Should i buy the freehold on my house

Marcosc92

I currently live in a new build house which i have been in for almost 3 years. When i bought the house it was sold to us as leasehold.
I have read a lot in the news about the leasehold scandal which is going on about ground rents doubling every ten years causing leasehold house un-sellable.
Recently i have been in touch with the builder of the site and asked if it was possible for me to purchase the freehold which they have agreed for a price of £2100 plus £180 legal fees, plus £400 for my solicitors fees.
We our thinking about selling our house in the next 3-5 years and are worried that if we buy the freehold we wont get any of the money back we spent on it when selling.
Our ground rent is £105 per year and there is 997 years left on the lease.

I was wondering if anybody could give me some advice on whether its worth purchasing the freehold or leaving it as a leasehold?

We also pay service charge for upkeep of the estate we live on, i have read that once you become a freeholder of a property, you have less rights when it comes to service charge price increases.

I would appreciate feedback.

HampshireH

I would always choose freehold over leasehold. As a buyer the freehold would be more attractive. However I think that viewpoint really depends on location. Where I am there are very few leasehold houses and they don't sell anywhere near as quickly as freehold properties.

Further north its more common and therefore not so much of a resale issue.

Tom99

[FONT=Verdana, sans-serif]£2,100 is exactly £105pa valued at a discount rate of 5%.[/FONT]
[FONT=Verdana, sans-serif]That's not too bad, it could be worse, and if £180 is the freeholders total costs that you are paying that's very cheap.[/FONT]
[FONT=Verdana, sans-serif]You might get it cheaper than £2,100 if you exercised a statutory right to buy the freehold but I expect the costs would be a lot higher that £580.[/FONT]
[FONT=Verdana, sans-serif]You might get a better deal if you wait for the proposed leasehold reform legislation but I doubt any saving would be that great.[/FONT]
[FONT=Verdana, sans-serif]Its impossible to say whether it will add £2,680 to the value of your house as that is probably quite a small percentage of it value.[/FONT]
[FONT=Verdana, sans-serif]However given the press outcry about leasehold houses if, when you come to sell, your competition is a similar house which is freehold for a little more money, which would you choose?[/FONT]

AdrianC

Marcosc92 wrote: »

I have read a lot in the news about the leasehold scandal which is going on about ground rents doubling every ten years causing leasehold house un-sellable.

The issue there is the doubling clause, not the lease.

Recently i have been in touch with the builder of the site and asked if it was possible for me to purchase the freehold which they have agreed for a price of £2100 plus £180 legal fees, plus £400 for my solicitors fees.
We our thinking about selling our house in the next 3-5 years and are worried that if we buy the freehold we wont get any of the money back we spent on it when selling.

£2,680 is neither here nor there in the grand scheme of a house sale. It's the kind of figure that quickly gets waved around in negotiating.


Perhaps a better question to ask is whether it will make the property easier to sell?
The answer to that has to be that it cannot make it worse. At the minimum, it's going to be neutral. But I'd hazard a guess that the likelihood is that it will help.

Our ground rent is £105 per year and there is 997 years left on the lease.

No problem on the duration. Perhaps the more important question is what increase amount/frequency is specified in your lease?

We also pay service charge for upkeep of the estate we live on, i have read that once you become a freeholder of a property, you have less rights when it comes to service charge price increases.

Can't see it making much difference at all. The freehold you are buying is for YOUR plot, and your plot alone. You are still obligated to contribute to the estate maintenance, and you are still one of quite a large number (I suspect) of people doing so.

D_M_E

For a new build property only 3 years old, that price seems cheap.

Wait until the freehold is sold to some investment company and the price is likely to shoot up to possibly around £30,000 or so plus another £5000 in fees.

My choice would be to buy it now at the price offered if I had the funds available.

ProDave

At that price I would buy it. Then again I would never have bought it as leasehold.

It might not add much to the value, but it WILL increase the number of prospective buyers as there must be lots like me that would never buy a leasehold house.

akh43

I am also considering purchasing the freehold on my property but not sure if the best option.

I moved in property in 2002 and currently pay £4.50 a year ground rent. The documents I got when I purchased the property say there is a underlease of the plot of land my property is built on for the term of 999 years less 10 days, paying £4.10.00 (£4.50 new money) document dated 22 May 1913.

When I first queried the freehold price it was quoted at £441 all inclusive price in 2006, but at that point was not sure what to do so left it.

When I queried again in 2008 it had increased to £482. Since 2011 they have automatically given a quote to buy freehold but the price jumped up in price £731 and then next increased in 2015 to £739 and for some reason back to £735 in 2016 and the past 2 years it has been £844.55.

House is worth in the region of £200,000 not many properties sold in our road over the years and last one sold for £250,000 this year. No mortgage and not planning to move in the foreseeable future.

Now I'm in a position where I can buy, but still dont fully understand the benefit of owning freehold over paying the £4.50 a year ground rent. Any comments appreciated.

Tom99

akh43 wrote: »

Now I'm in a position where I can buy, but still dont fully understand the benefit of owning freehold over paying the £4.50 a year ground rent. Any comments appreciated.

[FONT=Verdana, sans-serif]£4.50 per year and a 999yrs lease is, in itself, not worth buying out, the cost and fees are likely to outweigh the saving of £4.50.[/FONT]
[FONT=Verdana, sans-serif]However, what makes it much more beneficial to buy the freehold is that your current lease may well put restrictions on what you can do to the property, what use you can put it to and also require you to obtain the freeholders permission for certain works or changes.[/FONT]
[FONT=Verdana, sans-serif]All of that is very worth while buying out, particularly if the price is fairly low as in your case.[/FONT]

eddddy

akh43 wrote: »

Since 2011 they have automatically given a quote to buy freehold but the price jumped...

So it sounds like they're keen to sell freeholds - perhaps because it's not economic to collect GRs of £4.50 per year.

So if you want to buy the freehold, you could try making them an offer, below the price they're asking.

Although, the legal fees might end up being higher than the cost of the freehold.

TE16

Hi! I've been in a new build, leasehold house for 3.5 years and am considering buying the lease but am not sure whether it will add enough value to justify it. The freeholder has given a purchase price of £7.5k including their legal fees. My house is currently valued at circa £420k, I pay £325 per year on ground rent and the lease has 144 years remaining.
The main reason for potentially buying it now is to avoid having to pay £108 per question regarding alterations to the property plus £300 per change if I'm allowed to go ahead! This seems a massive rip off!
Would anyone be able to offer some good advice please?
Thank you in advance.

diggingdude

The best reason to do it is it will help you sell. Many many people, myself included, automatically would discount buying your property as we don't want a leasehold house. Spending that money now will pay off long term when you want out