Advice - Leasehold doubles every ten years - cost of buying?

martinsurrey

justme111 wrote: »

I take your point, speaking as a lay person I agree that is what one pays solicitor for. On another hand one could argue that those properties are obviously saleable as the whole street bought them once, that they have an option of removing the clause at a cost which would have been factored into original price.

Sometimes the market as a whole drops the ball, see PPI, endowment mortgages, self cert mortgages as recent examples of "because everyone else is doing it, it must be fine", that end up in a MASSIVE pain in the rear.

nicmyles

A doubling lease clause makes a property almost un saleable.

Goes without saying this is a disgusting practice, but it absolutely *does not* make a property unsaleable, although it's admittedly a bit like chucking a water balloon around and hoping it doesn't explode.

I bought my last flat in 2012 with 120 years of a 125-year lease left with a ground rent doubling clause (admittedly much less awful than the 999-year with doubling). Sold in 2016, didn't even come up as an issue.

It just depends when you and your buyer are expecting to move on from the property - clearly for a long-term purchase it would be a nightmare, but if it's the kind of property that you and potential buyers are likely to be looking at for the short-term, it's not really an issue if you're near the start of the lease.

martinsurrey

nicmyles wrote: »

Goes without saying this is a disgusting practice, but it absolutely *does not* make a property unsaleable, although it's admittedly a bit like chucking a water balloon around and hoping it doesn't explode.

I bought my last flat in 2012 with 120 years of a 125-year lease left with a ground rent doubling clause (admittedly much less awful than the 999-year with doubling). Sold in 2016, didn't even come up as an issue.

It just depends when you and your buyer are expecting to move on from the property - clearly for a long-term purchase it would be a nightmare, but if it's the kind of property that you and potential buyers are likely to be looking at for the short-term, it's not really an issue if you're near the start of the lease.

Sorry I should have said a "doubling every 10 years clause", 25-20 year doubling isn't a issue as its below long run inflation, its the short duration doubling that is going to cause a massive issue in 20 years time.

stator

In percentage terms, what is the annual equivalent of "doubles every ten years" ?
I'm thinking it's not THAT far away from rent inflation.
(I make it about 7% per annum)

martinsurrey

stator wrote: »

In percentage terms, what is the annual equivalent of "doubles every ten years" ?
I'm thinking it's not THAT far away from rent inflation.
(I make it about 7% per annum)

https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/indexofprivatehousingrentalprices/dec2016

UK wide its a fair bit lower than that, under 3% per year since 2011

moneyistooshorttomention

martinsurrey wrote: »

Sometimes the market as a whole drops the ball, see PPI, endowment mortgages, self cert mortgages as recent examples of "because everyone else is doing it, it must be fine", that end up in a MASSIVE pain in the rear.

That's the thing imo.

Just because "the market as a whole" is doing something doesnt mean its a viable proposition imo.

I bought starter house when "market as a whole" thought endowment mortgages were A Good Idea. Thankfully - my Inner Cynic kicked in - and I therefore got a repayment mortgage.

Most people simply dont do the research and just go on the basis of "Everyone else does = so it must be okay then". If only life were so simple and other people were so correct:(:cool:

stator

martinsurrey wrote: »

https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/indexofprivatehousingrentalprices/dec2016

UK wide its a fair bit lower than that, under 3% per year since 2011

But still within the realms of sanity. I don't see how 7% (if my figure is correct) would make a house unsellable!
If HPI is greater than 7% then as a % of the purchase price the ground rent will go down!

But still, I really don't understand why people buy leasehold houses when there are so many 'real' houses out there!

moneyistooshorttomention

stator wrote: »

But still within the realms of sanity. I don't see how 7% (if my figure is correct) would make a house unsellable!
If HPI is greater than 7% then as a % of the purchase price the ground rent will go down!

But still, I really don't understand why people buy leasehold houses when there are so many 'real' houses out there!

Well - it must be rather difficult if one is in an area where there simply arent many normal (ie "real") houses out there. How does one stick 2 fingers up to leasehold houses if a high proportion of houses in ones area are that? (Yep...I'm speaking as someone coming from an area where that lark is barely heard of).

I can see why 7% pa increase is unsustainable - because we are currently in times of very low inflation and the Government/employers busily denying there is any inflation at all and giving darn all in the way of yearly "cost of living rises".

Slinky

There was a report on the BBC website only last week that I can't find where a chap had a £500 charge which doubles every 10 years. The lease was 190 years. It becomes millions relatively quickly!

nicholbb

If we get Zimbabwe levels of inflation then we'll be quids in ... apart from the starving bit?

There is other hope:
1) Scotland have changed laws around leasehold so a working model may help; also
2) Ireland and other European nations seem to removing leasehold, enforcing sales at reasonable prices.
3) Leaseholds are confined to high density in small areas so changes now would have limited impact on a few corporations.

So thank god for our good relations with Scotland, where we happily listen, borrow and enact their better laws. The European union to allow a possible legal challenge or respect we have for them allowing the adoption of their attitude and finally that our capital city isn't largely owned by a single family of influential, billionaire, aristocrats where the wealth isn't mainly from landholding and leaseholds so won't bribe concessions ... Oh !!!!!!!

Edit: Interesting (well was until I made this an essay):
https://www.theguardian.com/money/2016/nov/19/new-build-ground-rent-scandal-legal-battles-solicitors-negligence
Here it says:

]insurers for solicitors, who cover the cost of professional negligence claims, have accepted that a doubling of the ground rent every 10 years is an “onerous term”

So insurance companies won't be happy and solicitor won't be happy either with rising insurance premiums.
So we have a house of lawmakers stuffed with people that work(ed), married and are friends with barristers, lawyers and solicitors. With a party in power that got £4.9 million between 2005-2011 (figures I could find).

The power, money and corruption looks like it has balanced out ... we'll continue to ignore any issues around justice, morals or debate, just look at the two sides of sith Vs darkside.