I'm buying a Leasehold House

Roo2000

Hello,

I'm hoping that those in the know can offer some advice, as I've no idea what I'm doing.

We had a new addition to the family in June and decided after 14years in our home, we now needed an extra bedroom.

We found our ("The one") new house on a 3 year old estate and had our offer accepted.

We are buying from the owner who bought from the builders 3 years ago and not from the builders directly.

We now have a buyer for our home, the mortgage is all ready and we're coming to the end of the whole house selling/buying process.

The house we are buying is Leasehold and knowing nothing of them, we thought if the Leasehold caused issues we'd just buy it.

The sellers Estate agent told us that it would cost around £6000 to buy, should we wish to.

Now I've read the MSE FAQ on Leaseholds and reading into leaseholds in general (still not totally understanding them), we read that the builders (Taylor Whimpy in this case) are likely to sell the lease to another company after a number of years. When they do it's unlikely that the new company will sell it to us.

We also read that we may have to have owned the property for at least 2 years before we are eligible to buy the lease from the builders, before they sell it on.

Then to throw a spanner in the works we read that the government has done something or other (January 2021) this year, which again I don't really understand.

My main questions...

Should we buy the lease?

Can we buy the lease?

If we buy the lease I assume we can ignore all the lease rules (no satellite dishes on the front of our home etc etc)?

What does the latest government ruling mean for us?

greatcrested

Roo2000 said:

....

The house we are buying is Leasehold and knowing nothing of them, we thought if the Leasehold caused issues we'd just buy it. I assume you mean you'd buy the freehold. You are already buying the leasehold.

The sellers Estate agent told us that it would cost around £6000 to buy, should we wish to. Obviously the freehold.

Now I've read the MSE FAQ on Leaseholds and reading into leaseholds in general (still not totally understanding them), we read that the builders (Taylor Whimpy in this case) are likely to sell the lease freehold (YOU are buying the lease!) to another company after a number of years. When they do it's unlikely that the new company will sell it to us. maybe, maybe not)

We also read that we may have to have owned the property for at least 2 years before we are eligible to buy the lease freehold from the builders, before they sell it on.

Once you have owned the lease for 2 years, you can apply to compulsorarily buy the freehold, irrespective of who owns it at that time.

Then to throw a spanner in the works we read that the government has done something or other (January 2021) this year, which again I don't really understand.

My main questions...

Should we buy the lease? that is what you are doing. If you like the house, and can afford it, buy it.

Can we buy the lease? Clearly the lease is being offered for sale, so yes.

If we buy the lease I assume we can ignore all the lease rules (no satellite dishes on the front of our home etc etc)?

No. If you buy the lease, you must abide by all the terms within the lease.

But I suspect you mean if you later buy the freehold can you then ignore all the lease rules? Possibly, though they may also be enforceable by covenants in the freehold title.

What does the latest government ruling mean for us?

Read

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

https://forums.moneysavingexpert.com/discussion/6229965/mse-news-millions-of-leaseholders-to-get-new-rights-which-could-save-10-000s#latest

You need to understand the difference between leasehold and freehold. In VERY simplistic terms:

* the freehold is the land on which the house is built, and the bricks and mortar of the house. You are currently NOT buying this (as I understand it).

* the leasehold is a right to use/live in the building for a period of years - maybe 99, maybe less, maybe 125, maybe 999 whatever. This is what you are buying and paying £X00,000 for

Your questions are all about the possibility of buying the freehold (of the land and bricks) in the future (at a cost you say, rightly or wrongy) of £6000.

eddddy

Roo2000 said:

The sellers Estate agent told us that it would cost around £6000 to buy, should we wish to.

Don't take any notice whatsoever of statements like that.

Even if the EA, the seller or the freeholder confirm that figure in writing, it's not binding - so you should not rely on it. It only becomes binding if/when a contract is signed.

If buying the freehold is important to you, you need to understand how the process works, and all the traps you can fall into. (FWIW, you don't necessarily have to wait 2 years.)

Maybe read the links above that greatcrested suggests, and maybe contact a specialist solicitor and/or freehold valuer for a chat about options. It's a specialist topic, so it's very likely that your conveyancing solicitor won't have relevant expertise..

What is the length of the lease on the house you are buying, and what is the ground rent?

Roo2000

eddddy said

If buying the freehold is important to you, you need to understand how the process works, and all the traps you can fall into. (FWIW, you don't necessarily have to wait 2 years.)

That's where I'm confused.

I don't know if buying the freehold is important to us.

I'm assuming that if I don't buy it, I could get into trouble for painting my house red for example.

Or could get lumbered with a bill when the freeholder decides to improve the street lighting by adding extra lights?

Where as if I do buy it I could paint my house any colour I choose and wouldn't get a bill for any improvements the freeholder made for the rest of the Leasehold residents on my street?

Does that sound right?

Roo2000

greatcrested said:

Roo2000 said:

....

The house we are buying is Leasehold and knowing nothing of them, we thought if the Leasehold caused issues we'd just buy it. I assume you mean you'd buy the freehold. You are already buying the leasehold.

The sellers Estate agent told us that it would cost around £6000 to buy, should we wish to. Obviously the freehold.

Now I've read the MSE FAQ on Leaseholds and reading into leaseholds in general (still not totally understanding them), we read that the builders (Taylor Whimpy in this case) are likely to sell the lease freehold (YOU are buying the lease!) to another company after a number of years. When they do it's unlikely that the new company will sell it to us. maybe, maybe not)

We also read that we may have to have owned the property for at least 2 years before we are eligible to buy the lease freehold from the builders, before they sell it on.

Once you have owned the lease for 2 years, you can apply to compulsorarily buy the freehold, irrespective of who owns it at that time.

Then to throw a spanner in the works we read that the government has done something or other (January 2021) this year, which again I don't really understand.

My main questions...

Should we buy the lease? that is what you are doing. If you like the house, and can afford it, buy it.

Can we buy the lease? Clearly the lease is being offered for sale, so yes.

If we buy the lease I assume we can ignore all the lease rules (no satellite dishes on the front of our home etc etc)?

No. If you buy the lease, you must abide by all the terms within the lease.

But I suspect you mean if you later buy the freehold can you then ignore all the lease rules? Possibly, though they may also be enforceable by covenants in the freehold title.

What does the latest government ruling mean for us?

Read

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

https://forums.moneysavingexpert.com/discussion/6229965/mse-news-millions-of-leaseholders-to-get-new-rights-which-could-save-10-000s#latest

You need to understand the difference between leasehold and freehold. In VERY simplistic terms:

* the freehold is the land on which the house is built, and the bricks and mortar of the house. You are currently NOT buying this (as I understand it).

* the leasehold is a right to use/live in the building for a period of years - maybe 99, maybe less, maybe 125, maybe 999 whatever. This is what you are buying and paying £X00,000 for

Your questions are all about the possibility of buying the freehold (of the land and bricks) in the future (at a cost you say, rightly or wrongy) of £6000.

Thank you Greatcrested.

That has explained it slightly better to me.

princeofpounds

Roo2000 said:

The sellers Estate agent told us that it would cost around £6000 to buy, should we wish to. Don't believe this, they almost certainly haven't done the calculations required to estimate it. It's not an impossible number, but it could be much higher or it could be a bit lower. It mainly depends on a) The value of the property, b) the remaining length of lease and c) ground rent. If you can tell us those variables, we (or rather freehold purchase calculators on the internet) can give you a more sensible figure.

When they do it's unlikely that the new company will sell it to us. In the end, they will usually not have a choice. Sometimes companies like this want to sell the freehold, sometimes they don't. It all depends on individual circumstances.

We also read that we may have to have owned the property for at least 2 years before we are eligible to buy the freehold from the builders, before they sell it on. Usually yes, but if you want the current owners can start the process and assign those rights to you so you don't have to wait. 

There are actually two ways to buy it. One is by informal negotiation. That can happen any time. The other is the statutory process, which requires a Tribunal. That is what the 2 year rule applies to. At Tribunal, the price is basically defined by a formula and an independent valuation and the freehold is required to sell, so often a sale ends up being agreed informally without the need to go to Tribunal.

Then to throw a spanner in the works we read that the government has done something or other (January 2021) this year, which again I don't really understand. They just announced that they want to make some unspecified reforms, at some unspecified time in the future, that would benefit leaseholders. They probably will do something, but how meaningful it is and whether it would help existing leases or only apply to new ones is almost entirely unclear.

My main questions...

Should we buy the freehold? Depends. There can be several reasons why someone may wish to do it, including a) not having to pay ground rent, b) not having to seek permission for structural alterations or similar things, c) not having to pay to extend your lease, d) not having to abide by various terms in the lease, e) feeling like you fully own the site etc. 

All these kinds of things have benefits. The question is whether they are worth the cost. That needs assessing on a case-by-case basis.

Can we buy the freehold? It's basically been answered already, but here is another specific link https://www.lease-advice.org/advice-guide/houses-qualification-valuation/

If we buy the freehold assume we can ignore all the lease rules (no satellite dishes on the front of our home etc etc)? Not necessarily all. If there are obligations to third parties, they may not disappear. If they are obligations to the freeholder, yes those effectively disappear. Ask your solicitor.

What does the latest government ruling mean for us? Not much.

Answers in the text above

Roo2000

princeofpounds said:

Roo2000 said:

The sellers Estate agent told us that it would cost around £6000 to buy, should we wish to. Don't believe this, they almost certainly haven't done the calculations required to estimate it. It's not an impossible number, but it could be much higher or it could be a bit lower. It mainly depends on a) The value of the property, b) the remaining length of lease and c) ground rent. If you can tell us those variables, we (or rather freehold purchase calculators on the internet) can give you a more sensible figure.

When they do it's unlikely that the new company will sell it to us. In the end, they will usually not have a choice. Sometimes companies like this want to sell the freehold, sometimes they don't. It all depends on individual circumstances.

We also read that we may have to have owned the property for at least 2 years before we are eligible to buy the freehold from the builders, before they sell it on. Usually yes, but if you want the current owners can start the process and assign those rights to you so you don't have to wait. 

There are actually two ways to buy it. One is by informal negotiation. That can happen any time. The other is the statutory process, which requires a Tribunal. That is what the 2 year rule applies to. At Tribunal, the price is basically defined by a formula and an independent valuation and the freehold is required to sell, so often a sale ends up being agreed informally without the need to go to Tribunal.

Then to throw a spanner in the works we read that the government has done something or other (January 2021) this year, which again I don't really understand. They just announced that they want to make some unspecified reforms, at some unspecified time in the future, that would benefit leaseholders. They probably will do something, but how meaningful it is and whether it would help existing leases or only apply to new ones is almost entirely unclear.

My main questions...

Should we buy the freehold? Depends. There can be several reasons why someone may wish to do it, including a) not having to pay ground rent, b) not having to seek permission for structural alterations or similar things, c) not having to pay to extend your lease, d) not having to abide by various terms in the lease, e) feeling like you fully own the site etc. 

All these kinds of things have benefits. The question is whether they are worth the cost. That needs assessing on a case-by-case basis.

Can we buy the freehold? It's basically been answered already, but here is another specific link https://www.lease-advice.org/advice-guide/houses-qualification-valuation/

If we buy the freehold assume we can ignore all the lease rules (no satellite dishes on the front of our home etc etc)? Not necessarily all. If there are obligations to third parties, they may not disappear. If they are obligations to the freeholder, yes those effectively disappear. Ask your solicitor.

What does the latest government ruling mean for us? Not much.

Answers in the text above

Thank you princeofpounds.

Everybody's replies are appreciated and have given me a better understanding.

For those that asked..

I do have the figures in the paperwork but off the top of my head...

It's a 250 year lease and ground rent is just under £300.

Mrs Roo2000 has just corrected me in that The house was built in October 2016 so is just under 4.5 years old.

We've been told at the moment there is a set fee by Taylor Wimpey of £5900 to buy the freehold, but we are unsure if we would be eligible to buy at that price or if that was for people who bought from the builders directly?

£5900 also looks right when using an online freehold calculator mentioned above.

If the current owner started the process how would that work?

Would they need to appoint a solicitor and then say right... The balls rolling, deal with these people who are buying the house now and put their names on the freehold?

princeofpounds

Roo2000 said:

I do have the figures in the paperwork but off the top of my head...

It's a 250 year lease

Mrs Roo2000 has just corrected me in that The house was built in October 2016 so is just under 4.5 years old.
Still can't tell you much about freehold valuation without ground rent and house value information.

We've been told at the moment there is a set fee by Taylor Wimpey of £5900 to buy the freehold, but we are unsure if we would be eligible to buy at that price or if that was for people who bought from the builders directly? There is no 'eligibility'. It's just the price that TW wanted from the people they have already discussed it with. Think of it as a starting offer in an informal negotiation. It may be a fair offer or a bad offer.

If the current owner started the process how would that work? 

Would they need to appoint a solicitor and then say right... The balls rolling, deal with these people who are buying the house now and put their names on the freehold? They send a notice to the freeholder, they then write that they are 'assigning' their place in the process to you. Their solicitor does nothing except draft those two letters, you would hire a solicitor to manage the process from that point - often the same one who is managing your purchase, but not necessarily. It does put you on the track to the statutory process, so discuss with your solicitor if that is right for you.

Answers in bold above

eddddy

Roo2000 said:

We've been told at the moment there is a set fee by Taylor Wimpey of £5900 to buy the freehold, but we are unsure if we would be eligible to buy at that price or if that was for people who bought from the builders directly?

£5900 also looks right when using an online freehold calculator mentioned above.

If the current owner started the process how would that work?

Would they need to appoint a solicitor and then say right... The balls rolling, deal with these people who are buying the house now and put their names on the freehold?

This would be an 'informal route' rather than a 'Statutory Route'. So there are 2 options (Option 1 is likely to be faster and more acceptable to the seller)...

Option 1

• You arrange to purchase 2 'things' at the same time:
•      1. A leasehold house from the seller for £???
•      2. The freehold title from Taylor wimpy for £5900

• Your solicitor would ensure that the purchases are linked, so that you exchange contracts on both purchases at the same time. i.e. you cannot end up with one, but not the other.

• Option 1 would require the cooperation of Taylor Wimpy

Option 2

• The seller of the leasehold house buys the freehold from Taylor Wimpey, then sells the leasehold and freehold to you.

If you simply buy the leasehold house, there is no guarantee whatsoever that Taylor Wimpy will sell you the freehold for £5900 later - even if they suggest that they will in writing. (Anything they put in writing is likely to be considered "Subject to Contract" and not binding.)


(There is also the statutory route which princeofpounds briefly describes above, but the outcome of that is less certain, and the fees might be much higher.)

daveyjp

As well as the ground rent are there any additional service charges paid for maintenance etc?

If so buying the freehold will probably not remove the obligation to still pay maintenance charges.  You may end up with a freehold with a rentcharge which is potentially worse than a leasehold.

Mattb79

The builders could easily have originally sold it as a freehold house. You have to ask yourself why they didn’t. The answer - money. If selling as freehold they would just have received the purchase price. By selling as leasehold, they get the purchase price but also an income stream of ground rent etc. They can either collect this themselves or more commonly sell the freehold on to a specialist freehold company.

There has been a lot in the news recently about ‘toxic’ leaseholds, where the ground rent doubles every few years and quickly reaches eye watering amounts. As a result people have found themselves with unsellable houses, and the government has now banned the sale of new build houses as leasehold.

I would say to the seller that your offer still stands, but only on the basis that they buy the freehold first and sell to you as a freehold house. Your mortgage company may well insist on this anyway.