Leasehold - Explain to me like I'm an idiot

not_so_witty

So we're looking at buying our first home and have found a likely candidate, but it is leasehold.
It's a terrace house and there's around 800 yrs left on the lease. I asked the seller about how much the charge is and they said it was less than £10 p.a., but the solicitors were bought out by another firm a few years back and they hadn't charged anything since. I'm guessing once we go to change the name on the lease they'll realise they've been missing out on money and will start charging again. So I have a couple questions:
1) Can they just jack up the price of the ground rent as they like it? It looks like the cost hasn't been adjusted in line with inflation in the last 100-odd years!
2) Could we be liable for rent not charged in the last four or five years? Not such a problem at £7 per annum, a big problem if they up it to £250 and back-date that.
3) Are there any other charges/bother associated with a leasehold? Will it cost more money at point of purchase or further down the line?

I've tried to research leaseholds but keep coming across articles that seem to be aimed more at multi-occupancy. Any advice greatly appreciated.

G_M

not_so_witty wrote: »

...... I have a couple questions:
1) Can they just jack up the price of the ground rent as they like it? It looks like the cost hasn't been adjusted in line with inflation in the last 100-odd years!
No. The lease will specify what the ground rent (and any other charges) are.
2) Could we be liable for rent not charged in the last four or five years? Not such a problem at £7 per annum, a big problem if they up it to £250 and back-date that.
Yes. If it were a potentially large amount you could ask for a 'retainer' on the purchase price - an agreed amount would not be passed to the seller but would be held by the solicitor for an agreed period, in case you get charged.
In your case this seems unnecessary!
3) Are there any other charges/bother associated with a leasehold?
Read the lease
Will it cost more money at point of purchase or further down the line?
?? Errr... more than what?
.

As with all things leasehold, read the lease.

bobobski

Copying G_M's style to throw in my two pennies' worth...

not_so_witty wrote: »

So we're looking at buying our first home and have found a likely candidate, but it is leasehold.
It's a terrace house and there's around 800 yrs left on the lease. I asked the seller about how much the charge is and they said it was less than £10 p.a., but the solicitors were bought out by another firm a few years back and they hadn't charged anything since. I'm guessing once we go to change the name on the lease they'll realise they've been missing out on money and will start charging again. So I have a couple questions:
1) Can they just jack up the price of the ground rent as they like it? It looks like the cost hasn't been adjusted in line with inflation in the last 100-odd years! Read the lease. Some double the ground rent every 25 years or something along those lines. That can get very expensive over time.
2) Could we be liable for rent not charged in the last four or five years? Not such a problem at £7 per annum, a big problem if they up it to £250 and back-date that. Read the lease. When is the ground rent due? Is it a specific day (e.g. 1 January every year) or "when demanded"? If the latter, worst case scenario they pursue you for all missing years. If the former, worst case scenario your seller has breached the lease by not paying even though the money wasn't demanded. Has your seller told you why they haven't paid? You say the landlord hasn't "charged" anything but usually rent is payable "whether demanded or not".
3) Are there any other charges/bother associated with a leasehold? Will it cost more money at point of purchase or further down the line? Read the lease. The main !!!! with leaseholds is needing consent for various things (decoration, pets etc). Sometimes consent can cost you money. There should be a specific "landlord's costs" clause in the lease - check whether these costs must be "reasonable and proper" where payable by the tenant.

I've tried to research leaseholds but keep coming across articles that seem to be aimed more at multi-occupancy. Any advice greatly appreciated.

Final thought: read the lease.

copperjar

I don't think the OP is able to read the lease yet because they have only just viewed the house.

bobobski

copperjar wrote: »

I don't think the OP is able to read the lease yet because they have only just viewed the house.

If the lease is registered, which it sounds like it should be, OP can order a copy from the Land Registry for a few quid. Or just ask the seller for a copy.

starving_artist

The Leasehold advisory services website covers leasehold houses. You need to the look at the information on http://www.lease-advice.org/faq/my-landlord-has-not-demanded-ground-rent-for-several-years-can-he-still-demand-it/

Rent arrears are subject to the Limitations Act and the landlord can only recover rent going back six years IF it was demanded in the proper format.

bobobski wrote: »

usually rent is payable "whether demanded or not"

Even if it says this in the lease rent is not payable unless it is demanded in the required format.

deFoix

copperjar wrote: »

I don't think the OP is able to read the lease yet because they have only just viewed the house.

This is a real bugbear of mine. Stupid gov't make supply of EPC information mandatory up front but the content of the lease can be hidden until the late stages of conveyancing.

Every buyer should demand a copy of the lease before making an offer since its instrumental the the price. EAs who refuse this should be shamed and avoided.

System

There will be maintenance fees id imagine
If he decides to do a lease extension in say 720 years time they may try to set a higher ground rent

eddddy

Taking a step back...

A lease is essentially a contract between the leaseholder (i.e. you) and the freeholder.

The lease says what you must do and what you must pay for, and it also says what the freeholder must do.

However, there is also loads of legislation that protects leaseholders. So some of the 'unreasonable' terms in a lease might be overridden by legislation.

In general, your solicitor should advise you if any of the terms of the lease are onerous or unusual. But you can also read the lease yourself and ask about anything that worries you.


If it's a very old lease, it may even contain covenants about things like maintaining a shared outside toilet, or banning you from using the house as a brothel.

Mossfarr

You definitely need to to see the lease before you make your decision and don't rely on the solicitor to tell you everything. When I bought my first house (very young and naive) the solicitor never told me that it had a groundrent and my property was responsible for collecting it for all the properties in the terrace. I was absolutely horrified.
You could always purchase the freehold at the same time as you purchase the property. I recently purchased mine and the total cost was £1500 including legal fees.

not_so_witty

Thanks very much all. We haven't gotten to making an offer stage as we only saw it yesterday. I hadn't seen the lease and assumed we wouldn't see it until much closer to completion, but I know nothing about them and everything about buying a house is new to us.
That's really useful to know that you can get them from Land Registry. Hopefully we'll be able to stick to any agreements about not running a brothel!


Sorry, when I said would it cost more money, I meant more than a freehold, I assume there'll be additional solicitors fees to sort it out.

It was the seller who did the viewing and he said that the solicitors that used to collect the ground rent went under/was bought out by another solicitors a few years back and since then they hadn't been charged. Before then it was £7 per annum. Is the worse case scenario that they can backdate the charge to the point they took over? In which case it would only be £42 back pay and potentially an increase down the line.

I don't think leaseholds are a thing in Ireland, which is where we are both from so we have nobody to guide us either.