Leasehold vs Freehold

20122013

I am looking for some advice.  I have a terrace house with 84 years lease. There are a total of 32 terraces on the estate and all are leaseholds.  

I have informally asked the Freeholder about the lease extension as their offer price to extend was high with a low lease extension, I then find out about the option of buying the freehold and asked about it and I was told that they are not selling the freehold, If I was going to do either, I wll have to take the formal route.

As I am selling my propertty, I would like to know people's view  on whether to leave the lease as it is, or extend it, if so, when ? or buy the Freehold, which may increase the valuation by a few thousands (I think) as similar freehold with no Service Charge / insurance are valued at £10000 more.

Also, how do I find out the costs involve in the lease extension or buying the freehold?   As all 6 agents I have spoken to do not seem interested of me buying the freehold.  To confuse me more, last summer I was told that the lease must be extended otherwise, I will not be able to find a buyer as no lender will lend, now I was told that it will be  better to wait till I have a buyer and then decide what to do.  (none of the agent had mentioned about buying the freehold option)

For some reason, I think the Lease extension will be more straight forward and less time to do than the Freehold, and there will be not much difference in the selling price but more expensive to buy the Freehold and not sure when there is a buyer can they complete the process of buying the freehold.

jellybean73

I’m no expert, but we sold our leasehold house 7 years ago, but we bought our freehold at the same time.  So sold as freehold ultimately.  We had 70 years remaining and lenders weren’t not interested in lending unless freehold purchased as lease too short.  It was bit of a mess really and the leasehold situation put a lot of potential buyers off.  Our freehold was held by the local council. 

The estate agents may not be an expert in leasehold houses.  The area we lived some EA’s had a clue and some didn’t.  We sold through a local EA and used a local solicitor who had experience in leasehold houses/ freehold purchase with the council as freeholder. 

Buying the freehold was easy and straight forward.  Our solicitor dealt with it all, we just signed paperwork.  It cost us a little more on the conveyancing of course.  I don’t know about lease extension really.  For us the answer came back to buying the freehold as no buyers wanted a leasehold house.  It ticks down again and they then can’t sell.  Lenders don’t seem to like leasehold houses, so I would suggest buying freehold is the best choice.  Gives you a better pool of potential buyers.  As I say though, no expert, just my opinion.  

dinosaur66

me personally i would serve a section 42 notice but this cannot be done unless you have a fair bit of spare money on hand that is not needed

this man sounds like he will drive a hard deal and will serve you a section 45 notice with poor terms and drag it out to the tribunral which will take about 6 months from now and will cost you maybe £4k in fees plus the cost of the leasehold descion but you will get lease extended to 160 plus years which should pay for itself when you sell it.

eddddy

dinosaur66 said:

me personally i would serve a section 42 notice but this cannot be done unless you have a fair bit of spare money on hand that is not needed

this man sounds like he will drive a hard deal and will serve you a section 45 notice with poor terms and drag it out to the tribunral which will take about 6 months from now and will cost you maybe £4k in fees plus the cost of the leasehold descion but you will get lease extended to 160 plus years which should pay for itself when you sell it.

It sounds like you're talking about statutory lease extension for a flat.

The OP has a house - so it's very different.

With a house, a statutory lease extension is free and it adds 50 years to your lease. But you'll have to pay legal costs.

BUT... the ground rent will stay as it is for the next 84 years, then increase to a 'Modern Ground Rent' for the 50 years after that.

The Modern Ground Rent will be much more expensive than the current ground rent. That's often seen as a big negative.


So it's generally recommended that you buy the freehold of a house, rather than do a lease extension - unless you can't afford to pay for the freehold.


See: https://www.lease-advice.org/faq/i-cant-afford-to-buy-the-freehold-of-my-house-can-i-extend-my-lease-instead/

20122013

jellybean73 said:

I’m no expert, but we sold our leasehold house 7 years ago, but we bought our freehold at the same time.  So sold as freehold ultimately.  We had 70 years remaining and lenders weren’t not interested in lending unless freehold purchased as lease too short.  It was bit of a mess really and the leasehold situation put a lot of potential buyers off.  Our freehold was held by the local council. 

The estate agents may not be an expert in leasehold houses.  The area we lived some EA’s had a clue and some didn’t.  We sold through a local EA and used a local solicitor who had experience in leasehold houses/ freehold purchase with the council as freeholder. 

Buying the freehold was easy and straight forward.  Our solicitor dealt with it all, we just signed paperwork.  It cost us a little more on the conveyancing of course.  I don’t know about lease extension really.  For us the answer came back to buying the freehold as no buyers wanted a leasehold house.  It ticks down again and they then can’t sell.  Lenders don’t seem to like leasehold houses, so I would suggest buying freehold is the best choice.  Gives you a better pool of potential buyers.  As I say though, no expert, just my opinion.  

Your post has given me some reassurance.

I am thinking of starting the process of buying the freehold before listing my property for sell, as I am unsure whether any buyers will want to buy unless the freeholdc is completed?I think it will be better to find a 'local Freehold Purchase Solicitors' , did you need a valuer, too? 

dinosaur66

i thought it is all the same did not know it was different from house to flat

i live in london and essex where no houses i have ever looked at are leasehold

other places i buy is scotland where no leasehold law exsists

i have bought in yorkshire and know sheffield`s huge ammount of leasehold property houses / i automatically discounted them before i looked into leasehold house law , hence my mistake

i looked in property auction at a leasehold flat with 60 something years remaining in lake district which is when i read up on lease extending process / my mistake for assuming it applied to houses

i have seen the ground rent / leasehold issues on the news  and of course the glacial pace the conservative govt

had dealt with the proposed partial stopping of selling on ground rents and making new builds leasehold

 

20122013

eddddy said:

dinosaur66 said:

me personally i would serve a section 42 notice but this cannot be done unless you have a fair bit of spare money on hand that is not needed

this man sounds like he will drive a hard deal and will serve you a section 45 notice with poor terms and drag it out to the tribunral which will take about 6 months from now and will cost you maybe £4k in fees plus the cost of the leasehold descion but you will get lease extended to 160 plus years which should pay for itself when you sell it.

It sounds like you're talking about statutory lease extension for a flat.

The OP has a house - so it's very different.

With a house, a statutory lease extension is free and it adds 50 years to your lease. But you'll have to pay legal costs.

BUT... the ground rent will stay as it is for the next 84 years, then increase to a 'Modern Ground Rent' for the 50 years after that.

The Modern Ground Rent will be much more expensive than the current ground rent. That's often seen as a big negative.


So it's generally recommended that you buy the freehold of a house, rather than do a lease extension - unless you can't afford to pay for the freehold.


See: https://www.lease-advice.org/faq/i-cant-afford-to-buy-the-freehold-of-my-house-can-i-extend-my-lease-instead/

@Eddddy - as my Leashold Property shares Communal grounds etc, I think I will still be libable for the Service Charge and insurance, will these increased significantly?

eddddy

20122013 said:

@Eddddy - as my Leashold Property shares Communal grounds etc, I think I will still be libable for the Service Charge and insurance, will these increased significantly?

Do you mean if you buy the freehold?

If so, it will probably go like this...

• You will become responsible for insuring your own house - so you'll arrange and pay for that yourself. So you won't have to pay a contribution to the freeholder for buildings insurance.

• You will still have access to the communal areas - and going forward, your contribution towards managing it should be the same whether you own the lease or the freehold.

In general, covenants (or rules) in your lease that only affect your property will become irrelevant, if you buy the freehold. For example, you no longer need to worry about covenants like these:

• You need consent for alterations
• You need consent for subletting

But covenants (or rules) that affect other leaseholders or the freeholder will remain. So the freeholder will continue to maintain the common area, and you'll have to continue paying the same share.