Leasehold Purchase Rights.

Mercuryrev

eddddy said:

So why don't you buy it leasehold?

The stuff about not being able to get a mortgage on a leasehold property over £300k sounds like it might be a misunderstanding.

In the current market nothing that doesn't have an issue is staying on for more than a few days. Compared to other properties it is a good size, has good parking and is in a desirable location. Having been let it needs decorating etc., but nothing daunting.

So why hasn't it sold?

The selling agents have told us that in their experience the purchase price, ground rent and service charges make it difficult for first time buyers to get a mortgage. Another agent has mentioned this as well. A friend, experienced in buying/selling also mentioned it. So there would appear to be some truth to it. If not, again, why hasn't it sold?

It won't be our forever home, we will likely look to sell it in 5 to 8 years, so we don't need to buy something that will either be difficult to sell or that we have to sell at a loss.

eddddy

Mercuryrev said:

So why hasn't it sold?

The selling agents have told us that in their experience the purchase price, ground rent and service charges make it difficult for first time buyers to get a mortgage. Another agent has mentioned this as well. A friend, experienced in buying/selling also mentioned it. So there would appear to be some truth to it. If not, again, why hasn't it sold?

It all sounds a bit confused - I think something's got lost in translation.


It sounds like the estate agent is talking about mortgage affordability.  That's not really an issue with the property, that's an issue with with how much you earn.

Maybe the estate agent is just saying that a FTB is unlikely to earn enough to pay the mortgage, ground rent and service charges on that property. (But that's a slightly strange thing to say.)


Alternatively, it could be an escalating ground rent that's making the property unmortgageable.  But that would apply to any buyer - not just a FTB.


Alternatively, if the problem is a high service charge, you'd still have to pay that, even if you bought the freehold. And again, that would apply to any buyer - not just a FTB.


You could ask the estate agent again about the mortgage issue - and ask them to be a bit clearer. And specifically ask if it's an escalating ground rent problem.

Mercuryrev

I'm sure the agent is talking about affordability, as would a mortgage company, no doubt, and that is the problem as far as I can tell.

I think the agents told us because we aren't FTBs. We are early retired, we live abroad and want to buy this property as we now want to spend more time in the UK.

The agents have been very poor, it seems the current thinking is 'it's easy to sell a 'shed' at the moment, so why bother trying'. Hard to understand when the place has been on the market so long but there you go. The vendor didn't seem very keen to help us either, so we made an offer which kickstarted him into asking about the freehold. Nearly 10 days on we are still waiting on the breakdown of the service charge however.

eddddy

Mercuryrev said:

I'm sure the agent is talking about affordability, as would a mortgage company, no doubt, and that is the problem as far as I can tell.

OK - so let's summarise, based on what you've said...

• There's no problem with the property

• The estate agent says FTBs can't afford the property, because they don't earn enough

Not everyone is a FTB. Why do you think that will make it difficult to sell?

You're not a FTB, and you think it's a nice property. Why won't other non-FTBs think the same?

(And how would buying the freehold make a difference?)


More generally, if it's not selling, it's probably overpriced.

MobileSaver

Mercuryrev said:

It won't be our forever home, we will likely look to sell it in 5 to 8 years, so we don't need to buy something that will either be difficult to sell or that we have to sell at a loss.

Are you buying a second home or an investment?

Being pragmatic, even in the very unlikely scenario that you sell at a loss in 8 years time, is that such a big deal for a "good size, has good parking and is in a desirable location" second home that you'll be enjoying for the next 8 years?

Similarly, nothing is difficult to sell if priced right.

Mercuryrev

eddddy said:

Mercuryrev said:

I'm sure the agent is talking about affordability, as would a mortgage company, no doubt, and that is the problem as far as I can tell.

OK - so let's summarise, based on what you've said...

• There's no problem with the property

• The estate agent says FTBs can't afford the property, because they don't earn enough

Not everyone is a FTB. Why do you think that will make it difficult to sell?

You're not a FTB, and you think it's a nice property. Why won't other non-FTBs think the same?

(And how would buying the freehold make a difference?)


More generally, if it's not selling, it's probably overpriced.

I think it will be difficult to sell largely because everything else at that price range, with the same set up of 2 beds, leasehold, flat/coach house, parking space, has sold. Not only that but anything that comes on is usually sold within a week and (albeit hearsay) for more than the asking price. Anything that remains on the market seems to have some 'issue'. Be that high service charges, bad location, poor parking.

Whilst I appreciate that we are potential buyers, we are only the second people to offer on it, in 4 months. In a market that has more buyers than houses. If we tried to sell at a time when the market was totally reversed, then we could be waiting years.

Having a freehold would remove the ground rent and potentially escalating service charges. Everyone on the estate pays the same management costs, so that wouldn't change but IF FTBs are out of the market because of the ground rent and service charge, why buy something that would later have a restricted number of potential buyers. It's the same reason we own a metallic grey car rather than a fluorescent green one, I might like the look of both but I know what the sales man will say when I come to trade it in.

I think it is overpriced and will not be paying the asking price.

Mercuryrev

MobileSaver said:

Mercuryrev said:

It won't be our forever home, we will likely look to sell it in 5 to 8 years, so we don't need to buy something that will either be difficult to sell or that we have to sell at a loss.

Are you buying a second home or an investment?

Being pragmatic, even in the very unlikely scenario that you sell at a loss in 8 years time, is that such a big deal for a "good size, has good parking and is in a desirable location" second home that you'll be enjoying for the next 8 years?

Similarly, nothing is difficult to sell if priced right.

Thanks for your reply.

It is very much a second home, if in the future our situation changed, we would likely rent it, until we were ready to return to the UK full time. For the time being elderly relatives and young grand children mean we want to spend more time in the UK.

I take on board what you're saying and it is a very valid point. However we are stretching ourselves financially to afford this purchase and subsequent expense of running 2 homes. We were unlucky (and maybe a little foolish) to have been caught in rather a lot of problems with our current property in the UK. This has cost us a lot of money and we will walk away after 11 years of ownership, with an increase in the value of £10k. Whilst I can see that it isn't all about profit, as the property is at the lower end of the market, we need to try to keep pace with the market rather than fall behind.

There is also the thought that in a very strong sellers market, we are buying something that is struggling to sell. We aren't experts on property by any means (can you tell?) and so to make a mistake doesn't aid restful sleep....

NameUnavailable

How long is the lease? Is the GR fixed at £250 or does it increase at any point in the future (if so when and by how much)? What is the current service charge?

These are the important questions. Forget the freehold, if the freeholder doesn't want to sell then you aren't going to be able to purchase it (it would include the leases for the parking bays that aren't yours).

These type of properties can be freehold but are sold as such. Even then they appear to cause problems when buying/selling due to the leases and flying freehold issues that some have. In fact I would have thought that a leasehold coach house would be easier to deal with.

NameUnavailable

Mercuryrev said:

eddddy said:

Thanks again for your reply.

Apologies again for my ignorance, why would the freeholders not want to sell? They are currently building coach houses on the same development and selling them freehold, complete with car ports that will be for other house owners. A ground rent of £250 pa isn't exactly a good return, is it? As they are responsible for repairs to the property (albeit unlikely in a 6 year old property) is the hassle worth it?

Also the agents mention "not able to offer the freehold to individual leasehold flat owners on an individual basis" As there is only one 'flat' how can it be anything other than an 'individual owner', we can't exactly enlist the support of other flat owners?

Just on this point, the freeholder is indeed responsible for repairs (usually for parts not demised to you under the lease) but YOU will be responsible for paying for any repairs, which are recovered under the service charge or a demand for major works.

Mercuryrev

NameUnavailable said:

How long is the lease? Is the GR fixed at £250 or does it increase at any point in the future (if so when and by how much)? What is the current service charge?

These are the important questions. Forget the freehold, if the freeholder doesn't want to sell then you aren't going to be able to purchase it (it would include the leases for the parking bays that aren't yours).

These type of properties can be freehold but are sold as such. Even then they appear to cause problems when buying/selling due to the leases and flying freehold issues that some have. In fact I would have thought that a leasehold coach house would be easier to deal with.

Thanks for the reply.

It was 125yrs back in 2015 when it was built. I have asked for info on the ground rent and the service charge. The agents aren't particularly good and the vendor hasn't got a clue what he's paying for. He's requested the info from the management company and is still waiting after around 10 days.

As I say, I have been told by several people the reason it hasn't sold is because it is leasehold and it's over £300k. Again, I have been told that lenders aren't keen on lending to FTBs on properties over £300k when there are other charges that have to be paid. Because of the current market in the area, £300k is FTB territory.

Therefore if we are able to buy the freehold, when it comes time to sell on, we should be in a better position.