Leasehold property with around 40 years left on EXTENDED 50 year lease-looking for advice

Cakeguts

moneyistooshorttomention wrote: »

I have an idea that I've only read VERY recently (ie in the last few weeks) somewhere about some law about to come in re the price that can be charged for freeholds.

That price was a very reasonable one imo. There were a couple of different options to establish what the price would be and, from vague memory, there were two options and one of them was a maximum of a certain number of years worth of service charges (10 years??).

Your fathers house won't be one of these modern "freehold" type properties - but I doubt this coming law would only refer to them.

Couldnt swear to it - but worth checking out - as I think there's a good chance more "traditional" type freehold properties might just be covered (ie as well as the modern "sell a house without a typical 'its freehold - end of' scam that's currently going on, but the law will soon stop this lark).

It depends on the length of the lease and how many years are left. The shorter the lease the more the freehold costs because at the end of the lease the freeholder either gets his house back or a tenant paying a market rent. Obviously if the freeholder has to wait 998 years for this the freehold won't cost as much as if the end is in only 20 years.

Hoploz

Oh dear. If you value the house at around £40-50k due to its condition, then with only a 40 odd year lease it seems to me it has little or no value on the open market. That's fine if you just want to keep it as your home, but if you ever want to sell nobody will get a mortgage on it.

So ... Although over £20k seems a lot relatively, you would actually be increasing the value from £hardly anything - 'cash buyers who wish to spend over £20k later' only - to the £50k level.

topoftherock

Cakeguts wrote: »

If you buy the freehold you won't be in a position to make a profit. That is the whole point of the legal way of working out how much you pay for the freehold. The shorter the lease the more the freehold costs because when your lease runs out the landlord can sell the house for the full amount. The price you pay for the freehold has also to be fair to the landlord who is losing the opportunity to wait until the lease ends and get the full value of the house.

Hi Cakeguts, thanks your reply. To be honest, I don’t think the house would ever be sold because, as you stated, there is not much profit to be made out of it. Furthermore, it holds a lot of sentimental value as the house has been in the family for a long time. In addition, I would like to live here long term.

topoftherock

eddddy wrote: »

There is no real harm in contacting the freeholder to make an offer for the freehold.

For this kind of informal approach, there are no rules.
(e.g. You could offer £5k and the freeholder could ask for £100k. If you can't find a price that you both agree on, the transaction won't happen.)


BUT... there is an alternative route that you can probably follow. You probably have the legal right to compulsorily purchase the freehold.

If you go down the 'compulsory purchase' route, there are legal formulas for calculating what you have to pay.

Here's some info about that route: https://www.lease-advice.org/advice-guide/leasehold-houses-valuation/

Hi Eddddy, many thanks for your help. I’ve had a quick look at the link, but it seems quite complex, so I’ll have to read it again a few times to fully understand what it means. Thanks again.

topoftherock

Cakeguts wrote: »

https://www.lease-advice.org/faq/i-own-a-leasehold-house-how-do-i-buy-the-freehold/



This government site tells you how to do it.



Depending on how old your father is will depend on whether it is worth it to him or not. If he is in his 70s now and there is 40 years left on the lease it may not be worth his while to buy the freehold unless you think he will still be living there at 110 years old.



Buying the freehold is likely to cost several thousand pounds. If he has to have care he will have to sell the house to pay for it unless he can pay for it out of savings. He will have to pay for the freehold with cash from savings unless he is young enough to get a mortgage which is sounds as if he probably isn't.

Hi Cakeguts, thanks for your reply. Yes, I know what you mean. Ultimately, my father wants to buy the freehold in order to pass on the house to his children. It’s a real shame because the freehold was offered to his mother in 1994 for around £400 (with 16 years left on the original 99 year lease).Hindsight is a great thing and she should have bought it then. But my grandmother didn’t really understand how the price increases exponentially during the last few years of a lease, so I guess she thought she could wait a few more years and the price would be the same (plus, she was saving for other things at the time). And the sad thing is that she never told my father of the letter she received in 1994. It was only years later, when my father cared for her full time, that he found the letter (around 2006). So you can imagine how he felt then. When the lease ran out in 2010, we never told her the new asking price of £22,000, otherwise it would have finished her (a few months after getting the 50 lease extension, she passed away). So in summary, this is why my father is determined to buy the freehold.

Cakeguts

topoftherock wrote: »

Hi Cakeguts, thanks for your reply. Yes, I know what you mean. Ultimately, my father wants to buy the freehold in order to pass on the house to his children. It’s a real shame because the freehold was offered to his mother in 1994 for around £400 (with 16 years left on the original 99 year lease).Hindsight is a great thing and she should have bought it then. But my grandmother didn’t really understand how the price increases exponentially during the last few years of a lease, so I guess she thought she could wait a few more years and the price would be the same (plus, she was saving for other things at the time). And the sad thing is that she never told my father of the letter she received in 1994. It was only years later, when my father cared for her full time, that he found the letter (around 2006). So you can imagine how he felt then. When the lease ran out in 2010, we never told her the new asking price of £22,000, otherwise it would have finished her (a few months after getting the 50 lease extension, she passed away). So in summary, this is why my father is determined to buy the freehold.

You can probably persuade him then that it isn't actually really worth all the stress of doing it. What he is going to finish up with after all the expense and stress is a house that is worth next to nothing with lots of things needing doing to it which will have to be sold if he needs care in a care home. It would be a lot simpler to save the money needed to buy the freehold or even to enjoy spending it because there is a high posibility due to the cost of care home fees that there won't be anything left from the house sale to pass onto his children. Plus he won't have to go through the stress of selling the home to pay for care if he needs it and seeing the house that he so carefully spent time and money buying being sold again.


If the lease is longer than you think he is going to live for then it is probably better to let it remain leasehold because it will be possible for him to continue to live there. The chances are that he won't be able to pass it on anyway.

Hoploz

That's right, hence asking in my first reply what the benefit is of buying the freehold. Future plans for the long term make all the difference.

If the plan is to sell and profit from the house then it's no good with this type of leasehold. But if it's to live in and that's all, there's no point spending all that. It can still be inherited and enjoyed for years to come and the likelihood is the next owner in the family can renew the lease for relatively small money again when it comes up for another 50 years

Cakeguts

Sunny_Intervals wrote: »

The Government is currently considering making massive changes to how leasehold works, including the costs involved in extending leases/buying the freehold. They're currently collecting evidence for an inquiry into leasehold reform. Unless you're desperate to make a decision now, it's worth waiting a few months to see what they come up with.

That probably won't make any difference in this situation because even if they buy the freehold the house will probably need to be sold to pay for care. In a situation like that however little it costs to buy the freehold will be just the same as keeping the money in a savings account.


If the lease was owned by a much younger person then that might make sense but for an older person as long as the lease is longer than they are expecting to live for there is no point in buying the freehold and there will be costs involved.

topoftherock

moneyistooshorttomention wrote: »

I have an idea that I've only read VERY recently (ie in the last few weeks) somewhere about some law about to come in re the price that can be charged for freeholds.

That price was a very reasonable one imo. There were a couple of different options to establish what the price would be and, from vague memory, there were two options and one of them was a maximum of a certain number of years worth of service charges (10 years??).

Your fathers house won't be one of these modern "freehold" type properties - but I doubt this coming law would only refer to them.

Couldnt swear to it - but worth checking out - as I think there's a good chance more "traditional" type freehold properties might just be covered (ie as well as the modern "sell a house without a typical 'its freehold - end of' scam that's currently going on, but the law will soon stop this lark).

Hi moneyistooshorttomention,
Many thanks for mentioning this. After reading your post, I found an article that outlines what you have said. It seems that the new proposals (from the Law Commission), will make it much fairer. However, the article goes on to say that the proposed rules are unlikely to be in place until Summer 2019. But it is very promising. Thanks again!!!

topoftherock

Hoploz wrote: »

Oh dear. If you value the house at around £40-50k due to its condition, then with only a 40 odd year lease it seems to me it has little or no value on the open market. That's fine if you just want to keep it as your home, but if you ever want to sell nobody will get a mortgage on it.

So ... Although over £20k seems a lot relatively, you would actually be increasing the value from £hardly anything - 'cash buyers who wish to spend over £20k later' only - to the £50k level.

Hi Hoploz, thanks for the reply. Well, I wouldn't want to sell it (when it eventually passes to me). I would like to stay in the house and renovate it. And then after a while (e.g If I decide to move abroad), I would like to rent it out. That's providing we (my father) can pay the freehold.