Buying the Freehold of our Leasehold house - rip off?

Mojisola

theshed said:

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 ?

www.moneysavingexpert.com/mortgages/extend-your-lease/
From this - I would start now.

theshed

Yes, I'm afraid I agree after reading.
I was concerned I may lose any right to complain if I have bought or extended but looks like it may be the lesser of the evils.☹️ 

anotheruser

amylloyd98 said:

My parents are in their late 60s so doubt they can get a mortgage for this? I am in my mid-20s and planned on getting mortgage next year in hopes of buying my first property - I’m assuming I can’t do both

If they add you to the deeds, I wonder if you could get a mortgage to pay off the £58,000 and then the house would be yours.
However, it would scupper any plans to buy your own house in a few years.

anotheruser

user1977 said:

Not being funny, but if you knew the lease only has 15 years left - what did you think happened at the end?

Education.
There is NOTHING about how buying a house works.
Why we still allow leaseholds on houses like this, I don't know.  They likely cause more damage than good and it's just a way for someone to gain more money again in the future.

theshed

anotheruser said:

user1977 said:

Not being funny, but if you knew the lease only has 15 years left - what did you think happened at the end?

Education.
There is NOTHING about how buying a house works.
Why we still allow leaseholds on houses like this, I don't know.  They likely cause more damage than good and it's just a way for someone to gain more money again in the future.

Anotheruser is right. The system seems designed to confuse and yes make more money for the few who do know the system.

TBG01

theshed said:

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

Complain over what? 

HampshireH

theshed said:

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

What would you complain about? Leasehold by the very definition means someone has rights for the duration of the lease.

It sounds like you knew it was a 100 year lease when you bought.

A lot of houses are leased onleases of 125 or sometimes 99/100 years 

Once a lease expires the tenancy continues on the same terms until ended by either the landlord or tenant. So whilst the freeholder /landlord could start proceedings it isn't as clear cut as the lease ends Monday and you have to leave by Tuesday. They would still need to evict properly. 

GDB2222

I'll just add this here, in case somebody else comes across this thread.

The cost of the freehold is calculated by valuing the future income stream from the ground rents (almost nothing in this case), plus the value of the reversion. The reversion is based on the value of the property when the lease ends (around £280k according to the op), and this is discounted because the freeholder won't get the property for 15 years.

The discount is based on a notional interest rate of 5-6% a year, compounded for the 15 years.

On a discount rate of 5%, the freehold is worth £135k.
 
On a discount rate of 6%, the freehold is worth £116k.

Overall, I'd be taking the offer the Op has, as several others have said!

eddddy

GDB2222 said:

I'll just add this here, in case somebody else comes across this thread.

The cost of the freehold is calculated by valuing the future income stream from the ground rents (almost nothing in this case), plus the value of the reversion. The reversion is based on the value of the property when the lease ends (around £280k according to the op), and this is discounted because the freeholder won't get the property for 15 years.

The discount is based on a notional interest rate of 5-6% a year, compounded for the 15 years.

On a discount rate of 5%, the freehold is worth £135k.
 
On a discount rate of 6%, the freehold is worth £116k.

Overall, I'd be taking the offer the Op has, as several others have said!

I think you've used the wrong valuation method.

It looks like you've used the "Special Valuation Basis" - and you've forgotten to take into account marriage value (because the lease has less than 80 years left).

And you haven't taken account of Tenant's Improvements....

I suspect the house is about 100 years old - so the tenant's improvements might be huge. e.g. Improvements might include Electricity and Running Water in the house. Creating a kitchen and indoor bathroom in the house. Maybe central heating. Maybe even an extension.)


But in any case, I think you should be using the "Original Valuation Basis" - that makes the cost of the freehold closer to £49k.



As I said previously, the freeholder got a valuation and then asked for £58k.

If the valuation came back at £116k, why would the freeholder only ask for £58k?

See: https://www.lease-advice.org/advice-guide/leasehold-houses-valuation/

theshed

HampshireH said:

theshed said:

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

What would you complain about? Leasehold by the very definition means someone has rights for the duration of the lease.

It sounds like you knew it was a 100 year lease when you bought.

A lot of houses are leased onleases of 125 or sometimes 99/100 years 

Once a lease expires the tenancy continues on the same terms until ended by either the landlord or tenant. So whilst the freeholder /landlord could start proceedings it isn't as clear cut as the lease ends Monday and you have to leave by Tuesday. They would still need to evict properly. 

No I did not know the lease was for 100 years, I have since found that by accessing my account on the leaseholders website.
I would be complaining that I wasn't told the lease was for 100 years, 10 or even a Thousand. I was not told anything with regard to the lease other than "it means they cut the grass and do maintenance on the site".
Of course proving that is something completely different.