'Old type of leasehold' - what are the risks?

hito91

Hello,

My partner and I found a house we are interested in putting an offer in. It is a leasehold with the following information:

• The lease started in August 1921

• Ground rent is £5 a year

• The ground rent payments are up to date

• The seller/estate agents have confirmed the ground rent payments will remain constant until the end of the lease

• They don't currently know if it's possible to buy the freehold

There has been a lot of negative press around leaseholds and their costs which seem to increase every 10/25 years (for example).

From what I can tell, the leasehold of this house isn't the 'new' type of leasehold that's been in the press.

However what makes me nervous is that the estate agents have asked for a reservation fee to take the house off the market. We're currently negotiating the terms of that;

• We pay £500 (negotiated down from £1,500)

• We get a refund if the agent, purchaser or purchaser's lender deems the property to be overvalued, unsafe or damaged, or if the seller pulls out

• We've requested there be additional points which state that if we're not happy with the homebuyer's report (e.g. costing a lot to fix issues) then we can pull out/can't negotiate the price with a full refund

Due to this reservation fee I feel extra cautious about every element of the house. Is it common for freeholders of these types of properties to sell the freehold on, and for that to impact us negatively as a result? I'm thinking if the new freeholders suddenly hike up the yearly leasehold charges - can they do that?

I'm worried that there are other valid negative things that could surface that would mean we don't get a refund, because we haven't explicitly stated it in the reservation fee document.

Thanks, really appreciate your advice.

eddddy

hito91 wrote: »

I'm worried that there are other valid negative things that could surface that would mean we don't get a refund, because we haven't explicitly stated it in the reservation fee document.

Exactly right - that's why almost nobody agrees to a 'reservation fee'.

You can lose days/weeks arguing about the terms of the reservation, instead of proceeding with the purchase.

Then if the purchase is aborted, you can spend days/weeks arguing about whose fault it is.

davidmcn

hito91 wrote: »

My partner and I found a house we are interested in putting an offer in. It is a leasehold with the following information:

• The lease started in August 1921

You haven't told us how long the term is, which is a fairly significant point...

However what makes me nervous is that the estate agents have asked for a reservation fee to take the house off the market. We're currently negotiating the terms of that;

• We pay £500 (negotiated down from £1,500)

• We get a refund if the agent, purchaser or purchaser's lender deems the property to be overvalued, unsafe or damaged, or if the seller pulls out

• We've requested there be additional points which state that if we're not happy with the homebuyer's report (e.g. costing a lot to fix issues) then we can pull out/can't negotiate the price with a full refund

Well, those are all the normal reasons for pulling out, so why bother with the reservation fee at all? You don't want to hand over money to them and then have them quibble about whether it's really "overvalued" or whether items in your survey cost "a lot". Are they going to pay you a deposit to cover your costs if they pull out?

hito91

Ah yes I didn't say, the lease started in 1921 for 999 years.

Well, those are all the normal reasons for pulling out, so why bother with the reservation fee at all? You don't want to hand over money to them and then have them quibble about whether it's really "overvalued" or whether items in your survey cost "a lot". Are they going to pay you a deposit to cover your costs if they pull out?

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That's a very good point, one which I raised with my mortgage advisor. He said it's very unlikely they'll agree to anything like that (obviously) but I wanted to raise it to them just to show how ridiculous their request is.

It's such a frustrating position to be in.

Does anyone have further advice regarding the freeholder questions?

eddddy

hito91 wrote: »

Does anyone have further advice regarding the freeholder questions?

I guess you need to check the lease for onerous conditions (covenants).

For example, you might need the freeholder's consent to make alterations to the house - and pay them a fee for granting consent.

If that's the case, you could also be liable for retrospective fees, for alterations already made without consent.

One way of avoiding that is to buy the freehold - which should be very cheap, based on the lease terms you mention.

G_M

Lease is probably fine (subject to checking the terms which you/your solicitor will do during conveyancing.)

No to the reservtion fee. Just show evidence of ability of affordability, and willingness to progress (pass on solicitor details and arrnge survey) and ask marketing to cease.

Make sure the seller knows all this as wellas the EA - leter to the adderss?



If seller refuses, keep looking.

hito91

The seller is the mum of someone who works at the estate agents so she's bound to be aware of this...

You make a good point. Given the conveyancing would happen after the reservation fee, if anything unsavoury does reveal itself then I stand to lose that reservation fee.

I would like to buy the freehold but again, I won't be able to get information around this until after the reservation fee.

I think the best course of action is to refuse to pay the fee, as there just seems to be something inherently suspicious about it.

Thanks for the advice everyone.

G_M

It's not the normal way of property purchases. Just say so.

jamesperrett

hito91 wrote: »

The seller is the mum of someone who works at the estate agents so she's bound to be aware of this...

I doubt she knows anything about this. I would try to establish direct contact with her to make sure she knows what is going on.