need to do the same and with 700 years to run there would not necessarily be any point in you doing so either.

The issue is not really the ground rent but the terms of the lease. You need to have a good look through and make sure that you fully understand (and are happy with) the terms.

While you solicitor will do this from a strictly legal perspective, I would highly recommend getting a copy and reading yourself. You have a strong vested interest in the whole issue and will therefore be motivated to spend time going through it clause by clause.

If there is anything you don't understand then come back on here, there are many knowledgeable people hanging around these boards.

I agree with this- my first property, built 1899 for a ground rent of £3 every 3 years shared with other houses on the terrace, was leasehold on 800 years, and there was covenant in the lease which said I couldn't open or run a facility making steelware (Sheffield- so cutlery was big back then!) or have open kilns in the communal or private areas....
However, it also had a small extra with regards to the shared outside facility which had been installed in 1910, which said I couldn't convert it or use without the neighbours permission. As the neighbour had already bagged half to convert to a brick shed, we came to a legal agreement and my solicitor dealt with the rest and somehow made the covenant ok- I'm sorry I can't remember if she had it changed or what she did though- so it wasn't a problem for selling on. To be honest, most of the time I didn't think about it as my mortgage company paid the lease company, so it may have been easy to forget?
But I think 700 years and £7 wouldn't in itself put me off.... Unless you want a kiln in the yard?!!!