Buying the Freehold of our Leasehold house - rip off?

theshed

The rules and regulations around Leasehold for houses seems vary vague.
From the little I understand with a lease the ground belongs to the Leaseholder but the property belongs to the 'Owner'.
So if the mortgage is paid off what is stopping the owner from just making the property uninhabitable at end of lease if they can't afford to buy ? Not good for either party but surely would encourage leaseholder to be reasonable with costs. 

user1977

theshed said:

From the little I understand with a lease the ground belongs to the Leaseholder but the property belongs to the 'Owner'.
So if the mortgage is paid off what is stopping the owner from just making the property uninhabitable at end of lease if they can't afford to buy ?

I think you understand too little. There isn't (generally) a distinction between "the ground" and "the property", and I think you've got the leaseholder and the freeholder mixed up anyway.

Assuming the leaseholder is obliged to maintain the property, they'd be in breach of that obligation if they handed back a wreck. 

theshed

I may well have them confused, as I say I know little and perhaps should no more.
So for definition, for houses as in this case not flats, is it the Freeholder who owns the ground and the Leaseholder is basically just renting long term ?

user1977

theshed said:

So for definition, for houses as in this case not flats, is it the Freeholder who owns the ground and the Leaseholder is basically just renting long term ?

The freeholder owns everything. The leaseholder is leasing everything.

BV88

My mother went through exactly this situation with our family home.

Firstly, completely ignore these people telling you it’s a bargain as they clearly
have no experience on this topic. It’s just not true that the freeholder can wait 15 years and instantly gets to take everything from your parents so you are getting a good deal.

Your parents have the legal right to purchase the freehold and you can take the valuation to tribunal. The valuation has to be fair on the basis of the original lease, the freeholder can’t simply set any price they like. 

The original offer on my mums house was £47,000. After getting three independent valuations and taking the matter to tribunal she paid £21,000. She was also able to get compensation from the conveyancing solicitor of £10,500. So from an original cost of £47,000 to in the end paying net £10,500. 

But you should get this sorted as soon as possible to avoid the costs increasing further. 

mjm3346

BV88 said:

My mother went through exactly this situation with our family home.

Firstly, completely ignore these people telling you it’s a bargain as they clearly
have no experience on this topic. It’s just not true that the freeholder can wait 15 years and instantly gets to take everything from your parents so you are getting a good deal.

Your parents have the legal right to purchase the freehold and you can take the valuation to tribunal. The valuation has to be fair on the basis of the original lease, the freeholder can’t simply set any price they like. 

The original offer on my mums house was £47,000. After getting three independent valuations and taking the matter to tribunal she paid £21,000. She was also able to get compensation from the conveyancing solicitor of £10,500. So from an original cost of £47,000 to in the end paying net £10,500. 

But you should get this sorted as soon as possible to avoid the costs increasing further. 

Don't know if it's a bargain or not but if they do nothing then it's game over in 15 years - They have rights but with such a short time left on the lease it is likely to be expensive as per the MSE article which recommends, if you are a buyer, staying away from leases with less than 80 years to run

https://www.moneysavingexpert.com/mortgages/what-is-a-leasehold/?

BV88

mjm3346 said:

BV88 said:

My mother went through exactly this situation with our family home.

Firstly, completely ignore these people telling you it’s a bargain as they clearly
have no experience on this topic. It’s just not true that the freeholder can wait 15 years and instantly gets to take everything from your parents so you are getting a good deal.

Your parents have the legal right to purchase the freehold and you can take the valuation to tribunal. The valuation has to be fair on the basis of the original lease, the freeholder can’t simply set any price they like. 

The original offer on my mums house was £47,000. After getting three independent valuations and taking the matter to tribunal she paid £21,000. She was also able to get compensation from the conveyancing solicitor of £10,500. So from an original cost of £47,000 to in the end paying net £10,500. 

But you should get this sorted as soon as possible to avoid the costs increasing further. 

Don't know if it's a bargain or not but if they do nothing then it's game over in 15 years - They have rights but with such a short time left on the lease it is likely to be expensive as per the MSE article which recommends, if you are a buyer, staying away from leases with less than 80 years to run

https://www.moneysavingexpert.com/mortgages/what-is-a-leasehold/?

As it’s their first offer it’s almost certainly NOT a bargain. Even if they don’t buy the freehold in the next 15 years they have a legal right to extend the lease for 50 (at modern ground rent). 

This is supposed to be a money saving forum and so far the advice to the OP has been misinformed and likely to cost them £10’s of thousands if they follow it.
 

They should seek professional advice who can help them get multiple independent valuations, present evidence at tribunal, negotiate with the landlord and so on.

newsgroupmonkey_

BV88 said:

mjm3346 said:

BV88 said:

My mother went through exactly this situation with our family home.

Firstly, completely ignore these people telling you it’s a bargain as they clearly
have no experience on this topic. It’s just not true that the freeholder can wait 15 years and instantly gets to take everything from your parents so you are getting a good deal.

Your parents have the legal right to purchase the freehold and you can take the valuation to tribunal. The valuation has to be fair on the basis of the original lease, the freeholder can’t simply set any price they like. 

The original offer on my mums house was £47,000. After getting three independent valuations and taking the matter to tribunal she paid £21,000. She was also able to get compensation from the conveyancing solicitor of £10,500. So from an original cost of £47,000 to in the end paying net £10,500. 

But you should get this sorted as soon as possible to avoid the costs increasing further. 

Don't know if it's a bargain or not but if they do nothing then it's game over in 15 years - They have rights but with such a short time left on the lease it is likely to be expensive as per the MSE article which recommends, if you are a buyer, staying away from leases with less than 80 years to run

https://www.moneysavingexpert.com/mortgages/what-is-a-leasehold/?

As it’s their first offer it’s almost certainly NOT a bargain. Even if they don’t buy the freehold in the next 15 years they have a legal right to extend the lease for 50 (at modern ground rent). 

This is supposed to be a money saving forum and so far the advice to the OP has been misinformed and likely to cost them £10’s of thousands if they follow it.
 

They should seek professional advice who can help them get multiple independent valuations, present evidence at tribunal, negotiate with the landlord and so on.

Facts are, without the lease, as it stands, the house is worth a small percentage of what it would normally be worth.

I don't disagree with getting professionals involved - in any transaction of this size it would always be worthwhile.

At tribunal, however, it's still likely to be more than £58k.

You're right that the landlord cannot simply take the property back. However, they can turn it into an APT or apply to the courts to get their land back

https://www.lease-advice.org/advice-guide/security-tenure/

eddddy

newsgroupmonkey_ said:

At tribunal, however, it's still likely to be more than £58k.

Why do you think that?

The freeholder had a valuation done and has asked for £58k 

Why would the freeholder ask for less than the valuation? Almost all freeholders start off by asking for way over the valuation, and then get negotiated downwards.

(The valuation will use the same calculation formula that the tribunal use.)




FWIW, I have just done a quick calculation using the same formula - and I get a cost of about £49k for the OP's freehold.

But I've made a lot of assumptions. It could be quite a bit lower or higher.

A RICS valuer who looks at the house, the land it's on, and investigates the local property market would be able to give a much more accurate valuation.

theshed

Ok, I mentioned on here earlier that I should know more than I do. That is because our house is leasehold and to be honest did not know what it meant at the time. It was a new build and when I asked the sales person she said it just means you pay to have grass cut and maintenance things like that.
I have started trying to see if we should have been better informed by the conveyancing solicitor. Stupidly we went with the builders recommended solicitor because they offered us a deal.
It was a hundred year lease so about 85 to go ! So do I wait to see if we have cause to complain or investigate buying ?
Thanks