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What is the point of leasehold for houses?

zzzt
zzzt Posts: 407 Forumite
Part of the Furniture 100 Posts Name Dropper Combo Breaker
edited 23 March 2016 at 12:32PM in House buying, renting & selling
I can understand why flats tend to be leasehold. It makes sense because they are part of a building containing many flats. Someone has to own the land and the building, and you want control over what people can modify.

What I don't understand is why most new build houses seem to be leasehold. What is the idea behind it? Most of the houses I have looked at that are built in the last ten years seem to be leasehold. These are semi-detached or even detached houses. I just can't understand it.

Even if the lease is 900+ years, I just don't like the idea of it in principle. If I'm paying hundreds of thousands of pounds for something then I would hope that I own the land and the building, and not have to pay a freeholder ground rent or ask the freeholder's permission to make modifications. I want it to be mine.

Edit: just read this horror story.
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Comments

  • JoeCrystal
    JoeCrystal Posts: 3,266 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    Surely it must be an income for the Freeholder I imagined, simple as that
  • clint_S
    clint_S Posts: 366 Forumite
    Agree, this is the real Scam in modern houses, as well as non adoption by the council.
  • brownbabygirl
    brownbabygirl Posts: 1,356 Forumite
    to make the rich richer. is it not the same lawmakers who have these rules in place?
    QUIDCO £2827 paid out since October 2007:D
  • wymondham
    wymondham Posts: 6,355 Forumite
    Part of the Furniture 1,000 Posts Photogenic Mortgage-free Glee!
    Are new houses leasehold?
  • clint_S
    clint_S Posts: 366 Forumite
    some are and some aren't.
  • Mossfarr
    Mossfarr Posts: 530 Forumite
    Ninth Anniversary Combo Breaker Hung up my suit!
    edited 23 March 2016 at 3:10PM
    Its not as simple as just an easy income for the freeholder. My house is leasehold but the ground rent is one peppercorn - ie no annual charge.
    The purpose of the lease is to ensure that properties on this 'estate' are maintained to a good standard. For everyones benefit I would say.
  • Leasehold houses are quite common up here in the North. (old ones anyway) Usually remaining of 999 years. A relative of mine who used to live in one payed something like £3 per year ground rent.

    The new builds, yeah. It seems a bit sneaky to sell them as leasehold nowadays.
    Busting this debt!

    Started in August 2024 with debt = £19,966

    Loan: £3,854 to go.

    I eat far too much chocolate...
  • Derboy
    Derboy Posts: 168 Forumite
    Glad we don't have it in Scotland.

    "In Scotland, a similar freehold and leasehold system occurred up to the 15th century. A landlord would grant some land to the tenant in return that he fought for the King. This was then replaced by the tenant paying some form of payment to the landlord as part of his ‘duty’. This system was abolished on 28 November 2004.

    When buying a property in Scotland, there is no freehold and leasehold distinction. What you buy is 100% yours and you can say everything is ‘freehold’ in Scotland. Once you buy the property, you can give a tenancy to someone else so they can occupy it for a rent. The desirability of having 100% ownership is that there is no other landlord controlling how the property is managed with extra service charges payable and the buyer does not need to worry about having to pay a premium to extend their lease before it expires. This would then make it easier to sell a property as in England, leases with less than 70 years remaining would find it difficult for buyers to obtain a mortgage."
  • Where I am (excdept in limited special cases where a lot of estate management is involved) builders do not sell houses leasehold but it deos sem to happen in other parts of the country - presuymably because people are less incliuned ot question i t.

    Scenario runs like this:
    Builder create a lease for say 99 years with an initial ground rent of say £100 pa (which perhapos doublkes every 25 years) - enough gto be worth collecgting but not enough to put the average buyer off altogether..

    Builder then sells freehold to nasty proeprty company and therreby makes an erxtra sum on the dsie. Proiperty company sits there collecting the ground rent (and sometimes whacking on admin charges of various kminds if they can get away with it.).

    Nobody thinks much about it until say 25 yaers have gone by and someone is trying to sell their leasehold house. They then have to approach property companyt fpor a elaseextension ro to purchase freehold - and they make a tidy(4 or 5 figure) sum out of that and seller effectively gets less for his house because he had to meet this expense.

    New housess are usually sold for inflated prices and too many people accept this. If more folk threatened to walk away because there was a similar 10 year old house down the road on another estaste going for £10K or £20K less, builders would put their prices down. Tthis is evenmore the case with off-plan purchases and those where a neew lease is to be granted.
    RICHARD WEBSTER

    As a retired conveyancing solicitor I believe the information given in the post to be useful assuming any properties concerned are in England/Wales but I accept no liability for it.
  • agrinnall
    agrinnall Posts: 23,344 Forumite
    10,000 Posts Combo Breaker
    edited 24 March 2016 at 10:48AM
    Richard has been here long enough (and a lot longer than you) to make a convincing case for being a retired solicitor, I'm guessing he was posting from an unfamiliar device in this instance.
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