Leasehold Property Values

djh

I have posted on MSE previously regarding offer from Freeholder Developer via section 5 notice to buy the Freehold.
Are there any views on likely impact on resale value of individual flats and if they would be more  ("desirable) and easier to sell in the future
Long leases currently with ground rent likely to increase to £500 pa next year.(10 year RPI Review)
Properties are located outside London area with current individual values of 380-400K.
I do believe we could make Service Charge savings of £400 pa.

GDB2222

I have a flat in a block where the leaseholders bought the freehold from a particularly avaricious freeholder. The flat values increased an awful lot. 

eddddy

Reducing the ground rent to zero (and extending the leases to 999 years) would probably make the flat more attractive to buyers.


Maybe look at it from a buyer's perspective. Let's say there are 2 very similar flats for sale...

• One has a share of freehold, £0 ground rent, 999 year lease, and £400 less service charge

• The other has no share of freehold, £500 ground rent, 100 year lease (or whatever) and £400 more service charge

How much more would you offer for the first flat, than you would for the second?

TBH, I'm not sure that people would offer a huge amount more for the first flat - but perhaps it would sell more easily.



(The challenge would be to make sure that the building is managed well. Are you planning to employ a management company? For example, you want to make sure management packs, service charge accounts, etc are provided in a timely, professional way for buyers - to prevent delays, and reassure buyers.)

JM68

When we were looking for a flat/maisonette long lease versus share of freehold did not really make much difference to us and therefore did not change the amount we considered fair value.  We never came across anything with high ground rent as we were only looking at period properties.  But I read somewhere that ground rents in excess of 250 could be an issue now with mortgage companies so that could limit your pool of buyers if/when you come to sell and therefore the price.   

eddddy

JM68 said:

But I read somewhere that ground rents in excess of 250 could be an issue now with mortgage companies so that could limit your pool of buyers if/when you come to sell and therefore the price.   

Most mortgage lenders will be happy with indemnity insurance for that.

It will be called something like Forfeiture of Lease Indemnity Insurance or Housing Act Repossession Indemnity Insurance.

It's not a perfect solution - but it should allow buyers to get a mortgage.