Buying freehold... or so I thought.

Chandler85

Sounds expensive that.  4k is the equivalent of 500 years rent, with 6k being 750 years.

Good return on investment for the company who hold it.  I would have thought buying the freehold would have been much less.  But if you are happy to pay the extra then that is your choice.  Good luck with the purchase.

[Deleted User]

Holeydel said:

Hey all, I'm hoping to get some opinions here on my current dilemma. I'm well on my way to purchasing my first BTL in Liverpool and was notified by my conveyancer today that the house in a leasehold property. The house was advertised as freehold. Weeks ago when I was accepted as the buyer, my conveyancer did a land registry search and mentioned the property was a lease. I queried this over the telephone with the selling estate agents and they assured me that the property was being sold as a freehold. Today I learned this was BS and I'm unsure of how to move forward.

The leasehold is 999 years from 1975 and ground rent is charged at £8 per year. The landlord is an investment group so I assume they'll be unwilling to sell the deed, though I have emailed them asking. 

I'm unsure whether to go ahead as I'm not too clued up on leasehold properties. I'm doing my research tonight but maybe I can get some direct opinions here? My main fear is a lack of control of additional costs, such as rising ground rent in the future. So far I've spent £300 on solicitor fees and will probably write this off if I cancel the purchase. The house was purchased for £85k and I doubt at this stage I'll be able to find another for the same price / location etc. I plan to hold onto this home for 40 years or so. Any thoughts?

Sounds dodgy. If the rent is £8/year then either they will sell you the freehold for next to nothing, because it's worth next to nothing to them, or it's one of those scams where it starts low and then rapidly increases to crippling levels. If they are investors then you have to assume the latter, because no competent investor would look at a £8/year return and think it was worth buying into.

chorlton

As someone said previously - chief rents / rentcharges are very common in the northwest - and very different to leasehold- so before getting too carried away on the downsides of leasehold I’d check exactly what you are dealing with. 

https://www.gov.uk/guidance/rentcharges#what-is-a-rentcharge

Holeydel

Chandler85 said:

Sounds expensive that.  4k is the equivalent of 500 years rent, with 6k being 750 years.

Good return on investment for the company who hold it.  I would have thought buying the freehold would have been much less.  But if you are happy to pay the extra then that is your choice.  Good luck with the purchase.

It's expensive but that's on the basis of the rent remaining £8 for basically ever. I can't see this being the case along with any potential charges in the future. On the other hand when the time comes to sell down the road in the future, I suspect having the freehold to the property will increase the overall value rather than being lease. It will certainly attract more attention.

The solicitors have been instructed to have a chin wag with the landlord company, so it may turn out to be cheaper once they discover more details of the current agreement. It's wait and see for now.

Holeydel

[Deleted User] said:

Holeydel said:

Hey all, I'm hoping to get some opinions here on my current dilemma. I'm well on my way to purchasing my first BTL in Liverpool and was notified by my conveyancer today that the house in a leasehold property. The house was advertised as freehold. Weeks ago when I was accepted as the buyer, my conveyancer did a land registry search and mentioned the property was a lease. I queried this over the telephone with the selling estate agents and they assured me that the property was being sold as a freehold. Today I learned this was BS and I'm unsure of how to move forward.

The leasehold is 999 years from 1975 and ground rent is charged at £8 per year. The landlord is an investment group so I assume they'll be unwilling to sell the deed, though I have emailed them asking. 

I'm unsure whether to go ahead as I'm not too clued up on leasehold properties. I'm doing my research tonight but maybe I can get some direct opinions here? My main fear is a lack of control of additional costs, such as rising ground rent in the future. So far I've spent £300 on solicitor fees and will probably write this off if I cancel the purchase. The house was purchased for £85k and I doubt at this stage I'll be able to find another for the same price / location etc. I plan to hold onto this home for 40 years or so. Any thoughts?

Sounds dodgy. If the rent is £8/year then either they will sell you the freehold for next to nothing, because it's worth next to nothing to them, or it's one of those scams where it starts low and then rapidly increases to crippling levels. If they are investors then you have to assume the latter, because no competent investor would look at a £8/year return and think it was worth buying into.

It is puzzling however the solicitors have the previous statements from the seller. It's £8 a year. Blaffling really but as another poster mentioned it may have additional benefits to the company rather than a monetary benefit from myself. The investment company even has a management company looking after the payments, who no doubt get a cut of the £8!

Sandtree

Chandler85 said:

Sounds expensive that.  4k is the equivalent of 500 years rent, with 6k being 750 years.

Good return on investment for the company who hold it.  I would have thought buying the freehold would have been much less.  But if you are happy to pay the extra then that is your choice.  Good luck with the purchase.

So in both cases they are giving up value.

The OP would need to live in the property for 2 years to be able to go down the statutory route and so for now its a simple commercial negotiation. 

Also worth considering if their price is inclusive or if they're expecting their legal fees on top.

davemorton

These are very common in the NE too.  Infact, in the city I live in, I would say more houses have these, than are freehold.  To buy the lease here it is usually about £1500-£2500. Never bothered myself in any of the 5 houses I have owned, I will be a long time dead when the lease is up.  Never had to pay to sell a house.  So long as they get their £'s, they don't really seem to bother at all really.  Sometimes the hardest thing is finding who to pay, and a lot of the time, they dont even actively collect it. 

SavingPennies_2

Had a house like this (in NW) never actually paid anything and sold a couple of years ago with no problems. Only one young FTB couple who viewed it were put off, most of the houses in the area are the same and sell very easily.

NQManchester

Agreed this is very common where I live too and no one I know with this set up has had issues selling again, they’re hard to avoid in my area if you’ve a first time buyer budget.
If you need to apply for any alterations to the property you will probably get quoted large fees for permission and I presume this is why these companies buy up all these peppercorn leases. I’ve heard of £400-1000 charges for permission for work. 

Jeffrey_Shaw

Holeydel said:

canaldumidi said:

Never believe the estate agent (who relies on his client who may not know) over the advice of your solicitor. That's why you are paying a solicitor - to check the property title for you! With respect, you should have been considering this weeks ago when he did his job and told you.

Having said that, a lease that expires in 2974, at a fixed ground rent of £8 pa is as good as freehold, though a) read the lease or ask your solicitor to check the ground rent is fixed and b) look for any restrictions in the lease about what you can or can't do with the property.

From what you say, the freeholder is not the same as the leaseholder? If they were, you could check if they are in fact selling both the lease and the freehold.

It's one of those. I contacted the estate agent weeks ago and told them the house is down as a leasehold according to my solicitor. The response given assured me that the freehold would be included - what more could I do? The leaseholder (individual) and freeholder (investment company) are seperate. I really appreciate your suggestion of finding out the fixed rent and rental restrictions queries as all this is new to me.

If your purchase is to include both the leasehold (owned by the present vendor V) and the freehold reversion (owned by the landlord L), ensure that your solicitor makes both V and L party to the contract for purchase into which you are to enter.