Buying a leashold house,- should we just walk away? Advise please.

DoctorRN

I would be grateful for the advice of other forum members. Apologiesfor the long post. My wife and I are FTBs. We have been hoping to purchase afive bed new build house for some time. The property is currently being builtand the price is ~£550,000. It is being sold leasehold with a 999 year lease.Ground rent is currently £300 and is reviewed every 10 years and the increaseis initial rent multiplied by RPI and then divided by base index. There is alsoa service charge, which is payable every six months and is determined based onworks carried out to the estate by a management company (RMG propertyservices). Before the property was released for sale, the salesperson one dayhappened to mention that the sale of another property on the estate hadrecently fallen through because the purchaser had found out that you are notallowed to have a commercial vehicle on the drive. I am naturally a cautiousperson and this rang an alarm bell to me. While I do not have such a vehicle,it made me wonder what other clauses were in the lease. I therefore enquiredabout this and asked whether I would need to get permission from the developerto make changes such as adding a conservatory. The salesperson was a bitevasive about this. Eventually they suggested that I ask the developer’s legaldepartment, which I did and never got a reply. Shortly after this, the plotbecame available to reserve. I was called by the salesperson and asked if Iwished to reserve the plot and pay the £1000 reservation fee (you then have to exchangewithin six week). I explained that I had not had an answer to my question yet,to which I was told “that is probably because the legal department will notspeak to you until you have reserved”. I therefore asked for a copy of thelease and was this time told that they are not allowed to give out a copy ofthe lease until you have reserved. This annoyed me and I explained that therewas no way I was going to part with any money until I had seen a lease. Theusual tricks were tried like “you have to move fast as there are lots of peopleinterested”. I resisted this and was eventually given a copy of the lease. Theimportant points to note in this are:



1. Ground rent – see above.

2. Service charge – says that it is calculated bythe managements companies accountant based on work done and then charged every6 months. No mention of how this is divided among residents. Is it equal ordependent on size of house.

3. No additional dwellings can be built on land.

4. No alterations can be made to the propertywithout the permission of the developer.

5. House cannot be sold without permission of thedeveloper and payment of a fee – minimum £100 (no maximum).



Having read online about the ongoing problems with leaseholdhouses, I was nervous. I asked the developer if I could purchase the freeholdat the time of sale. Initially I was told that it is not the developer’s policyto sell the freehold to purchasers. However there was a legal right to buy itafter two years. I was also told that it was not the policy of the developer toretain the ground rent portfolio (in other words they sell it on). I explainedthat I was not prepared to purchase the property unless I was sold the freeholdimmediately. After some deliberation, the developer has offered that freeholdfor £10,500 (35 years ground rent at £300). Today, when I spoke to the salesperson, I stated that I assumed that if I purchased the freehold, I would nothave to follow the other terms of the lease as I would be buying a freeholdproperty. I was shocked to hear that I would still have to adhere to the termsof the lease! I would also have to pay the service charge and was quoted aprice of ~£150 per annum, even though the lease says that it is variable.

This now leaves me with a dilemma. We had really set ourhearts on the house. However, to me, if they are expecting me to have to adhereto the terms of the lease, they are not selling the freehold. Instead they areleasing me a property and I pay 35 years ground rent upfront. Throughout theentire process the salesperson/developer has been evasive about the lease andits terms. We now have to make a decision – should we pay the £1000 and reservethe property or walk away.



I would be grateful for the thoughts of other forum members.



Many thanks.

Harryp_24

walk away. They will restrict you on alot of things - charge you mammoth fees for doing anything.
They will sell the freehold to a management company who can charge what they want. So saying it will be £150 a year is !!!!!!!!, in a year or two that could be £500, £1000 ect.

I believe being a freeholder in the leased development ran by a developer and not the council means you will actually have less rights then a leaseholder. Yes you will still have to pay service charge for whatever they do (that theyre likely to charge ridiculous prices for).

If you can afford £550,000. buy a freehold property. There is plenty around. It will save you sleepless nights and worrying about all the crap they try to resitrict you on.

as posted in another thread who A old couple built a porch on their house and it was spotted by the developers on google maps! They then told them to tear it down or pay a substantial fee.

Its literally just a money making ploy.

Although i am very cynical of leaseholds so take everything i say with a grain of salt and wait for more experienced people to tell you the legalities of everything, To me, It basically means you're renting a house for an agreed long term contract.

If it is leasehold ran by the council its a different story and buying the freehold would cost you a few hundred quid but this isnt im afraid. This is like buying a 5 bedroom flat in a block sort of thing.

Of course if it your dream house and you can swallow paying the ground rent/service charge/invoices for repairs ect. Go for it!

This is only an opinion, but i would walk away from that and not look back)

ACG

I do not do many new build mortgages, but it is not uncommon on new developements to have a lot of rules in place for a period (which I think is about 10 years)...No commercial vehicles, no vehicles over a certain weight, if you want to build an extension you have to use one of their companies and no sky dishes are some that I can think of. Whether or not they enforce the rules is another matter.

But I would not spend half a million pound on a leasehold house with rules and regulations personally and the fact they are discussing these things with you probably means the demand is not as high as they are making out.

getmore4less

Walk.....fast.

the problem is you are dealing with an unknown, by the time you come to sell any potential buyer will have real data that may not look good.

even freehold I would walk from an estate like that.

even if the freeholders get to form their own management company it will go the way of homeowners associations in the US and get taken over by the power hungry that will have you cutting your grass to the mm every week and moaning if the bins are out for 5 mins too long.

haf1

I agree, walk away, and walk fast. However lovely the house may seem at the moment, it may well become a serious PITA to sell, years down the line.

sparky130a

This has to be a wind up.

Over half a million Pounds Sterling on a house and those restrictions... Not a bloody chance.

Hoploz

Find another house at £560k where there are no lease terms still to adhere to!!!

Mrs36

Ouch. I would steer clear, even if you are happy to buy a leasehold now would your buyer in X time?

I don't believe there is any genuine reason these days for a house to be leasehold (obviously flats are a different scenario entirely) other than greed of developers.

maisie_cat

Walk away, do not look back

Chanes

I am very much averse to leasehold properties though I accept old houses (on peppercorn payments with no service charges) don't seem as bad as the current trend for leaseholds and service charges that seem incredibly sneaky and obtuse in wording. Given that it is a sizeable chunk of cash you will be handing over my instinct would be to look again at the area you want to live in for something less worrying (for want of a better word)

It could work out just fine for you and this property and on balance that is the most likely outcome but I would like better than most likely at the prices you are considering.

Whatever you choose I wish you the best of luck, home buying is incredibly stressful.

getmore4less

2. Service charge – says that it is calculated bythe managements companies accountant based on work done and then charged every6 months. No mention of how this is divided among residents. Is it equal ordependent on size of house.

This needs a full list of everything you will be responsible for.

What is to be retained or adopted, what is included in your list and the list of properties you will be sharing the costs with, any social housing in the list sharing your costs alarm bells
eg. if they keep the street lights you will be paying.
you could be responsible for the upkeep of a play area you never use.

What if there is a dispute over the developer not doing their job properly on the shared stuff and the substandard work become chargeable in the service agreement to maintain.

What if they change the development from reserving to completion and what you end up being responsible for is different.

Older freehold estates will have covenants stopping things but those with the vested interests move onto their next development so don't bother, we had no sheds in the gardens, everyone has a shed now, loads of other developer(keep the place pretty) covenants are forgotten

A development with a freeholder and management company far too risky.

Some types of setups need this type of arrangement